Budget labelled a ‘shambles’ as blame game erupts in Westminster

Philip Hammond

Better than expected growth had given the Chancellor billions of pounds more to play with while pre-briefed announcements had made five days of positive headlines.

The Telegraph reports that Philip Hammond, just eight months into the job, had breezed through a TV grilling on The Andrew Marr Show days earlier and privately agreed extra cash for social care.

But as the Chancellor, Tory blue tie on show, took the Government’s most senior figures through his announcements, there was one crucial omission: the manifesto.

Not once did Mr Hammond mention that his National Insurance increase for the self-employed could clash with a Tory promise made just two years ago, according to numerous sources.

During the hour-long briefing, the 2015 election pledge to “not raise VAT, National Insurance contributions or Income Tax” was conspicuous only by its absence.

The oversight lies at the heart of a vicious blame game that has erupted across Westminster this weekend after the worst-received Budget in half a decade.

Why were ministers not warned? Was the Treasury aware of the issue that would lead almost every newspaper front page the next day? And if not, why not?

“On something as significant as that, you need to say ‘it could be seen that this is a breach of our manifesto commitment but it’s not because of X, Y, Z,” a Cabinet source said. “You need to flag it more clearly. There is a very clear view that the Treasury should have politically flagged the risk.”

The error was not Mr Hammond’s alone. When Cabinet ended at 9am ministers selected to defend the measures on television went to No 11 for further briefings with officials.

Those present including Justine Greening, the Education Secretary, and Karen Bradley, the Culture Secretary, only had the manifesto issue flagged up in passing.

“This was barely even mentioned,” said one present. “We were dealing with the substance of the Budget measures in order to do media.”

A 2,000-word “special brief” circulated to political aides about how to spin the Budget if contacted by journalists compounded the blunder.

It dropped into inboxes at 1.32pm as the Chancellor finished his Budget speech in the House of Commons, but what to say about the manifesto was again totally absent.

Only in a heated Budget briefing with journalists outside the Commons chamber did the scale of the political own goal became apparent.

No 10 was not impressed. “There wasn’t a Thick of It-style people charging around on phones,” a Whitehall source said, referencing the foul-mouthed political satire. But there was concern. “The Treasury’s response left a lot to be desired.”

Government figures continue to insist that the manifesto has not been broken. A law enacting the pledge after the election said only Class 1 National Insurance rates – for the employed – would not rise. There was no mention of Class 4 rates which were hiked this week.

But critics say this is the exact misleading use of small print that Mr Hammond himself promised to clamp down on during the Budget.

The Treasury team’s relative inexperience is being blamed by some Whitehall sources. Mr Hammond –dubbed “Spreadsheet Phil” for his conservatism – has only been in post since July.

“Hammond is not up to it. He is a remarkably good bookkeeper but he is not a Chancellor,” said one minister who believes the rise has to be scrapped.

The Chancellor’s political aides such as Poppy Trowbridge, a former Sky News reporter who joined last summer, are still getting to know the Treasury’s ways.

One George Osborne ally said Theresa May was paying the price for getting rid of so much talent in her ruthless reshuffle last summer.

“George had been doing that job or was shadow chancellor in opposition for an awfully long time – for 10 years. That is a lot of institutional knowledge that you just carry around with you, The problem is they cleared out George and his team and brought in new people,” the source said.

“There were plenty of copies of the Tory manifesto hanging around in the Treasury during his day and they were regularly looked at.”

A Treasury source fiercely rejected claims it was unaware that raising National Insurance for the self-employed could clash with the manifesto. “We went through this fully sighted,” the source said. “We knew people wouldn’t like a tax rise but they are required when paying for public services is a priority.”

But the blame game cuts both ways in Westminster. Treasury figures have named Theresa May’s defence of “just about managing” families – or JAMS – as the real cause of the Budget meltdown.

In the weeks before the Budget, Mr Hammond had to find £2.4 billion extra for social care and close to another half a billion to help firms with business rate rises after growing political pressure.

With money from better-than-expected growth being put aside for a Brexit “war chest”, that left one option, it is claimed – higher taxes.

“If No 10 has got all these projects to spend money here, there and everywhere then you have to raise it from somewhere,” a Treasury figure said.

“They would have done other things. They would have increased Capital Gains Tax and done goodness knows what to make Philip Hammond look like a Corbynista.

“Nick Timothy [Mrs May’s co-chief of staff] is the one who loves taxes and he loves taxes on the rich because he thinks that’s good for the JAMs nowadays. That’s the impression I get.

“We are the ones who are deemed to be culpable if we don’t get it right. You cannot borrow, spend more and not increase revenue. It is as simple as that.”

Whoever is to blame, Cabinet ministers could not have been more blindsided by the fallout. Within hours Tory rebels had set up a group on the social media service WhatsApp to plot how to force a reversal via their smartphones.

Civil servants were also sent scrambling when Guto Bebb, the Welsh minister, decided to “apologise to every voter in Wales that read the Conservative manifesto” on live radio.

Officials were ordered from the Welsh Office to babysit him for the rest of the day. “He was marshalled in and out of his next event by senior officials to make sure he did not get in front of a camera microphone,” said a source.

Mr Bebb later said the comment was a joke. However, dozens of Tory MPs – possibly as many as 100, according to leading rebels – shared his sympathies.

Spokesmen in No 10 and the Treasury have denied there is a rift between the two departments over the Budget mistakes.

Both Mrs May and Mr Hammond said in public that the manifesto had not been broken and insist the changes – backed by leading think tanks – were right and progressive.

Figures at the top of Government are now working out a face-saving measure that can be announced at a second Budget later this year.

But many in the party fear the damage has already be done.

As David Cameron was caught on camera saying this week, according to a lip-reader: “Breaking a manifesto promise – how stupid can it get?”

About Business Matters

Business Matters staff