Liz Truss is under mounting pressure to change course on her tax and borrowing plans after a new opinion poll gave Labour a historic lead over the Conservatives.
The prime minister was rocked by a YouGov poll which found that Labour had a 33-point lead over the Tories, the biggest gap since the 1990s.
The survey for The Times was published after Truss vowed to stick by the government’s “mini” Budget of last Friday, including £45bn of debt funded tax cuts, which sparked turmoil in financial markets.
The survey also followed Wednesday’s intervention by the Bank of England, when it launched a £65bn emergency bond-buying programme to stem a crisis in the pensions system caused by sharply rising gilt yields.
Banks have pulled mortgage products following Kwasi Kwarteng’s “mini” Budget last week while the IMF strongly criticised it. Some Tory MPs believe Truss will fire Kwarteng, but her allies dismissed that as “absolute nonsense”.
Sterling fell sharply on Monday but rallied on Thursday, climbing 1.7 per cent against the dollar to $1.107.
The YouGov poll found that almost three times as many voters said Labour leader Sir Keir Starmer would make the best prime minister as Truss, who only entered Downing Street this month.
In her first public comments since the chancellor’s statement, Truss on Thursday did a round of stilted radio and television interviews in which she defended the “mini” Budget.
“We are cutting taxes across the board because we were facing the highest tax burden on Britain in 70 years, and that was causing a lack of economic growth,” Truss told BBC Radio Tees.
The prime minister said a cut in corporation tax and abolition of the 45p upper rate of income tax would generate economic growth. She also said her energy package would cut inflation, and blamed the turmoil on global factors caused by Russia’s invasion of Ukraine.
But her interviews prompted strong criticism from Conservative MPs. George Freeman, a former Tory science minister who backed former chancellor Rishi Sunak to be party leader, said there was a “serious crisis” and urged a change of tack on Kwarteng’s fiscal statement.
“The economic package of borrowing and tax cuts announced last week clearly can’t command market or voter confidence,” he added.
Julian Smith, a former Tory chief whip and another Sunak supporter, also said Truss must change course.
Other Tory MPs, including some Truss supporters, expressed dismay at her broadcast interviews, which were marked by prolonged silences from the prime minister as she struggled to give answers.
Some ministers are uneasy about the government’s willingness to cut public spending to try to restore fiscal credibility: “That will go down like a lead balloon with the public,” said one.
Kwarteng sent a message to Tory MPs to rally behind Truss. “We need your support,” he told them. Insisting that the “mini” Budget measures were “sound”, he said: “The only people who will win if we divide is the Labour party.”
The UK’s bond and currency markets remained at depressed levels despite a rally on Thursday following the BoE’s intervention.
In gilt trading that began just as Truss’s round of interviews was broadcast, selling pressure nudged up borrowing costs, with the yield on the 30-year bond rising 0.03 percentage points to 3.96 per cent, after having posted its steepest drop on record on Wednesday.
Selling pressure was more acute for shorter-dated UK bonds, with the yield on the policy-sensitive two-year gilt rising 0.11 percentage points on Thursday to 4.35 per cent. The benchmark 10-year yield added 0.2 percentage points to 4.21 per cent.
The pound rose to its highest level since the “mini” Budget, climbing 1.7 per cent against the dollar to $1.107.
Mark Carney, former BoE governor, tore into the government’s fiscal plans for exacerbating financial instability and working at cross-purposes with the central bank.
Carney accused Kwarteng of “undercutting” institutions such as the Office for Budget Responsibility, the UK fiscal watchdog.
Meanwhile, Kwarteng on Thursday interviewed four Whitehall mandarins to succeed Sir Tom Scholar, the former Treasury permanent secretary whom he sacked on his first day at the Treasury.
Four candidates are Treasury veterans: Tamara Finkelstein, James Bowler, Peter Schofield and Jeremy Pocklington, while Antonia Romeo has never worked there. Truss has previously railed against Treasury “orthodoxy”.
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