The future of the “triple lock” protection for state pensions was tonight thrown into doubt after new chancellor Jeremy Hunt refused to commit himself to keeping it.
Charities voiced alarm over the chancellor’s words, which stand in stark contrast to previous promises from Liz Truss and Mr Hunt’s predecessor Kwasi Kwarteng to keep the lock, which guarantees pensions will rise with the highest of inflation, earnings or 2.5 per cent.
Age UK said older Britons of modest means face “deep hardship this winter unlike anything most of us have seen before.”
It came as Mr Hunt dramatically slashed from two years to six months the government’s package of support for energy bills, which are now expected to rise to an average of £4,000 in April.
In a shock statement, the chancellor tore the last of Ms Truss’s economic policies to shreds, scrapping her plans to take a penny off the basic rate of income tax.
The PM was also plunged into desperate talks to salvage her tottering premiership, as Labour said she had been left with “no credibility, no mandate, no authority” and Tory MPs warned she had only a matter of weeks to persuade them she should stay at No 10.
Ms Truss missed a Commons grilling over the collapse of her economic policies in order to meet with Sir Graham Brady, the chair of the powerful backbench 1922 Committee, which will decide whether rules should be changed to allow MPs to throw her out.
No 10 insisted the meeting was “pre-planned”, but it is thought that MPs’ worries over her leadership were raised. The PM’s absence from the Commons to answer an urgent question from Sir Keir Starmer forced Penny Mordaunt – sent to stand in for her – to deny Ms Truss was “hiding under her desk”.
Appearing alongside Mr Hunt shortly afterwards on the government front bench, Ms Truss appeared pale and almost stunned, scarcely moving or uttering a sound before leaving the chamber after 30 minutes.
Shadow chancellor Rachel Reeves said the PM could not speak for her chancellor’s plans “with a shred of credibility, given that the survival of this government depends on smashing to smithereens everything she stands for”.
“It’s not just impossible – it is absurd,” Ms Reeves told MPs. “The prime minister is barely in office and she is certainly not in power.”
Ms Truss later went on to address moderate Tories of the One Nation group before holding a reception for cabinet ministers in what was seen as part of a charm offensive to rally support.
Financial markets appeared reassured by Mr Hunt’s announcement that he was tearing up the majority of the remaining tax-cutting measures from Mr Kwarteng’s ill-fated 23 September mini-Budget, just three days after being appointed to replace the sacked ex-chancellor.
The pound rallied against the US dollar and gilt yields – effectively the cost to the state of borrowing – declined following his early-morning TV broadcast.
Only the reversal of Rishi Sunak’s 1.25 per cent hike in national insurance and the rise in zero-rate thresholds for stamp duty survive from the Kwarteng package, with Mr Hunt saving £32bn by reining in tax giveaways.
But the chancellor warned that there were “decisions of eye-watering difficulty” ahead in his 31 October medium-term fiscal plan, in which he will set out a combination of tax rises and spending cuts to get the national books back into balance.
He also sparked concern by refusing to confirm that the triple lock – introduced by David Cameron’s coalition government and credited with improving the living standards of pensioners – will survive.
“I’m not making any commitments on any individual policy areas,” Mr Hunt told MPs. “But every decision we take will be taken through the prism of what matters most to the most vulnerable.”
Ms Truss repeatedly vowed to keep the triple lock during this summer’s Tory leadership contest, and as recently as 29 September Mr Kwarteng said he and the PM were “absolutely committed” to maintaining it.
Treasury sources said the chancellor was simply signalling that “nothing is off the table”. But Age UK said his unwillingness to stick to previous government promises was bound to cause anxiety.
“It’s been hard keeping up with all the fiscal policy changes the last few days, but they seem to leave us in a position now in which nothing is guaranteed and with the government increasingly warning of ‘hard choices to come’,” said charity director Caroline Abrahams.
“This chilling outlook will be a huge concern for our older population, with only the healthiest and wealthiest able to view the future with equanimity.”
Mr Hunt’s announcement of a review of energy support left millions of families in financial uncertainty, with expectations that it will be replaced with far less generous means-tested scheme from April.
Becca Lyon, head of UK child poverty for Save the Children, said: “Families on the lowest incomes were already feeling incredibly anxious about the months ahead, but now there’s no clarity about what energy bill support might be in place post-April 2023.
“The chancellor needs to set out a clear plan for how he’ll target support with energy bills to all families on low incomes, and he should confirm the promised benefits increase.”
One of the most prominent backbench Tory critics of the mini-Budget package, Treasury committee chair Mel Stride, said Mr Hunt’s “frank and bold” demolition of the Kwarteng plan appeared to have steadied the markets “in the very short term at least”.
But other Conservative MPs said Ms Truss may have won herself only a temporary stay of execution, as new polls suggested Labour has maintained an overwhelming lead of as much as 36 points – pointing to a wipeout for Tories in the 2024 election.
Former minister Steve Double told The Independent: “There are still huge questions about where this leaves the prime minister, because her whole leadership campaign was based on economic policies which have now been cast aside.
“We need to hear from her soon what she now stands for. She has to demonstrate that she has the qualities we need to take us forward. She has a very short window of opportunity to do that – a couple of weeks, max.”
But veteran MP Sir Roger Gale told The Independent that Ms Truss could still recover her position if Mr Hunt’s measures succeed in calming the markets.
“Power clearly now resides in No 11 rather than No 10 in terms of the economy,” said Sir Roger. “But give the lady a chance. Winter does turn into spring and into summer.”
Warning of the damage further instability will do to the country and party, he said: “It may be that she has gone too far and she will be forced out of office. But while it was right to remove Johnson, I’m not sure it would be right to remove Truss unless we have a unanimously supported alternative to take us into the general election.”
