The premier crossed swords with the Labour leader over the cost-of-living crisis in the Commons the day after she was installed in Downing Street.
She batted away pressure from Sir Keir for a bigger windfall tax on companies – but insisted she would not leave Britons and businesses to suffer the fallout from the standoff with Russia. She confirmed she would be unveiling a new package tomorrow.
‘I will make sure that in our energy plan we will help to support businesses and people with the immediate price crisis, as well as making sure there are long-term supplies available,’ she told MPs.
The exchanges came after Ms Truss gathered her new loyalist Cabinet to finalise plans for an energy bill freeze – and the Bank of England delivered a stark warning that inflation could hit 22 per cent without action.
Truss’s Cabinet reshuffle
Kwasi Kwarteng – Chancellor
Therese Coffey – Health Secretary/Deputy Prime Minister
Suella Braverman – Home Secretary
James Cleverly – Foreign Secretary
Brandon Lewis – Justice Secretary
Ben Wallace – Defence Secretary
Nadhim Zahawi – Chancellor of the Duchy of Lancaster / Equalities Minister
Penny Mordaunt – Leader of the Commons
Jacob Rees Mogg – Business Secretary
Simon Clarke – Levelling Up Secretary
Kemi Badenoch – International Trade Secretary
Chloe Smith – Work and Pensions Secretary
Kit Malthouse – Education Secretary
Chris Heaton-Harris – Northern Ireland Secretary
Alister Jack – Scotland Secretary
Robert Buckland – Wales Secretary
Michael Ellis QC – Attorney General
Tom Tugendhat – Security minister at Home Office (will attend Cabinet)
Vicki Ford – Development Minister at Foreign Office (will attend Cabinet)
The PM has plunged straight into tackling the burgeoning crisis, forming a fresh top team stacked with her leadership backers and purged of Rishi Sunak’s supporters.
A package to limit energy bills that could cost the taxpayer £150billion is being thrashed out, limiting typical household payments to £2,500 a year. Including a £400 handout already in place that would effectively wipe out the massive hike that is slated to take effect next month.
Alarm has been raised in some quarters that this will simply be added to the UK’s debt mountain, with markets already responding by increasing interest payments.
However, giving evidence to MPs this morning Bank of England chiefs made clear that failing to act could deepen the problems.
Chief economic Huw Pill said predictions that CPI inflation could hit 22 per cent were ‘plausible’, saying it was simply a ‘mechanical’ consequence of surging gas prices amid the standoff with Russia.
He suggested that a bailout would reduce inflation, which the Bank’s most recent forecast had peaking at 13 per cent in the final quarter of the year.
‘Net-net on the implications for headline inflation in the short term, I would expect that to see a decline,’ Mr Pill said.
Bank governor Andrew Bailey declined to be drawn on the impact of Ms Truss’s plans on borrowing costs and inflation. He said the focus was on ‘policy being laid out properly’ after the Tory leadership contest.
After offering token congratulations to Ms Truss in the House, Sir Keir asked: ‘When she said in her leadership campaign that she was against windfall taxes, did she mean it?’
Ms Truss replied: ‘I am against a windfall tax. I believe it is the wrong thing to be putting companies off investing in the United Kingdom just when we need to be growing the economy.’
Sir Keir said the reality was that ‘energy producers will make £170bn in excess profits over the next two years’.
He added: ‘The Prime Minister knows she has now choice but to back an energy price freeze, but it won’t be cheap and the real choice, the political choice is who is going to pay.
‘Is she really telling us that she is going to leave this vast excess profits on the table and make working people foot the bill for decades to come?’
Ms Truss said she understood people were ‘struggling with the cost of living’ and energy bills, adding: ‘That is why I as Prime Minister will take immediate action to help people with the cost of their energy bills and I will be making an announcement to this House on that tomorrow.’
The premier added she would reform the UK’s overall energy mix by building more nuclear power stations and exploring more fossil fuel supplies in the North Sea.
She added: ‘The reality is that this country will not be able to tax its way to growth.
‘The way we will grow our economy is by attracting investment, keeping taxes low, delivering the reforms to build projects quicker.
‘That is the way that we will create jobs and opportunities across our country.’
She said: ‘And if taxes are put up and raised to the same level as France, which is what the current proposal is, and which I will change as Prime Minister, that will put off investors.
‘It will put off those companies investing in our economy and ultimately that will mean fewer jobs, less growth and less opportunities across our country.’
