Chancellor’s relations with PM crash to a toxic low – just days before critical Budget
Chancellor risks storm as he plans to toughen rules on tax
RELATIONS between Theresa May and Philip Hammond have sunk to a new low just days before the Budget amid claims that the Prime Minister is being ‘poisoned’ against the Chancellor by her exiled ‘Rasputin’.
Mr Hammond’s Budget on Wednesday will be one of the most critical in recent memory, with the fate of the Government potentially riding on its success.
But the Chancellor’s allies complain that his task has been rendered a ‘nightmare’ by Mrs May’s ‘hostile’ attitude to him, which they say is a legacy of the feud between Mr Hammond and her former Chief of Staff, Nick Timothy.
They also claim that Environment Secretary Michael Gove is behind negative briefings about Mr Hammond – because he wants to land the Chancellor’ s job. The Budget is expected to focus on measures to improve living standards for the young voters who have swung behind Labour leader Jeremy Corbyn, with Mr Hammond pledging to ‘build a country fit for the future’ – including a £1 billion boost for new technologies, with plans to put driverless cars on UK roads within four years.
The Cabinet has been bitterly split over housing, with critics claiming Mr Hammond has not released sufficient funds. Treasury sources counter that they have been stymied by Mrs May’s reluctance to build on the Green Belt. Mr Ham- mond’s relationship with Mrs May has never recovered from his toxic rows with Mr Timot hy over economic policy, which had been expected to lead to the Chancellor’s sacking. Instead, Mr Timothy was forced out for his role in the backfiring Election campaign.
Mr Timothy – dubbed Rasputin because of the beard he sported in No 10 – has since made repeated public attacks on Mr Hammond. Last week, he accused the Chancellor of having no ‘burning desire or imagination’ to improve the lives of ordinary families.
The Hammond ally said: ‘Philip feels that every time the PM stares at him, she is raging inside that Philip is still sitting there while Nick has gone.’
The attacks have so infuriated the Treasury that one official recently went in to No 10 to confront Mrs May’s aides over whether Mr Timothy was acting under orders.
A friend of Mr Timothy said last night: ‘ Nick hasn’t even seen the PM since the Election. Hammond sees her several times a week. If he’s worried about t he relationship, he should think about his own conduct and performance.’
Allies of the Chancellor also claim he is being undermined by Brexiteers who want to install Mr Gove in the Treasury. Speculation that Mr Gove might move to the Treasury has increased after Brexiteers pri vately championed hi s cause as an intellectual who could ‘challenge the Europhile orthodoxy’ in the department.
Downing Street has been worried for months that a misfiring Budget could threaten the stability of the Government – either through a Commons rebellion by Tories, or because disenchanted MPs will be spurred into adding their names to the list of rebel MPs who want Mrs May to step down.
It is understood the rebels are still about a dozen names short of the 48 needed to trigger a leadership contest. But one leading rebel source said they expect that to change if the PM makes a mess of any post-Budget reshuffle.
The source said: ‘The danger is she is making enemies faster than making friends.’ Any reshuffle is now expected to take place in the New Year.
A spokesman for Mr Gove declined to comment.
‘Philip should think about his conduct’
CHANCELLOR Philip Hammond is this week expected to risk a new political storm by announcing plans to raise billions of pounds from Britain’s army of self- employed workers and contractors.
Hammond will unveil his Budget on Wednesday amid a gloomy outlook for the economy and the public finances. In a speech that economists said would be cautious, the Chancellor is likely to tighten the tax rules under which freelance workers are paid.
Hammond’s March Budget was derailed by a row over hikes in National Insurance Contributions for self-employed workers.
A repeat this week could be politically fatal for the Chancellor, who has struggled to win over Tory backbenchers because of his lukewarm attitude to Brexit.
Treasury officials are thought to be considering two major proposals. One involves a plan to extend ‘offpayroll working’ rules which would force big companies to deduct tax and National Insurance Contributions automatically from the gross pay of self-employed workers who work through personal companies.
The rules, which came into effect for the public sector in April this year, could be extended to all private sector businesses.
Lee Hamilton, a partner at accountant Blick Rothenberg, said there was ‘mounting pressure’ on the Government to apply the rules to the private sector to make the system more fair and to address fears that tax is being lost because contractors are not adhering to the rules. ‘A change is coming,’ he said.
The Treasury estimates that the public sector offpayroll moves will raise £800 million over five years. The private sector change could raise twice as much, experts said.
A second proposal relates to existing Treasury plans to lower the threshold at which small businesses have to register and pay VAT. The threshold could be brought down from a taxable turnover of £85,000 to as little as £26,000. A reduction of that mag- nitude would raise £2 billion a year. Tory backbenchers have been arguing against a reduction in the threshold and have warned it would tie up hundreds of thousands of small businesses in red tape. Anne-Marie Trevelyan, backbench Conservative MP for Berwick-uponTweed, said: ‘A number of us have made it very clear that this would be unacceptable.’ She said Conservatives should be supporting self- employed people rather than trying to squeeze them for more taxes. ‘Self-employed people take risks,’ she said. ‘It’s as if the Treasury has forgotten our aim should be to encourage risk-taking.’ Chris Bryce, chief executive of the Association of Independent Professionals and the Self Employed, said: ‘The nation’s self-employed could be excused for thinking Mr Hammond is waging war with the way they choose to work. ‘ If off- payroll rule changes are extended to the private sector, the implications would be disastrous.’ He said VAT changes would ‘lead to serious cash flow problems for many of our smallest businesses’. The Chancellor r eport - edly pl ans t o r ework public finances, releasing an extra £5 billion. But there were concerns measures to ease rising business r a t e s woul d b e restricted to an early switch to t he Consumer Prices Index of inflation. Robert Hayton, executive vice president of advisory firm Altus Group said: ‘ He should be bolder.’