Hammond’s anger as May ‘railroads’ him into ending austerity

THERESA May’s pledge to end austerity has ramped up tensions with Philip Hammond’s Treasury – with allies of the Chancellor complaining that they were ‘railroaded into it’ to ensure that she enjoyed a successful party conference.

The Prime Minister used the Birmingham gathering to announce a boom in council house building and a freeze in fuel duty, heralding the end of the swingeing public spending cuts introduced by David Cameron in 2010.

She said that austerity would come to an end in next year’s spending review, when Mr Hammond will set out the spending targets for Government departments.

Mrs May’s move pleased party activists keen to neutralise the electoral threat of Jeremy Corbyn – but has left Mr Hammond struggling to balance the books for this month’s Budget.

One Treasury source told The Mail on Sunday: ‘We weren’t consulted about the housing plan until very late in the day, and we had hoped to announce the latest fuel duty freeze ourselves. None of this was ideal.’ Even before Mrs May’s announcement, the Chancellor was looking for ways to find the money for the extra £20 billion a year for the NHS which the Prime Minister announced with great fanfare earlier this year. It has forced Mr Hammond to t i ghten t he squeeze on other departments such as the Ministry of Defence, leading to rows with Defence Secretary Gavin Williamson.

The source said that there had been similar tensions with No 10 before Mrs May made her extra spending pledge on the NHS.

‘Philip is very conscious about protecting the party’s reputation for fiscal rectitude and responsibility. He had been hopeful of stopping the NHS splurge until just days before she said it,’ the source said. ‘At the moment he just buttons his lip and goes home to complain to his wife.

‘He doesn’t blame May so much as [her Chief of Staff] Gavin Barwell, who thinks that turning on the taps is the way to beat Corbyn.’

Mrs May’s announcement of the end of the austerity era reflects the views of party strategists that Labour would win the next Election i f the Tories did not abandon the cuts.

But Mr Hammond will struggle to meet the pledge without raising taxes – which promises to be equally unpopular among both Tory MPs and the party’s core voters.

The tensions come as the Treasury released calculations to this newspaper which revealed that Labour’s spending promises would cost each household £35,000 over ten years – more than the average family spends would spend on food in a decade. Plans announced by Shadow Chancellor John McDonnell at Labour’s party conference in Liverpool included re-nationalising industries such as water, energy and rail – which the Treasury has costed at £176 billion.

In total, it said Labour’s plans would require a £997 billion borrowing binge – not including a further 37 unfunded spending commitments made by Labour since the General Election – which amounts to £35,200 of additional borrowing per family over a decade.

A Treasury spokeswoman said the Chancellor had been aware of Mrs May’s conference announcements in advance.

Mrs May’s pledge to end austerity contrasted with Mr Hammond’s own conference speech, during which he signalled a ‘ cautious’ Budget and disciplined financial management in order to reduce the national debt, despite coming under attack from what he called ‘populists and demagogues’ among Corbyn’s supporters.

He urged the Conservative Party to hold its nerve in the face of pleas for extra spending.