Liz Truss set to announce U-turn on mini-Budget at press conference

PM widely expected to reverse corporation tax cut

Liz Truss is set to announce a major U-turn on the government’s mini-Budget on Friday afternoon, and is widely expected to reverse her planned corporation tax cut.

The prime minister will hold a press conference at 2.30pm at Downing Street in a bid to reassure the public, the markets and her own MPs she can balance the books.

Ms Truss sacked Kwasi Kwarteng as her chancellor at lunchtime on Friday following the disastrous response to last month’s tax-cutting mini-Budget.

Mr Kwarteng rushed back from the US to be sacked by the PM. British Airways BA292 was the most tracked flight in the world – with over 6,000 people monitoring as it touched down just after 11am.

The PM is understood to be keen to announce her U-turn before the weekend in a bid to avoid fresh market panic when the Bank of England ends its bond-purchasing scheme on Friday.

It came after The Independent revealed earlier this week that officials had been asked to go through the tax giveaway mini-Budget “line by line” to see what could be changed.

Ms Truss is now expected to reverse – whether partially or in full – her plan to axe the corporation tax hike from 19p to 25p scheduled for 2023 by ex-chancellor Rishi Sunak.

The move could raise more than £18bn a year to fill Treasury coffers, as the government looks to convince the markets and wavering Tory MPs that there is a clear fiscal plan.

At Westminster, there were reports of fevered plotting among Tory MPs amid suggestions that Ms Truss’s two main rivals for the Tory leadership over the summer – Mr Sunak and Penny Mordaunt – could be installed.

MPs are said to have held talks about how to change 1922 Committee rules and arrange a joint Sunak-Modaunt ticket. One senior Tory told The Times that “a coronation won’t be that hard to arrange”.

One former Tory minister told The Independent that the latest moves as “desperate” and said it would not be enough to salvage Ms Truss and Mr Kwarteng’s careers.

“A prime minister and chancellor reacting to the markets, the centrepiece of their core narrative for the economy shredded and no credibility left,” the MPs. “It is impossible for them to come back from this.”

Before he left the US, Mr Kwarteng initially insisted he stood by his growth plan. But in a later interview with The Telegraph he said “let’s see” when asked if he could ditch the corporation tax plan.

Senior Tory MP Mel Stride said it was essential that the government acted decisively – with a reversal on corporation tax “at the heart” of a U-turn – to restore confidence.

“The danger here is that they decide they are going to nibble at the edges of this and don’t think that will cut it,” the chair of the Treasury select committee told the BBC on Friday morning.

Mr Stride added: “To could end up in that circumstance in the worst of worlds – that you’ve U-turned but it doesn’t settle the markets.”

On the markets, government bonds and the pound have steadied at the start of London trading on Friday, with traders apparently encouraged by the prospect of U-turn on tax cuts.

Yields on UK 30-year gilts – the cost of government borrowing – fell back to 4.47 per cent, while 10-year gilt yields fell to 4.11 per cent. Meanwhile, the pound was 0.3 per cent higher at 1.127 against the US dollar as trading sentiment improved.

Conservative support has slumped below 20 per cent in the worst poll yet to hit beleaguered Ms Struss, giving Sir Keir Starmer’s Labour a remarkable 34-point lead.

The PeoplePolling survey also found that just 9 per cent of voters have a favourable view of the PM, compared to 65 per cent who regard her unfavourably.