Budget seen as 'make or break' for Philip Hammond

Philip Hammond is preparing to deliver a budget to parliament that will “make or break” his political career, according to senior allies, who warned that one mistake could mark the end of his tenure at the Treasury.

The chancellor is already under intense pressure from Brexit-supporting Tories as he prepares to prioritise investment in housing, teacher training and technological research and development.

Hammond will attempt to take on his critics by striking an upbeat tone in his first financial statement since June’s election, promising to “embrace change, to meet our challenges head on, and to seize the opportunities for Britain”.

Setting out a vision for a global Britain propped up by a “prosperous and inclusive economy”, he will say the country is at the forefront of a technological revolution and promise to “invest to secure a bright future”.

However, it comes amid reports of tensions between No 10 and No 11 as advisers to Theresa May expressed frustration at pre-budget gaffes, including claiming on television that there were no unemployed people in Britain.

Jeremy Corbyn will respond to the budget on Wednesday by attacking the chancellor for failing to understand voters’ real lives.

In an attempt to boost the Conservatives’ reputation after Corbyn’s party won over younger and middle-aged voters and stripped the Tories of a majority in June’s general election, the chancellor will:

• place housing reforms centre stage with a promise to push housebuilding up from 217,000 to 300,000 homes a year, with £5bn for new schemes, proposals to make it easier to grant planning permissions, and the possibility of some borrowing to invest;

• promise a £42m investment in teacher training and £177m to promote maths skills, including giving schools and colleges £600 for every additional new student taking maths A level. Sources said that children who study maths until they are 18 earn up to 10% more in their early 30s;

• provide the money to cut a wait of up to six weeks for recipients of universal credit after an outcry from Tory MPs;

• boost investment in artificial intelligence, driverless cars, as well as research and development;

• and promise that public sector pay will rise but not give any actual figure as the Treasury says increases for nurses or other workers must be set by the pay review bodies.

There have also been suggestions of a cut to stamp duty for first-time buyers.

Many will be hoping for a significant financial boost for the health service, although the amount is likely to fall well short of the amount demanded by the NHS chief executive, Simon Stevens, as Hammond strives to maintain his reputation as a fiscally conservative figure.

One source said that the chancellor wanted to keep the principle of “sound money” at the heart of the budget.

One ally of Boris Johnson claimed to the Guardian that the foreign secretary had told friends earlier this year that May had given him a personal assurance that her government was ready to boost NHS spending by £350m a week in the long term in exchange for his backing on Brexit.

The source claimed the prime minister wanted to honour the commitment made by Vote Leave during the EU referendum. However, the suggestion of such a promise was denied by sources in both Downing Street and the Foreign Office.

A senior Treasury source told the Guardian that they felt there was little chance of getting many tax-raising policies past MPs given the difficult parliamentary arithmetic for May. Already an idea to levy more tax on diesel has been killed off.

Hammond is also unlikely to push ahead with one controversial money-making move to lower the threshold at which businesses start paying VAT from a turnover of £85,000 to £43,000. The idea, which has been floated in the media, would be quickly characterised as hammering the “white van man” if he were to proceed.

Hammond’s March budget was overshadowed by a failed attempt to increase national insurance for the self-employed.

One cabinet minister, who is close to Hammond, has told friends that such a move would surely mark the end of the chancellor’s time in charge of the Treasury.

They described themselves as an ally of the chancellor but said they had been frustrated by the closed process ahead of the budget, and claimed that Hammond would have benefited from achieving consensus with colleagues. “This is make or break for him,” they said.

Another senior Conservative said the backdrop of Brexit and the fragile parliamentary arithmetic meant Hammond’s budget would have always have been a difficult one – but that he had made it harder by failing to reach out to cabinet colleagues.

“None of us know how difficult it is to be in that job. He has a choice, and it’s absolutely his choice to make. But it’s the way he acquits himself – he doesn’t go out of his way to make friends. He could have tried to bring people with him, be he chose not to. He’s got a hard job but the way he deals with it makes it harder for himself,” they said.

There also appeared to be some annoyance about the way the media briefing was handled ahead of the budget, with lacklustre coverage as a result of limited policy announcements. Advisers at No 10 appeared to take control on Tuesday evening by insisting that the Treasury put out additional information for journalists.

The shadow chancellor, John McDonnell, said: “Our view is Hammond and the government are not living in the real world; they’re completely out of touch about what’s happening in the country and how people are experiencing public services, their pay, and their standards of living being eroded.”