Meanwhile, incoming Chancellor Kwasi Kwarteng has met bankers and investors to reassure them that although borrowing will rise ‘in the short term’, he is committed to the economy growing faster than debt.
Liz Truss (left) crossed swords with Keir Starmer (right) over the cost-of-living crisis in the Commons the day after she was installed in Downing Street
Ms Truss was taking PMQs for the first time since winning the keys to Downing Street
However, the scale of the bloodletting has caused alarm in some quarters, with many big beasts now outside the tent. In what has been taken as a thinly-veiled warning, Mr Shapps has promised to be a ‘strong independent voice’ outside of government.
The wife of ousted veterans minister Johnny Mercer branded Ms Truss an ‘imbecile’ after he said he had been ‘relieved of duty’.
The new deputy PM and Health Secretary Therese Coffey dismissed the concerns as she toured broadcast studios this morning, saying the Cabinet is ‘diverse’ and includes ‘all the talents’. ‘She is focused on a government of all the talents,’ Ms Coffey said.
Alongside making more appointments, Ms Truss is bracing for her first showdown with Sir Keir in the Commons.
Kwasi Kwarteng has been confirmed as Chancellor, James Cleverly is Foreign Secretary, and Suella Braverman takes the other Great Office of State as Home Secretary – meaning for the first time there is no white man in any of the top posts.
Elsewhere, Wendy Morton has been installed as the Tories’ first female chief whip, in charge of parliamentary party discipline.
Ben Wallace remains Defence Secretary after backing her campaign and Brandon Lewis is made Justice Secretary, while Boris Johnson loyalist Jacob Rees Mogg is business secretary. Kemi Badenoch was rewarded for a strong leadership bid as she is named Trade Secretary, while Kit Malthouse has become Education Secretary.
Tory chairman Andrew Stephenson and levelling up secretary Greg Clark, who all stayed neutral, also declared they were leaving their posts.
Nadhim Zahawi, who ran to be leader before supporting Truss, was demoted from Chancellor but remains in the Cabinet as Chancellor of the Duchy of Lancaster and Equalities Minister, while Alok Sharma was re-appointed as Cop26 president.
Penny Mordaunt, who came close to blocking Ms Truss’s run for power, becomes Leader of the Commons, while Chief Secretary to the Treasury Simon Clarke is Levelling Up Secretary.
Ms Truss has been fielding calls from world leaders overnight, with Ukraine’s Volodymyr Zelensky the first leader to speak with the new PM.
He said he thanked Ms Truss for the UK#’s ‘major defense & economic aid’ for Ukraine, and urged her to ‘strengthen it’. ‘
Ms Truss used her first speech in Downing Street last night to spell out her determination to create an ‘aspiration nation’.
She warned of a ‘vital time for our country’ and said she will deal ‘hands on with the energy crisis caused by Putin’s war’ – hinting at the huge bailout expected within days.
The new premier said fixing the NHS and cutting taxes would be her other priorities.
‘I’m confident that together we can ride out the storm, we can rebuild our economy and we can become the modern brilliant Britain that I know we can be,’ she said.
‘This is our vital mission to ensure opportunity and prosperity for all people and future generations. I’m determined to deliver.’
Ministers and MPs had gathered outside as Ms Truss’s convoy weaved through the roads of the capital.
But there was confusion as aides took the podium indoors when the weather intervened – only to bring it out again as the heavy shower passed.
Ms Truss seemed to make light of the rain with her reference to the ‘storm’.
New PM Liz Truss chairing her first Cabinet in Downing Street today, where the package to freeze energy bills was top of the agenda
The Cabinet has been dramatically overhauled by Liz Truss with most allies of Rishi Sunak evicted
Giving evidence to MPs this morning Bank of England chiefs made clear that failing to act could deepen the problems
Incoming Chancellor Kwasi Kwarteng has met bankers and investors to reassure them that although borrowing will rise ‘in the short term’, he is committed to the economy growing faster than debt
Foreign Secretary James Cleverly and Home Secretary Suella Braverman in Downing Street today
Education Secretary Kit Malthouse (left) arriving for Cabinet today, while Alister Jack (right) is staying on as Scotland Secretary
In what has been taken as a thinly-veiled warning, Grant Shapps has promised to be a ‘strong independent voice’ outside of government
Sacked veterans minister Johnny Mercer’s ‘bitter’ wife calls Liz Truss an ‘IMBECILE’ and compares her to a Muppet for axing him
Johnny Mercer, pictured with his wife Felicity, was removed as veterans affairs minister
The wife of sacked minister Johnny Mercer has called new Prime Minister Liz Truss an ‘imbecile’.
