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Liz Truss ‘scrapped plans to reveal spending cuts in mini-Budget’

Liz Truss - Daniel Leal/Pool AFP
Liz Truss - Daniel Leal/Pool AFP

Liz Truss abandoned proposals to announce spending cuts in her mini-Budget, one of her closest allies has claimed.

The former prime minister held discussions with members of her inner circle about “making sure tax and spend were in alignment” but later decided this was “not necessary”, according to Simon Clarke, the Conservative MP.

Mr Clarke – the chief secretary to the Treasury at the time – said that during the leadership race in the summer he and Ms Truss had talked about announcing spending cuts of between five and 10 per cent at the same time as a series of tax cuts.

But he added that, as the summer wore on, Ms Truss’s “appetite for radicalism” increased and she abandoned the plans.

Kwasi Kwarteng, her chancellor, announced a series of radical tax cuts in the mini-Budget but made no mention of how these would be funded.

That spooked the markets and led to warnings of an imminent crisis in the UK pension market, forcing the Bank of England into a £65 billion intervention as it agreed to buy long-term government bonds at an “urgent pace”.

But Mr Clarke – at one stage tipped to become Ms Truss’s Chancellor but ultimately appointed to her Cabinet as levelling up secretary – revealed that conversations about a series of spending cuts had taken place among Ms Truss’s top team.

“We had certainly discussed the importance of making sure tax and spend were in alignment, and that was at the heart of the discussions that we had in July,” he told the BBC’s Nick Robinson in a podcast entitled Liz Truss’s Big Gamble.

“The question that sits at the heart of all of this is at what moment in her mind she decided that was not necessary.”

The podcast pointed out that Truss’s allies in the Cabinet had warned her that she needed to produce plans to cut spending to demonstrate how she intended to pay for tax cuts.

It also revealed that there had been plans to stress the need for spending restraint in Mr Kwarteng’s mini-Budget, with a section about it added to his draft speech. But this was deleted at the last minute after Ms Truss ruled that cuts would “distract from the message” about tax and growth and they could “worry later” about it.

The reaction of the markets to the disastrous mini-Budget was seen as paving the way for Ms Truss’s downfall. In an attempt to limit the damage, she sacked Mr Kwarteng and replaced him with Jeremy Hunt, who promptly scrapped a number of the measures.

Mr Clarke recalled a meeting with Ms Truss at Chevening, her official countryside residence as foreign secretary, at which she gathered trusted aides and advisers who “shared her belief in the need for economic revolution”.

“There was a very charged atmosphere in the room,” he told the BBC. “There was excitement, there was conviction. You could definitely sense that she herself had resolved that it was do or die.”

Once it had become clear that Ms Truss would win the Conservative leadership race, Treasury officials met her at Chevening but did not warn her about her plans, the podcast said. They believed it was not their job to do so because she was not yet prime minister.