Philip Hammond under pressure to deliver bold budget, say Tory sources

The chancellor, Philip Hammond, is under pressure to deliver a bold budget next month, aimed at resetting the agenda on intergenerational fairness on which the party feels it is being outdone by Labour, Tory sources have said.

Ministers have been asked to come up with strong proposals on issues such as housing and tax relief. One idea reportedly being examined by the chancellor is a proposal to link tax to age – and offer younger voters a cut in National Insurance contributions.

A senior government source said Hammond’s budget was a chance to reset the party’s image after Theresa May’s conference speech failed to do so.

“There were a lot of brilliant ideas at conference which might have got overshadowed because of some other narratives. We can’t run the risk of that happening again,” the source said.

“Anyone looking at the result of the last election will see that the Conservatives may get to a stage where we start to run out of voters, which is why many want to see an offer on intergenerational fairness. Any Tory minister, any Tory MP can see that’s crucial.”

One influential Conservative backbencher said the feeling among Conservative MPs was that it was the right time to take risks to win back support for the party.

“The party has to show it is prepared to be bold in helping younger people feel they have a stake, whether that’s in owning a home, in savings, in pensions,” said the MP said.

Tax cuts offered to voters in their 20s and 30s could be paid for by cutting pension tax relief, the Telegraph reported, a risky move given the ageing demographic of Conservative core voters.

The chancellor has been in the firing line this week from hardline Eurosceptics in the party who criticised him for refusing to commit additional funds in case of a “no deal” Brexit. But over the weekend the transport secretary, Chris Grayling, appeared to quash rumours that the chancellor would be replaced in a snap reshuffle, confirming Hammond was preparing to deliver the budget.

The former education secretary Nicky Morgan also appeared to suggest that the home secretary, Amber Rudd, is among those appalled by the briefings against the chancellor.

Morgan said she had been speaking to a “very senior” cabinet minister who criticised the behaviour of Hammond’s opponents. She described her source as a “she”, prompting speculation she meant the home secretary.

“Those who are saying that he should be sacked are incredibly self-indulgent. I should just say I have been contacted this morning by a very senior cabinet minister who is appalled at what she is reading in the newspapers this morning,” she told ITV’s Peston on Sunday. “It’s not on to have all of this. It is not helpful for anybody to have ministers being attacked.”

Among those calling for Hammond to be replaced were Nigel Lawson, a Eurosceptic and former chancellor, who said his actions were “very close to sabotage”. Tory MP Nadine Dorries also called for him to quit this week.

Grayling, a Brexit supporter, said Hammond was focused on preparing the upcoming budget, but did suggest ministers needed to be “upbeat” about the future of the country post-Brexit.

Asked whether Hammond should be sacked, Grayling said: “In a month’s time the chancellor is going to deliver a very important budget for this country and I’m working with him and we are all behind him in delivering that.”

Democratic Unionists denied reports the party had asked May to “rein in” Hammond, saying claims in the Sunday Telegraph that its parliamentary team wants May to force the chancellor to change his line on Brexit “does not reflect the party’s position at this time”.

The DUP source added that it was in interests of the party and Northern Ireland “at all costs to keep Theresa May” in power, rather than pave the way for Labour under Jeremy Corbyn. The DUP’s 10 MPs prop up May’s minority Conservative government under its “confidence and supply” agreement with the Tories.

Housing and tax relief are likely to be two of the key areas under consideration for further reform, according to the Sunday Times. In her speech to Conservative conference this month, which was overshadowed by an interruption buy a prankster and her coughing fit, May announced an extra £2bn for affordable housing, including the building of an extra 12,500 homes for social rent each year in 2020 and 2021.

Charities and housing experts have warned the figure is unambitious, with 1.2 million households on council waiting lists in the UK. Councils and charities have pressed for local authorities to be given more power to allow local authorities to borrow to build new council houses.

The housing minister, Alok Sharma, said the government accepted there was more to do, but stopped short of committing to give councils more financial flexibility. “We’re going to see a lot more house building, but also house building within the social sector,” he told ITV’s Peston on Sunday.

“The prime minister is leading on this . She has said this is going to be the mission that she has in her government and we have a big meeting on Tuesday which she’ll be leading with the big developers, with housing associations, with local government, so that we can turbocharge our efforts to build more homes.”

On Tuesday, May will host summit with developers, local authorities and housing associations to challenge them on solutions to barriers to home building.

The chancellor has also been urged to revisit the freeze on working-age benefits, which a leading thinktank has warned would result in low-income working families facing a further living standards blow of up to £300 next April.

The Resolution foundation found the benefit freeze, which is projected to save the Treasury £1.8bn, will hit working households hardest, with a couple with one earner and two children £305 worse off a year. Torsten Bell, the foundation’s director, said the freeze would be a “double blow” given average wages were falling in real terms.

“There are no easy answers for the chancellor, but there are right ones. He should scrap the benefit freeze planned for next April,” he said.

“Given the huge fiscal pressure he’s under – both from ministers’ demands for new cash and a likely downgrade in the economic outlook – he could raise revenues by freezing the personal tax allowance next April. This would save around £2bn, with three-quarters coming from better-off households, and still leave him on track to deliver his tax cut pledges over the remainder of the parliament.”