Felicity Cornelius-Mercer said the Cabinet system ‘stinks’ and ‘treats people appallingly’ after her husband was removed as veterans affairs minister.
Mr Mercer, the Plymouth Moor View MP, had appeared angry about Ms Truss’s move, saying he was ‘disappointed’ but accepted the PM is ‘entitled to reward her supporters’.
He also suggested he could quit the Commons, saying: ‘I have to accept that I will never possess the qualities required for enduring success in politics as it stands, and to be fair to my wonderful family, I must consider my future.’
His wife went further, tweeting a picture mocking Ms Truss as Beaker, a character from The Muppets television show and giving an account of Mr Mercer’s exit discussions.
Ms Cornelius-Mercer tweeted: ‘He asked her ‘why would you do this, who is going to be better at this role than me, which of your mates gets the job, you promised a meritocracy?’
‘PM – I can’t answer that Johnny.
‘This system stinks & treats people appallingly.
‘Best person I know sacked by an imbecile @trussliz.’
She added in a follow-up Tweet, ‘Yes I am feeling bitter. Please allow it – 24hrs then back to positives’.
Mr Mercer had tweeted a lengthy resignation statement accompanied by the words: ‘I will be spending time with my family and doing no media requests.’
is expected to announce that she will freeze household energy bills at about £2,500 per year until 2024 to protect the average Brit from the ever-increasing price cap.
The measure will reportedly be funded by government borrowing and will also cap the cost of gas used for electricity and heating, which will also apply to businesses.
It comes before the Ofgem energy price cap is due to rise to £3,549 on October 1, before climbing to new heights of £5,386 in January, adding fuel to the fire of the ongoing cost-of-living crisis.
While ministers believe the freeze will be a popular intervention, there are fears the taxpayer could face unlimited liability if gas prices continue to climb or remain high for longer than predicted.
Some experts believe the cost will reach £150billion.
Supporters of the move stress it will bring down inflation, reduce the pressure on the Bank of England to hike interest rates, and prevent families and businesses going bust.
Joshua Mahony, a senior market analyst at the trading platform IG, told the Times: ‘For the near-term this [energy package] seems an effective way to bring greater certainty and relieve the pressure on the Bank of England [to increase interest rates], but the long-term consequence will undoubtedly result in another pile of debt that will ultimately need paying through higher taxes.’
Elizabeth Martins, senior economist at HSBC, described the policy as a ‘near-term game changer’.
She told the Telegraph: ‘If she [Liz Truss] were to freeze the cap at current levels, it could even mean that inflation has already peaked.
‘That would potentially reduce inflation expectations and the likelihood of a wage-price spiral – the two key reasons why the BoE chose to get ‘forceful’ in August.’
Meanwhile Neil Shearing, group chief economist at Capital Economics, branded the support package an ‘effective but expensive sticking plaster’, adding that it would also help to tackle price rises.
He believes inflation would peak at 11 per cent next month, as opposed to the 14.5 per cent in January as is currently predicted.
The markets seemed to agree as British businesses rose sharply and fears of inflation were downgraded following Ms Truss’s confirmation as PM yesterday.
Mr Raab had not expected to continue his run in Government, having described Ms Truss’s tax plans as an ‘electoral suicide note’.
The MP for Esher and Walton announced he would be supporting the Government from the backbenches.
‘Thanks to the brilliant MoJ (Ministry of Justice) team for all their hard work over the last year.
‘Good luck to the new PM and her team,’ Mr Raab tweeted.
‘I look forward to supporting the Government from the backbenches.’
Mr Shapps also tweeted his own exit as Transport Secretary but did not make the same remarks of support for the new Tory leader.
‘It has been a privilege to serve as Transport Secretary; a job I loved,’ he said.
‘Now I look forward to being a strong, independent voice on the backbenches, developing policies that will further the Conservative cause and the interests of my constituents in Welwyn Hatfield.’
Mr Barclay, the MP for North East Cambridgeshire who had been health secretary for Mr Johnson’s final months in office, tweeted: ‘Thanks to all colleagues, both political & civil service, for their fantastic support. Wishing @trussliz & her ministerial team every success for the future.’
