Conservative donors and business leaders are turning on Liz Truss even after the new chancellor ditched many of her key policies in a bid to save the government.
In his first full day in post, Jeremy Hunt admited there would be tax rises and spending cuts ahead as he urged Tory MPs not to oust her.
He also refused to say if he would keep Ms Truss’s flagship pledges to cut the basic rate of income tax and increase defence spending to 3 per cent of GDP.
Despite his bid to calm nerves, one of the Conservative Party’s most generous donors, John Griffin, said the prime minister was “out of her depth” and called for her to be replaced.
Lord Rose, the Tory peer and chairman of the Asda supermarket chain, described her as a “busted flush” and said the current situation was unsustainable.
Another major donor, Alexander Temerko, did not call for Ms Truss to go, but said: “I hope that the sense of self-preservation will force the government to cooperate with business to pursue a coordinated, socially responsible economic policy.”
In a highly unusual show of strength, which in turn highlighted the prime minister’s weakness, Mr Hunt admitted the government’s disastrous mini-Budget, which spooked the markets and saw the pound fall to its lowest level in 37 years, “went too far, too fast”.
He said the planned tax cut for the wealthiest and a decision not to publish Office of Budget Responsibility (OBR) calculations has been a mistake, and promised a clean slate.
In comments that infuriated parts of the Tory right, Mr Hunt said “some taxes will go up” as he works to balance the Treasury books.
Bank of England governor Andrew Bailey has warned that inflationary pressures could mean a higher-than-expected hike in interest rates soon.
Mr Hunt denied Britain was returning to an era of austerity but admitted “difficult” decisions would have to be made on spending, refusing to commit to raising benefits in line with inflation and signalling that the NHS would not be immune from the squeeze.
On the prime minister’s future, Mr Hunt insisted she had “listened” and warned against removing her from office, saying “I think the last thing people want now is more political instability”.
But Mr Griffin, founder of the Addison Lee taxi firm and who has given £4m to the Tories since 2013, said that the chaotic scenes on Friday, when Ms Truss sacked her first chancellor and announced a major U-turn on corporation tax, showed she was “out of her depth”.
He compared Ms Truss to Theresa May, ousted by the party in 2019, and said: “We are back in the same mode now. And in the end people are going to see sense. Time is running out. The more we dig this hole the deeper it is going to be. We need to all sit down now – senior members of society from all parties – to look at this. This is a moment in history and we have to really do what is right.”
Mr Griffin, who was highly critical of Boris Johnson over Partygate, also suggested that the former prime minister was the best person to replace Ms Truss. “It would be nice if there was someone else in prospect,” he said, “but we have to look closely at where our best chances lie.”
Lord Rose, the former boss of Marks & Spencer, who sits in the House of Lords as a Conservative peer, suggested Mr Hunt’s efforts were in vain because the “current situation is completely untenable and cannot be sustained”.
“In my view the prime minister is now a busted flush,” he told the BBC’s Today programme.
Tory MPs agreed that Mr Hunt’s intervention was not enough to save Ms Truss. “She can’t lead us into the next election, everyone knows that – it is just whether she goes in the short term or the long term,” said one.
Mr Hunt is due to meet Ms Truss on Sunday at Chequers.
