CABINET AT WAR OVER AUSTERITY

Chaos as string of top Tories – and Number 10 – hint at end to public sector pay cap ... only for enraged Chancellor to block the £5bn U-turn

‘Whole Treasury is in uproar’

‘We’ve had to take tough decisions’

THE Cabinet was at war over austerity last night after the Chancellor put the brakes on plans to lift the public sector pay cap that would send taxes soaring.

On a day of confusion, Downing Street was forced to backtrack over suggestions the one per cent ceiling could be eased.

At lunchtime, a senior No 10 source had told reporters that Theresa May had ‘heard the message’ that voters were ‘weary’ of austerity. A string of senior Tories, including Defence Secretary Sir Michael Fallon, Transport Secretary Chris Grayling and former policy chief Sir Oliver Letwin also suggested the cap could be ended three years early.

But the prospect of a potential £5billion commitment sparked a furious reaction from Chancellor Philip Hammond.

The move would require the equivalent of at least an extra penny on income tax. Announcing it now would also tie Mr Hammond’s hands five months before he is due to deliver his Budget.

One insider said: ‘The Chancellor is bouncing off the walls – the whole Treasury is in uproar. The pay cap saves an enormous amount of money, probably more than anything else in the last Parliament.

‘It also saved tens of thousands of public sector jobs. You can’t just junk seven years of fiscal policy – you lose the whole message about living within your means.’

Mr Hammond’s fury prompted an immediate climbdown by No 10. At a regular briefing for journalists at 4pm, the Prime Minister’s official spokesman insisted: ‘Government policy has not changed.’

The mixed messages on public sector pay will add to disquiet about a growing lack of discipline in the new Government. No 10 was forced to intervene on Tuesday after a bout of infighting over Brexit involving Mr Hammond, Brexit Secretary David Davis and Foreign Secretary Boris Johnson.

Shadow chancellor John McDonnell branded the shifting position on public sector pay a ‘shambles’, adding: ‘This war between No 10 and the Treasury isn’t sustainable.’ Despite confusion, many Tories believe the Government will ease the pay cap later this year – probably funded by higher taxes.

Rising inflation put ministers under renewed pressure over the issue during the election campaign. The one per cent cap, which affects 5.1million workers, is due to run until 2020 under current plans. It has already been in place for seven years – during most of which inflation was at rock bottom levels. But with the cost of living now expected to rise above 3 per cent, the cap is due to impose a significant squeeze on incomes.

The Institute for Fiscal Studies estimates that raising the ceiling in line with inflation would cost an extra £5.3billion a year by 2021, with the NHS alone needing an extra £1.6billion.

Defence Secretary Sir Michael Fallon hinted at a possible shift when he was asked if military personnel could expect above-inflation pay rises. He said: ‘This is something we have to consider, not just for the Army but right across the public sector as a whole.’

Transport Secretary Chris Grayling then told the BBC’s Daily Politics: ‘We have had to take some tough decisions and in the wake of the general election we are going to have to think through what we do come the next Budget.’

Sir Oliver Letwin suggested the Tories would now have to raise taxes in order to ‘ease up’ on austerity. ‘It may well be that, in one way or another, a large number of people will have to pay a little more tax if we are going to maintain the trend towards reduced deficits and yet spend a bit more on the crucial public services that do need more spending,’ he said.

Asked about the issue after Prime Minister’s Questions yesterday, No 10 initially suggested that the purse strings could be loosened.

‘Ministers, including the Prime Minister and the Chancellor, have been clear that we are going to listen to the messages that were sent at the election,’ a senior Government source said.

‘We understand that people are weary after years of hard work to rebuild the economy.’

Three hours later, No10 insisted there was ‘no change’ in the Government’s commitment to the pay cap. Last night, Health Secretary Jeremy Hunt told MPs that a ‘final decision’ on public sector pay would be made later this year. Mr Hunt said: ‘We will listen to what the pay review bodies say and listen to what this House says before we make a final decision.’

Several prominent Conservative MPs also called for the cap to be eased. Sarah Wollaston, former chairman of the Commons health committee, said it was time to ‘think again’. The qualified GP said issues with ‘recruitment, retention and morale’ in the public sector could be addressed by giving workers ‘a fair pay settlement’.

Ex-minister Andrew Murrison, a former naval medical officer, said: ‘It is absolutely right we should now be looking at removing that cap on pay for public sector workers and in particular think about those in our health services.’

The Government survived its first Commons test last night as DUP allies helped vote down a Labour bid to sabotage the Queen’s Speech. The amendment was defeated by 323 votes to 309 as all ten DUP MPs voted with the Tories.

NOTORIOUS hate preacher Tarik Chadlioui has been wanted throughout Europe since the 2015 Bataclan Theatre attack in Paris, in which 89 were killed.

So how on Earth did the Moroccan-born, Belgium-based imam – believed to have radicalised one of the killers – manage to make his way to Birmingham, where he lived for two years before his arrest?

If such a high-profile Islamist fanatic can waltz in and out through passport control, why do we bother to employ thousands of officials to protect our borders? AS a news anchor for state- owned Channel 4, Jon Snow is obliged to be impartial. He has an odd way of showing it. Not content with tweeting his fury over Brexit, he joined a group at Glastonbury chanting: ‘F*** the Tories.’ Mr Snow may be a goodish journalist. But shouldn’t Ofcom be asking questions about his objectivity? Or is the regulatory quango itself so steeped in bias that it regards such blatant bigotry as neutral? IN the Commons yesterday, Mr Corbyn could have distanced himself from his vile supporters who urinated on MP Sheryll Murray’s door, subjected her to four-letter abuse through social media and carved swastikas on her election posters. Yet he offered not a word of apology for the way his storm troops targeted female Tory candidates during the campaign. So much for his ‘kinder, gentler politics’.