Mr Vara, who was only appointed when Mr Johnson quit in July, posted: ‘Great privilege and honour to serve as Secretary of State at the Northern Ireland Office and work with some excellent people.
‘My best wishes to the new PM and I look forward to supporting the government from the backbenches.’
Mr Johnson swept out of Downing Street for the final time early yesterday with a typically boisterous and classically allusive address to the nation.
Jacob Rees-Mogg, aa close ally of Boris Johnson, has been made the Business Secretary in the new government
Michelle Donelan is Culture Secretary, taking the place of Nadine Dorries who stepped down before the reshuffle
Ben Wallace (right) is continuing as Defence Secretary while James Heappey (left) takes on the role of veterans minister
Watched by MPs, aides and allies as he spoke on the steps of No10, the outgoing PM put a brave face on his departure saying ‘this is it, folks’.
After walking out of the famous black door with wife Carrie, he pointed out he ‘got Brexit done’ and oversaw the ‘fastest vaccine rollout’ during near three-year stint.
He delivered a stark message that Britain must continue supporting Ukraine against Vladimir Putin’s aggression, despite the economic pain caused by his ‘blackmail’ on gas prices.
And in a barb at MPs for dramatically ousting him, Mr Johnson said: ‘The baton will be handed over in what has unexpectedly turned out to be a relay race. They changed the rules halfway through, but never mind that now.’
Mr Johnson also sparked laughter by comparing himself to a ‘booster rocket’ that was being jettisoned, suggesting he would keep out of the way in a remote part of the Pacific Ocean.
‘I will be offering this government nothing but the most fervent support,’ he said. ‘We will get through it, we will come out stronger the other side… it is time for us all to get behind Liz Truss.’
Ms Truss poses on the steps of No10 with her husband Hugh O’Leary after being confirmed as the new PM yesterday
Incoming premier Liz Truss was pictured meeting the smiling monarch at Balmoral as power is transferred – a process known as ‘kissing hands’.
Liz Truss’s first Downing Street speech in full
‘Good afternoon. I have just accepted her Majesty the Queen’s kind invitation to form a new government.
‘Let me pay tribute to my predecessor. Boris Johnson delivered Brexit, the Covid vaccine and stood up to Russian aggression. History will see him as a hugely consequential prime minister.
‘I’m honoured to take on this responsibility at a vital time for our country. What makes the United Kingdom great is our fundamental belief in freedom, in enterprise and in fair play. Our people have shown grit, courage and determination, time and time again.
‘We now face severe global headwinds caused by Russia’s appalling war in Ukraine and the aftermath of Covid. Now is the time to tackle the issues that are holding Britain back. We need to build roads, homes and broadband faster. We need more investment and great jobs in every town and city across our country. We need to reduce the burden on families and help people get on in life.
‘I know that we have what it takes to tackle those challenges. Of course, it won’t be easy, but we can do it. We will transform Britain into an aspiration nation with high paying jobs, safe streets and where everyone everywhere has the opportunities they deserve.
‘I will take action this day and action every day to make it happen. United with our allies, we will stand up for freedom and democracy around the world. Recognising that we can’t have security at home without having security abroad.
‘As prime minister, I will pursue three early priorities. Firstly, I will get Britain working again. I have a bold plan to grow the economy through tax cuts and reform. I will cut taxes to reward hard work and boost business-led growth and investment.
‘I will drive reform in my mission to get the United Kingdom working, building and growing. We’ll get spades in the ground to make sure people are not facing unaffordable energy bills and we will also make sure that we are building hospitals, schools, roads and broadband.
‘Secondly, I will deal hands on with the energy crisis caused by Putin’s war. I will take action this week to deal with energy bills and to secure our future energy supply.
‘Thirdly, I will make sure that people can get doctor’s appointments and the NHS services they need. We will put our health service on a firm footing.
‘By delivering on the economy, on energy and on the NHS. We will put our nation on the path to long term success. We shouldn’t be daunted by the challenges we face. As strong as the storm may be, I know that the British people are stronger. Our country was built by people who get things done. We have huge reserves of talent, of energy and determination.
‘I am confident that together we can ride out the storm. We can rebuild our economy and we can become the modern brilliant Britain that I know we can be.
‘This is our vital mission to ensure opportunity and prosperity for all people and future generations. I am determined to deliver Thank you.’