Analysis: What really happened in the Budget about-turn and the fallout that followed

Ben Riley-Smith
Philip Hammond, the Chancellor - PA Wire

In the end, it took less than an hour for Philip Hammond to agree one of his Budget’s biggest revenue raisers should be scrapped.

Summoned to Number 10 at 8am on Wednesday, the writing had been on the wall after days of damaging headlines and Tory rebellion. 

Exactly a week before he had been briefing ministers in the Cabinet room about his Budget plans, with one crucial exception – how raising national insurance broke their manifesto. 

Now, a stone’s throw away in the Prime Minister’s personal office, the Chancellor came face-to-face with the full scale of that political misjudgement. 

Theresa May was flanked by her parliamentary eyes and ears – Gavin Williamson, the Chief Whip, and Baroness Evans, the Lords leader – who gave a bleak assessment of the situation. 

Mr Williamson, whose whips had been frantically calling rebels to sense the scale of the backlash, said the legislation needed had no guarantee of passing. 

Baroness Evans went further – if the law did squeak through the Commons it would be killed off by the Lords, who had no qualms defeating the manifesto breach.

Those familiar with the conversation repeat one word: “Inevitable.” The numbers were not there, the measure had to be scrapped. 

As Mr Hammond went next door to pen a “Dear Colleague” letter announcing a remarkable about-turn that would hit inboxes at 11.37am, Treasury figures were left “gutted”. 

Just hours earlier, at 8pm on Tuesday night, Mr Hammond’s backers had been telling Tory rebels there would be no backing down. They had no indication a about-turn was coming. 

Allies insist the decision was taken jointly. “He didn’t say to me: I was forced into this,” said one who has discussed it with the Chancellor. “A discussion took place, the advice was taken and a decision made.” 

But there is little doubt that Number 10 had been left furious by anonymous briefings from Treasury loyalists – including to this newspaper – that Mrs May and her team was to blame. 

“Theresa has a very loyal and uncompromising team around her. They are fiercely loyal to her,” said one source regularly in Number 10. 

“Philip has a great team, but we’ve all only been in office after eight months. There is a bit of teething problems at the adviser level if I’m honest.”

The blunders have triggered a wave of speculation across Whitehall – could Mr Hammond, less than nine months into the job, become Mrs May’s first Cabinet causality?

Certainly there are some Tory vultures circling. “Colleagues are asking why this Chancellor is dishing out punishment beatings to entrepreneurs and to our own voters,” said a backbencher. 

“Most people want him gone by May after the local elections. He is just not up to the politics of the job.” 

And the rebellions over the Budget appear not to be over. More than 20 Tory MPs have concerns about a raid on dividends, according to some backbenchers, plus there is concern over rising fees for those selling inherited estates. 

However much weight is being put on the friendship – or at least personal affection – between the Mrs May and Mr Hammond, Oxford University contemporaries. 

One minister who has known them for decades says they are the “same type of Tory”. Another Government source says they see “eye-to-eye” over the need to control the country’s finances. 

“They meet regularly for breakfast and meals. He’s very, very close to her. He is the same age, he is the same vintage,” says one Treasury figure. 

“Do they agree on everything? Of course they don’t. But Philip is extremely courteous to colleagues about her and is always complimentary.”

And then there is the living situation – Mr Hammond lives in No 10’s flat, the bigger of the two, while Mrs May who is stationed in Number 11. 

“You often see his two dogs wandering through being taken for a walk by Mrs Hammond,” says a Number 10 source. 

The Chancellor’s allies for their part are scathing about the idea he will be sacked, calling the idea “extremely unlikely”. 

“The notion that someone like Greg Clark [the Business Secretary] could fill his boots is absurd,” said one close to Mr Hammond.

"I think for most of the parliamentary party that is the same. I don’t know who the credible figure is to replace him."

More interestingly, some in Number 10 have decided they would be damaged by a sacking too – coming less than a year after Mr May gave Mr Hammond the role. 

“A reshuffle to move the Chancellor this May would be very damaging and look very weird,” revealed one senior source. 

“I can see people are talking about it this week. I think it would have gone within a few weeks. 

"Within a year of forming a Government to have a reshuffle would look like a sign of weakness.” But the source adds: “Within 18 months of taking office? Maybe.”

Perhaps most fascinatingly of all, key Eurosceptics are rowing behind Mr Hammond for now – through the medium of a secret WhatsApp group.

Shortly after his U-turn, a message went out of the social media chatroom involving more than 40 Tory Eurosceptics. “Give every support to Hammond”, it read according to a source. 

Days earlier the Brexiteers had been told that attacks on the Chancellor’s Eurosceptic credentials were “ludicrous and disruptive” – another clear message. 

Senior Leavers have told Mr Hammond’s Treasury allies that only a handful of their rank are out to get him; the rest will remain supportive. 

Aware of his fractured links, Mr Hammond has invited his backbenchers round for drinks. The invites, which dropped on Monday, have been dismissed by some. 

“I’m not going to fall for the vinegary white wine and crap canapé offensive,” said one. But others have decided differently – more than 100 are expected to turn up.

For Number 10 and Number 11, it is a case of “ball dropped” but carrying on as one.

“We all missed [the manifesto issue], we are all kicking ourselves and now we get over it,” said a Treasury figure.

“We have recognised we’ve got to work closer together, but there really is not a big falling out. We are not in Gordon Brown territory.” For now at least. 

By using Yahoo you agree that Yahoo and partners may use Cookies for personalisation and other purposes