Liz Truss is facing a fresh battle with Conservative MPs over a potential benefits squeeze and cuts to public spending, after already being forced into making a policy U-turn.
The prime minister is under pressure to set out whether benefit payments will be uprated in line with inflation, or if they will face a real-term cut.
It is understood that Downing Street is considering increasing Universal Credit using a lower metric, such as the increase in average earnings, instead.
Politics live: Major U-turn after prominent Tories speak out
While an official decision on benefit payments has still not been made, Welfare Secretary Chloe Smith said one “will be taken in due course”.
Senior Tories have called on the PM to row back on cutting public spending in the middle of the cost of living crisis, with concerns that failing to keep pace with rising prices would leave some of the poorest households worse off.
It comes as the government dramatically dropped its plans to abolish the 45% tax rate on earnings over £150,000 following widespread criticism.
The policy was announced during the mini-budget near the end of September, which plunged UK markets into turmoil.
What are MPs saying?
Speaking to Sky News, Conservative MP Damien Green said: “The government should uprate in line with inflation. The previous government said it was going to, so people are expecting this.”
Asked if cuts to benefits are the next battle, he replied: “Well, I hope not because I hope the government has clearly started listening.”
Former transport secretary Grant Shapps is also among the senior Tories calling for the government to be transparent about its plans
Asked if he would want to see benefits increased in line with inflation, he said: “Of course, every politician would want to see that.
“If there is a case whereby we are going to be going through difficult times, then the government must communicate that and be honest with people and explain how and what needs to happen next.”
Former home secretary Priti Patel is set to take aim over the government’s unfunded tax cuts, telling the Conservative Party it will “live or die” by its economic credibility.
According to The Times, she is expected to accuse the PM and Chancellor Kwasi Kwarteng of “spending today with no thought of tomorrow” and will call on Ms Truss to put a “ceiling” on public spending.
First part of Truss’ reign is over – is there any way back from 45p tax rate U-turn?
‘Action was needed urgently’
Despite the discontent within the Conservative Party, Liz Truss has pushed forward with her economic policy, saying the UK must have “the courage of its convictions to put our nation on the path to success”.
Writing in the Telegraph, the prime minister said the struggling economy was a global problem caused by Russia’s President Vladimir Putin and COVID and that there was “no time to waste”.
“Action was needed urgently. People forget the counterfactual of what would have happened had we not acted,” she wrote.
Has the government lost credibility?
Truss sticks by plan but admits mistakes
‘What a day!’ – Chancellor admits ‘tough time’
While she dismissed the U-turn on the 45p tax rate cut as a “tiny part of the plan”, reports in The Sun said that the Chairman of the 1922 Committee Sir Graham Brady went to see her at 7pm on Sunday evening.
The PM was then said to have met Chancellor Kwasi Kwarteng for crisis talks, hours before she ditched the tax promise on Monday morning.
Monday was a tumultuous day for the party, with Mr Kwarteng’s keynote conference speech altered at the last minute to acknowledge the U-turn.
Hours after his speech, it was revealed Mr Kwarteng will bring forward his medium-term financial statement from 23 November to this month, despite saying he would not earlier in the day.
Markets bounced back on Monday morning, but financial commentators cautioned that it was likely some respite only.
What will be happening at the Tory Conference today?
The Conservatives will be hoping for a quiet day on Tuesday ahead of Liz Truss’ speech on Wednesday.
In his first speech as foreign secretary, James Cleverly is expected to focus on the UK helping Ukraine defend itself against Russia.
He will also talk about finding a “mutually beneficial solution” to Brexit issues in Northern Ireland.
New Home Secretary Suella Braverman will also speak on Tuesday, setting out her plans to “redouble efforts to crack down on illegal migration”.
Education Secretary Kit Malthouse, Health Secretary and Deputy PM Therese Coffey, Transport Secretary Anne-Marie Trevelyan and Justice Secretary Brandon Lewis will also address the conference in Birmingham.