Liz Truss has said she “absolutely” will not cut government spending, despite expectations the chancellor is set to bring forward measures to balance the Budget this month.
The Prime Minister told the House of Commons that “what we will make sure is over the medium-term the debt is falling” and that “we will do that, not by cutting public spending, but by making sure we spend public money well”.
A Number 10 spokesperson told journalists that total “public spending is due to continue to rise”, but that “there will be difficult decisions to be taken given some of the global challenges we’re facing”.
This does not rule out real-terms cuts to departmental budgets, after the government spent more than £100bn on freezing energy bills last month and amid higher than expected UK inflation.
Kwasi Kwarteng will unveil a Medium-Term Fiscal Plan on 31 October, which the chancellor has said will show how the government will return to “fiscal responsibility”.
It has been widely expected this means public spending cuts, after markets reacted poorly to a £100bn+ energy support package and £43bn in tax cuts that will all be funded by government borrowing.
Labour leader Sir Keir Starmer said Truss was “in denial” over the economy and asked if the Prime Minister could guarantee there would be no spending cuts.
Truss said: “Absolutely. Absolutely. We are spending almost £1 trillion on public spending.
“We were spending £700bn back in 2010. What we will make sure is over the medium-term, the debt is falling.
“We will do that, not by cutting public spending, but by making sure we spend public money well.”
Starmer said that Conservative MPs know “you can’t pay for tax cuts on the never never”.
He said: “There is no point trying to hide it. Everyone can see what has happened. The Tories went on a borrowing spree, sending mortgage rates through the roof, they are skyrocketing by £500 a month.
“Does [Truss] think the public will ever forgive the Conservative Party if they keep on defending this madness and go ahead with a kamikaze budget?”
Several cabinet ministers said just over two weeks ago that the government would need to “cut the fat” as they indicated Kwarteng would slash public spending after the government’s mini-Budget.
Truss and Kwarteng have since U-turned on the abolition of the top 45p rate of Income Tax, however this represented only a small amount of the total cost of the package of tax cuts.
Treasury Select Committee chair Mel Stride today said Kwarteng will need to U-turn on more of the tax cuts, which included a cut in National Insurance and a cancellation of a planned Corporation Tax hike.
“Given the huge challenges, many, myself included, believe it is quite possible [the chancellor] will simply have to come forward with a further rowing back of on the tax annoucements he made,” he said.