Liz Truss insists she is not planning spending cuts as economic turmoil continues

ITV News Political Correspondent Carl Dinnen reports on how will the PM's plans be funded

The prime minister insisted she will not cut spending to balance the books as economists and the financial markets continued to question her plans - with some of her own MPs disillusioned.

Speaking during her first PMQs since the chancellor's £43 billion mini-budget unleashed chaos in the financial markets, Liz Truss said she would bring down debt "not by cutting public spending, but by spending public money well".

Her comments come just 24 hours after the IFS said public spending will need to be cut by £62 billion to fund the mini-budget.

Hours after her appearance, at the Tory backbench 1922 committee, she told her MPs that small businesses would have faced “devastation” if the government had not acted to cap energy prices, according to aides.

But there appears to be widespread unease with Ms Truss' premiership within her ranks, with a current cabinet member telling ITV News' Political Editor Robert Peston some MPs would vote against her in a confidence vote.

They would prefer a general election costing them their seats over the economic chaos, Peston reports, with Ms Truss' and Mr Kwarteng's governance "so dire".

Asked by Labour leader Sir Keir Starmer whether she was going to stick to her leadership contest pledge to not cut public spending at PMQs earlier, she replied: “Absolutely".

"Mr Speaker, we’re spending almost £1 trillion on public spending. We were spending £700 billion back in 2010. What we will make sure is that 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," she said.

Her answer was greeted by cheers from the Tory benchers, prompting Sir Keir to reply: “They can cheer. I hope they listened very, very carefully to that last answer because other people will have listened very, very carefully to it.”

The so-called mini-budget announced by Mr Kwarteng on September 23 unleashed turmoil in the financial and mortgage markets, sending interest rates soaring and the pound plunging.

Asked by the Labour leader whether the budget was responsible for the jitters in the market, she accused the opposition on not backing her energy support plan.

“We’ve also taken decisive action to make sure that we are not facing the highest taxes for 70 years in the face of a global economic slowdown," she said.

She continued: “What we are making sure is that we protect our economy at this very difficult time internationally. As a result of our action – and this has been independently corroborated – we will see higher growth and lower inflation.”

Sir Keir said the prime minister needs to “stop ducking responsibility” and reverse the “kamikaze budget”.

Carl Dinnen on the reaction to Liz Truss' public spending cuts

Asking his third question, Sir Keir said: “The economy’s in turmoil, people are really worried. This is really not the time to descend into absolutely nonsense attacks about last night.”

He added: “There’s 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.

“For nearly two million homeowners their fixed-rate deals are coming to an end next year. They’re worried sick, and everybody in this House knows it. They won’t forgive."

Ms Truss replied: “I’m genuinely unclear,” prompting jeers from the Labour benches, before she continued, “as to what the Labour Party’s policy is on our energy price guarantee”.

Despite Ms Truss ruling out public spending cuts, Downing Street said “difficult decisions” will need to be taken.

The prime Minister’s official spokesman said: “The prime minister was clear that government spending will continue to rise but beyond that it really is for the chancellor to come forward with anything on spending which he will do on the 31st.”

Economists warn that the UK has moved a "big step closer to recession", ITV News Consumer Editor Chris Choi reports on fears of what this might mean for households and businesses

Asked if the energy support scheme could be used as cover for departmental cuts, he said: “We are clear there will need to be difficult decisions to be taken given some of the global challenges we’re facing.

"I appreciate the interest but I’m not going to get drawn into what those might look like.”

Tories have returned to Westminster in a restive mood following the break for the party conferences, with their ratings tanking in opinion polls and economists questioning whether Mr Kwarteng’s plans are sustainable.

Watch the prime minister, Liz Truss face off against Labour leader Sir Keir Starmer at PMQs

There was further turmoil on Tuesday after the Bank of England announced that its emergency support operation to protect pension funds would end this week.

“As the Bank has made clear from the outset, its temporary and targeted purchases of gilts will end on October 14,” the Bank said in a statement.

“The governor confirmed this position yesterday, and it has been made absolutely clear in contact with the banks at senior level.”

Earlier, the Bank intervened for the second time in as many days to buy up government bonds, warning of a “material risk to UK financial stability” with “fire sales” of assets if did not act.

But speaking in Washington, the Bank Governor Andrew Bailey said there could be no further support beyond Friday and it was up to the funds concerned to rebalance their holdings.

“My message to the funds involved – you’ve got three days left now. You have got to get this done,” he said.

His comments saw sterling fall back again against the dollar.

Meanwhile, Mr Kwarteng had to endure a further dose of criticism from the International Monetary Fund (IMF) which warned his package of unfunded tax cuts was making it harder for the Bank to get soaring inflation rates under control.

With the Institute for Fiscal Studies warning he will have to find £60 billion in public spending cuts if he persists with his tax plans, Tory MPs fear the government’s reputation on the economy is suffering grievous damage among voters and markets.

After ministers refused to commit to uprating benefits in line with earnings – as Rishi Sunak had promised when he was chancellor – there are concerns also among Conservatives that it is the least well off who will end up paying the highest price.

Ms Truss and Mr Kwarteng have already been forced to abandon plans to scrap the top 45p rate of tax in the face of a threatened revolt during the Tory Party conference last week in Birmingham.

There are questions as to whether they will have to make further retreats with some MPs deeply sceptical of their ability to make the numbers add up.

While both prime minister and chancellor are sticking to the line that cutting taxes is the only way to get the economy growing again, there has been a noticeably more emollient tone in recent days.

Ms Truss has blocked plans to replace the former top civil servant at the Treasury – Sir Tom Scholar, who was abruptly sacked by Mr Kwarteng on his first day in office – with an outsider, appointing an old Treasury hand instead.

Want a quick and expert briefing on the biggest news stories? Listen to our latest podcasts to find out What You Need To Know

Mr Kwarteng meanwhile has brought forward the date of his “medium-term fiscal plan” – when he will explain how he intends to get the public finances back on track – to October 31 along with the Office for Budget Responsibility’s (OBR) latest economic forecasts in an attempt to reassure the markets.

The absence of any independent assessment of Mr Kwarteng’s tax plans by the OBR is seen as one of the reasons the markets reacted so badly to last month’s mini-budget.

While Ms Truss attempts to hold the line in Westminster, the chancellor is in Washington for the annual meetings of the IMF and World Bank.

Ahead of his visit, the IMF’s chief economist Pierre-Olivier Gourinchas said his fiscal policy was pulling in the opposite direction to the Bank which is expected to further hike interest rates to curb rising prices.

“Imagine a car with two drivers at the front and each of them has a steering wheel – and one wants to go left and the other wants to go right,” he told the BBC.

“One is the central bank trying to cool off the economy so that price pressures will ease, and the other one wants to spend more to support families… it’s probably not going to work very well."