The secret midnight meeting that killed off the 45p tax cut

Liz Truss and Kwasi Kwarteng - Reuters/Hannah McKay
Liz Truss and Kwasi Kwarteng - Reuters/Hannah McKay

In Liz Truss's suite at the Hyatt Hotel in Birmingham, the mood was grim.

As the hour approached midnight on Sunday, the Prime Minister and the Chancellor compared notes on the feedback they had received from MPs on the 45p tax cut, and realised the game was up.

Only hours after Kwasi Kwarteng had sent out a preview of his conference speech, in which he was to insist he would “stay the course”, he agreed to the most humiliating U-turn of recent times.

“It wasn’t worth the pain of keeping it,” admitted one Number 10 source familiar with the discussion in the hotel suite.

“The view from a political and communications point of view was that we just had to lance the boil.”

The idea of scrapping the tax cut was at an advanced stage by 9pm on Sunday evening, but only Ms Truss and Mr Kwarteng's closest advisers knew what was in the offing.

At 10.30pm, Ms Truss made her final appearance of the day, when she attended a drinks reception thrown by the 1922 backbench committee on the 25th floor of The Cube building, where she made a short speech in which she made no mention of the 45p cut.

By around 11pm she was back in her hotel suite, reviewing the terrible headlines in the early editions of the morning papers, and thrashing out a final decision with Mr Kwarteng. The 45p tax cut had to go, they agreed, and if they were going to do it, they might as well do it straight away.

The decision was taken so late that many ministers, as well as some Downing Street and Treasury aides, were already in bed, and only found out about it when they woke up the next day.

Criticism left them 'in no doubt' about the U-turn

Throughout Sunday, Ms Truss had made a series of increasingly worried phone calls to the Chancellor, as the Tory rebellion over the abolition of the 45p rate grew.

“The reaction they were getting from MPs whose inboxes and mailboxes were full of letters criticising the tax cut left them in no doubt about what a distraction it had become,” said one senior government source.

The Prime Minister’s frustration had been clear during her Sunday morning appearance on Laura Kuenssberg’s BBC show, when she complained that a mini-Budget that contained a £65 billion package of support for help with energy bills was being characterised as a tax cut for the rich.

She also admitted that the Cabinet had not been consulted about the 45p cut, and, in the first sign that she might not be wholly behind the policy, she added: “That was the Chancellor’s decision.”

On the same programme, Michael Gove had left little doubt that he would vote against the 45p cut once it came to Parliament. And away from the Tory Party conference, supporters of Rishi Sunak, who had decided to stay away from the event, were free to plot their next move.

Rebels told journalists they were confident that at least 36 of them would vote with the Opposition on the 45p cut - the number needed to overturn Ms Truss’s working majority - and it became increasingly clear that the policy was unsustainable.

"Every newspaper was reporting it. Everyone was talking about it. MPs, councillors," remarked one source involved in the conversations.

Meanwhile, Tory MPs unaware of the looming about-turn were busy drinking and gossiping with activists, colleagues, and journalists as they pressed together in fringe events and drinks receptions at conference.

One MP critical of the Government dipped into his wallet late on Sunday and said he had the most trusted currency around, then pulled out a clutch of US dollar bills with a flourish and a guffaw.

Speaking at a drinks reception at around 9pm, Penny Mordaunt, the Leader of the Commons, addressed the 45p row by saying: “It’s nearly Monday, and what have we learned so far in conference? We’ve learned that our policies are great, but our comms is s---.”

Downing Street let it be known that the vote on the 45p cut would not take place until after the Nov 23 “medium term fiscal plan”, the next fiscal statement by the Chancellor, in the first sign of an apparent concession to the rebels.

But with Nov 23 still seven weeks away, the row over the tax cut would surely dominate all autumn.

The thinking, as summed up by one closely involved, went something like this: “It makes no money, it doesn't change anything really. Just do it.”

Mr Kwarteng was left to rewrite his conference speech, due to be delivered on Monday afternoon, though allies said that he only needed to remove a few lines that referred to the 45p cut, as it was never a central part of his mini-Budget, they claimed.

The Prime Minister leaving the Hyatt Hotel this morning - Geoff Pugh for the Telegraph
The Prime Minister leaving the Hyatt Hotel this morning - Geoff Pugh for the Telegraph

Some Cabinet ministers who were never consulted about the 45p cut were again in the dark about the decision to scrap it.

Wendy Morton, the Chief Whip, arranged a hasty ring-round of the Cabinet early on Monday morning, with one Cabinet minister saying they were only informed by a call at around 7am, only 25 minutes before the Chancellor confirmed the move on Twitter.

“It is clear that the abolition of the 45p tax rate has become a distraction from our overriding mission to tackle the challenges facing our country,” he wrote. “As a result, I’m announcing we are not proceeding with the abolition of the 45p tax rate. We get it, and we have listened.”

One former minister said the 45p rate U-turn was “pretty final” for Ms Truss, and that backbenchers were now openly calling for her to leave Downing Street.

“The one thing about her was that she was determined,” the MP said. “But now, like every other PM, she is just beholden to parliamentary numbers.

“This is the consequence of everything that has happened up to this point. If you do a reshuffle that p***** off two thirds of the parliamentary party followed by a budget no one likes, that will come back to bite you.

“This [mini Budget] is so distant from what we promised in the manifesto. So there are MPs sitting there thinking ‘well, if I don’t like it, I don’t have to vote for it’ and no one respects the Chief Whip. That’s pretty final.”