The first signs of friction between Liz Truss and Kwasi Kwarteng over how to deal with the closed pound have emerged, after the pair met at No 10 to work out how to respond on Monday.
Downing Street refused to talk about a split between No 10 and No 11 over how to deal with the market reaction to the mini-budget and denied there was a row.
However, Whitehall sources said there was talk within the civil service of a discussion between the Prime Minister and Chancellor at Monday morning’s meeting, and Sky News said Truss had resisted the suggestion de Kwarteng that a statement from the Treasury was needed to calm the markets.
A Downing St source insisted it was “nonsense” that No 10 and No 11 had been at odds during the meeting, saying Truss meets Kwarteng every day and there was no argument.
But another government source contradicted that, acknowledging there was friction at the meeting.
Tory MPs remain furious over the budget, which has seen the pound fall to record lows against the dollar at times since Friday. At least one Tory MP is believed to have already sent a letter expressing his distrust of Truss to the 1922 Committee, where there was talk among MPs of trying to oust her if she did not change the economic course.
As the government tried to shore up support, Conservative MPs called MPs on Tuesday to seek assurances they would vote in favor of the upcoming finance bill, and Kwarteng held a call with MPs to explain more about his plans.
Two Tory MPs told the Guardian they were thinking hard about whether they could vote for the Finance Bill in its current form, predicting Labor would likely introduce amendments to the 45p rate and bankers’ bonus cap which might be tempting for some. Conservatives support.
A former cabinet minister said: “There will be a time when people will have to make a choice. Labor may not frame the amendment correctly, but they will. They will challenge us to vote against it and I think that is a problem for the government”.
In an attempt to calm markets, the Treasury issued a statement late Monday saying it would commission a forecast from the Office for Budget Responsibility and hold another fiscal event in mid-November.
Truss and Kwarteng are long-time friends, having laid out their free-market economic vision since 2012 in a book called Britannia Unchained. She asked him to be chancellor near the start of her leadership campaign and the pair met frequently in Greenwich, where they are neighbours, to map out their plans.
Friday’s mini-budget, which introduced £45bn of tax cuts, was masterminded by both, but the market reaction has been wild, with the pound at times falling to record lows and gold yields (the cost of public borrowing) increasing.
A senior Bank of England official said on Tuesday that the central bank would have to impose “significant” increases in interest rates.
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The Bank’s chief economist, Huw Pill, said the Chancellor’s planned tax cuts would act as a stimulus and increase inflationary pressures, with the result that interest rates would have to rise from expected
Lenders have already pulled hundreds of mortgage deals this week as they struggle to price their products amid financial market volatility.
George Osborne, the former chancellor who slashed public spending in a bid to balance the books during the coalition years, was a prominent critic, saying it was “strange to see free market traders urging a government of free market to ignore markets”.
David Gauke, a former chief secretary to the Treasury, said it was “entirely predictable” that the market would have panicked at the scale of borrowing to finance the tax cuts without independent forecasts supporting the promise of growth.
Professor Danny Blanchflower, a former member of the Bank of England’s monetary policy committee, questioned whether Truss and Kwarteng could survive the political and economic crisis they had created, accusing them of “raging incompetence”.