Liz Truss says she will ‘absolutely’ not cut public spending despite warning of £62bn shortfall

Liz Truss has pledged not to cut public spending to balance the books in her first PMQs since the chancellor’s contentious mini-budget – despite a leading economics-focused think tank warning the government is billions short of the sums needed.

The prime minister insisted she was “absolutely” not planning public spending reductions, but vowed that taxpayers’ money would be used well.

Her pledge comes as the government continues to be under pressure for the market turmoil that erupted after the government announced its £45bn package of unfunded tax cuts last month.

Speaking to Sky News after PMQs, Mel Stride, the Chair of the Treasury Select Committee, said that Chancellor Kwasi Kwarteng should not take the reversal of some of his tax cuts “off the table”.

He said that “holding the line” on the measures announced in his mini-budget will be even more difficult following Ms Truss’ comments on public spending, and that 31 October – the date of the chancellor’s debt-cutting plan being published – is a moment for a “reset”.

He told political editor Beth Rigby: “(Chancellor Kwarteng) has to be so careful that he doesn’t take any chances, he has to be sure the markets are going to like what they hear, that’s why I think rowing back on the tax cuts have to remain on the table.

“It’s extraordinarily important that whatever the chancellor comes forward with on the 31st, that it cuts it with the market.

“If there is any doubt in his mind about anything he is doing, he would do well to think again, he has got to play it ultra safe.”

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Economists have suggested that to gain a grip on the national finances, the government will have to make spending cuts or tax rises worth tens of billions of pounds.

The “Green Budget”, from the Institute for Fiscal Studies and Citi, the investment bank, warned this week that the chancellor would have to cut spending or raise taxes by £62bn if he is to stabilise or reduce the national debt, as he has repeatedly promised in recent weeks.

That shortfall is a direct consequence of the measures announced since the Truss government took office, which include its reversal of various tax increases such as corporation tax and national insurance and its energy price guarantee.

Chancellor Kwasi Kwarteng would instead have to carry out dramatic cuts, the think tank said, potentially reducing government investment and slashing public spending on departments that have already been squeezed during the austerity years.

The cost of government spending increased on Wednesday, with the pound falling against the dollar.

‘Kamikaze budget’

At PMQs, Sir Keir Starmer reminded Ms Truss that during her leadership campaign over the summer she had pledged: “I’m not planning public spending reductions.”

Asked if she was going to stick to that, the prime minister replied: “Absolutely… We are spending almost £1tn of public spending. We were spending £700bn back in 2010.

“What we will make sure is that over the medium term the debt is falling. But we will do that not by cutting public spending but by making sure we spend public money well.”

The Labour leader once again called for the government to reverse their “kamikaze budget”, warning Conservative MPs that voters will not forgive their party if they “defend” it.

‘Ducking responsibility’

Sir Keir also accused the prime minister of “ducking responsibility” for the consequences of her government’s economic policies and of being “lost in denial”.

“Who voted for this?” he questioned.

Ms Truss responded: “The way that we will get our country growing is through more jobs, more growth, more opportunities, not through higher taxes, higher spending and his friends in the union stopping hard-working people getting to work.”

‘No-fault’ evictions pledge

Also during PMQs, Ms Truss committed to honouring a 2019 Tory manifesto pledge to scrap “no-fault” evictions of private renters in England.

There had been reports earlier this week that the government could try and shelve the commitment.

On Tuesday, Downing Street said no decisions had been made on whether to pause a promised ban on Section 21 notices, which allow landlords to evict a tenant without giving a reason.

Labour MP Graham Stringer asked Ms Truss: “Can the PM reassure the 11 million private renters in this country that she will carry out her commitment to get rid of no-fault evictions?”

Ms Truss replied: “I can.”

Energy help

The prime minister also announced that Jacob Rees-Mogg, the business secretary, is working on a scheme to help households and businesses bring down their energy costs.

Last Friday, Ms Truss ruled out launching an energy-saving public information campaign after warnings from the National Grid Electricity System Operator that planned three-hour power blackouts could be imposed in some areas.

Only two days ago Downing Street had defended Ms Truss’s decision not to launch a “bespoke” energy-saving public information campaign during the energy crisis, saying it is down to individuals to decide what is right for them.

Mr Kwarteng has already dropped plans to abolish the 45% tax rate on earnings over £150,000 after internal criticism of the policy, though he has insisted he remains committed to the rest of his mini-budget.

Asked what happens after the Bank stops buying bonds on Friday, the chancellor said: “Well, it’s a matter for the governor.”

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