A furious row over who was to blame for the Budget “shambles” erupted last night after it emerged that the Cabinet was never briefed that the Tory manifesto was being breached.
Philip Hammond’s hour-long briefing to Cabinet colleagues failed to mention that a tax rise on the self-employed clashed with a Tory election promise, it can be revealed.
Cabinet sources have blamed the subsequent damaging headlines on the Treasury’s failure to detect the political danger and warn ministers. However, Treasury figures have pointed the finger at No 10 and its demand for spending to protect Theresa May’s “just about managing” families.
I’ve got deep reservations about the bulldozer approach to an issue that is clearly growing – it needs precision engineering
Nigel Evans MP
“If No 10 has got all these projects to spend money here, there and everywhere then you have to raise it from somewhere,” a Treasury source said.
The row follows the most damaging fallout from a Budget in half a decade with Mrs May facing her biggest backbench rebellion yet.
Wednesday’s announcement that self-employed workers would face an increase in National Insurance contributions was designed to bring tax rules for the growing number of entrepreneurs closer in line with people employed by companies.
However, a row erupted because the Tory’s 2015 manifesto promised “we will not raise VAT, National Insurance contributions or Income Tax”.
Almost 2.5 million self-employed people face a National Insurance rise of £240 on average, according to the Treasury’s own figures.
An immediate backbench revolt and negative newspaper headlines prompted Mrs May to pave the way for changes by announcing that the policy would not come into effect until autumn – after the next Budget.
Thirty Tory MPs are understood to oppose the changes and those leading the rebellion believe as many as 100 are sympathetic.
There are deep concerns among MPs about the reaction in their constituencies to the perceived attack on the self-employed – seen as traditional Tory voters.
On Monday night, the executive of the Tory 1922 committee will see the Prime Minister in Parliament and urge her to abandon the tax rise.
Nigel Evans, the joint-secretary of the committee, said: “I’ve got deep reservations about the bulldozer approach to an issue that is clearly growing – it needs precision engineering.
“Theresa May has given Philip Hammond the pause by which he can now reflect again on how to tackle the problem by not punishing our people.”
A second MP on the executive said: “The fact is we said we won’t raise Nationalist Insurance, full stop. There is a question about whether or not you do it in a manifesto, but we did it. The policy gives Labour a lifeline. When you are a drowning man you grab at any lifeline you’ve got.”
The Sunday Telegraph has established that Mr Hammond failed to mention that raising National Insurance could contradict the Tory manifesto when he briefed the Cabinet in Downing Street between 8am and 9am on Wednesday.
Sources have also revealed that a 2,000-word memo emailed to political aides detailing how to defend the measures did not warn them of contradictions with election promises.
A Cabinet source blamed Mr Hammond and Treasury officials for the oversights, saying they should have “flagged” the issue. “On something as significant as that, you need to say ‘it could be seen that this is a breach of our manifesto commitment but it’s not because of x, y, z,” a Cabinet source said.
However, the Treasury hit back. “The problem is No 10 don’t agree anything until the last minute,” a source said.
“There is no room to roll the pitch or check out the manifesto because they keep it all to themselves and they don’t agree anything until it’s too late.”
Despite the row, government figures still insist the manifesto promise was not broken because a law enshrining the pledge only protected those employed by a company from National Insurance hikes.
However, the co-author of the 2015 manifesto, Sir Oliver Letwin, a Tory MP close to David Cameron, has indicated the Budget outcome was different to what he planned.
He told the Telegraph: “I accept that some people with higher earnings will pay some more National Insurance contributions. But I think that, overall, it is a fair and principled move which does not constitute a breach of trust with the electorate.”
Boris Johnson, the Foreign Secretary and seen as a persuasive figure, has been asked by the Chancellor to defend the measures when they are debated by MPs on Monday.
To make up for lost ground, the Treasury is looking at giving all self-employed people the right of maternity and paternity leave for the first time to address concerns.
A review into employment practices in the modern economy by Matthew Taylor, Tony Blair’s former policy guru, will be published over the summer, giving Mr Hammond time to announce extra measures to support those affected by this week’s tax hike before a vote on the changes in the autumn.
Asked about Mr Hammond’s failure to mention the manifesto at the Cabinet briefing, a Treasury spokesman declined to comment on what was said.
“The Chancellor gave the Cabinet the usual presentation of the Budget and there was a full discussion on it,” the spokesman said.