Rishi Sunak is at loggerheads with No 10 over the growing list of the Prime Minister’s spending commitments.
The Chancellor is said to be increasingly concerned over the cost of huge bills for Covid recovery, green pledges at this autumn’s Cop26 climate summit – and Boris Johnson’s enthusiasm for a new Royal Yacht.
The situation is likely to come to a head tomorrow when they meet to discuss spending billions on social care.
Boris Johnson (pictured) and Rishi Sunak are said to be on a collision course over the PM’s big-spending promises amid rising fears over the UK’s debt mountain and inflation
Mr Sunak is believed to be increasingly alarmed about the commitments being made
The Chancellor is expected to use the meeting to ask the PM where the money to fund his pledges is coming from.
Treasury officials are examining plans to save £4billion by suspending the triple lock on pensions for a year, it was reported yesterday.
Mr Johnson wants to keep the lock in place, even though it would grant pensioners a 6 per cent rise at a time when working-age people are facing a financial squeeze.
Officials say Mr Sunak is also refusing to fund the £200million cost of Johnson’s pet project to build a Royal Yacht, with the Ministry of Defence, the Cabinet Office and the Department of International Trade also reluctant to foot the bill.
In a sign of rising tensions, one official branded the funding for the yacht ‘a complete and utter s***show’ and another even suggested the PM should ‘set up a trust to pay for it’ – a reference to his failed attempt to get Tory donors to fund the cost of renovations to his Downing Street flat.
The Chancellor has told colleagues that he does not think families should face any rise to personal taxation to pay for the extra spending.
The CPI index hit 2.1 per cent in May, up from 1.5 per cent the previous month and above the official 2 per cent goal
Ministers are said to fear that without greater restraint from No 10, the manifesto pledge not to raise these taxes will become strained.
Mr Sunak has also ruled out a long-expected increase in capital gains tax, on the grounds it does not raise enough money to justify the political pain of introducing it, not least from donors.
He is, however, said to be open to cutting the money for pensions.
‘Pensioners are going to be doing extremely well,’ one minister told The Sunday Times. ‘It’s not politically that difficult a thing to smooth it out for a year.’ The Chancellor is concerned that borrowing more, Mr Johnson’s preferred solution, is dangerous because rising inflation is likely to result in an increase in interest rates.
Mr Sunak and other senior ministers are also calling for the Cabinet to have more of a say in spending plans to rein in Mr Johnson.
‘There has to be Cabinet involvement in decisions like this,’ a senior government source said.
‘It can’t just be announced on the hoof or stitched up in a room with Boris and Rishi at loggerheads.’
In a sign that business will bear the brunt of any tax rises, the Treasury is continuing to work on plans for an online sales tax, probably to be unveiled this autumn. It is also developing plans to tax the gambling giants, with a Whitehall tussle under way over whether the levy targets profits or turnover.
A No 10 spokesman said: ‘The Prime Minister and Chancellor work closely together, and have been in lockstep throughout the most challenging period any government has faced since the Second World War.’
SIMON WALTERS: Boris Johnson loves bold plans… but can he afford war with Rishi Sunak?
To understand Boris ‘you need to realise the only things he is really interested in are bikes, buses, trains and bridges’, someone who has worked closely with him once told me.
The comment came long before yesterday’s report that the Prime Minister and Chancellor Rishi Sunak are at loggerheads over a £200million plan to build a Royal Yacht.
It is said to be part of a wider rift that has developed between the Downing Street neighbours.
The Prime Minister is also accused of having not even bothered to tell Mr Sunak about his ‘Marshall Plan’ for ‘green growth’ before he unveiled it at the G7 summit in Cornwall
The Prime Minister’s plan for a Royal Yacht appears to have been the final insult for Mr Sunak
Mr Sunak is understood to be annoyed by Mr Johnson’s habit of announcing expensive policies without bothering to tell the man who has to raise the money to pay for them.
The yacht is pocket money compared with the multi-billion-pound cost of paying for Covid and the headline-grabbing eco-pledges expected to stem from the global climate summit Mr Johnson will host this autumn.
The Prime Minister is also accused of having not even bothered to tell Mr Sunak about his ‘Marshall Plan’ for ‘green growth’ before he unveiled it at the G7 summit in Cornwall.
And there is more No 10 versus No 11 tension ahead.
It is claimed that the Chancellor intends to scrap the so-called pension ‘triple lock’ which would see the retired enjoy an inflation-busting 6 per cent rise in their state pension – when millions of others have had no pay rise or seen incomes cut during the pandemic.
The Treasury says that abolishing the lock is essential to reduce the £4billion cost.
But it fears that Mr Johnson, who has a near pathological aversion to delivering bad news, political and personal, will baulk at upsetting the over-65s.
The Prime Minister’s plan for a Royal Yacht appears to have been the final insult for Mr Sunak.
An official is said to have suggested sarcastically that the Prime Minister should ‘set up a trust to pay for it’ – a reference to his failed attempt to get Tory donors to pay for expensive wallpaper for his Downing Street flat via a trust.
Tellingly, royal courtiers say the Queen is not particularly keen on the yacht herself, fearing it will be seen as extravagant in the current climate.
The introduction of ‘Boris Bikes’, the 2012 Olympic Games and the return of red double-decker buses were all successes that defined Mr Johnson’s tenure as mayor of London.
Visible, innovative and fun, they symbolise everything that interests and excites him.
Similarly, a Royal Yacht is the kind of grand gesture that would delight any of the Roman emperors the classicist Mr Johnson so admires. However, other schemes are almost childlike in nature and impractical to the point of being laughable.
These have included his proposal to replace Heathrow with an airport built on an island in the Thames estuary.
Then there’s his support for a road bridge to France across the English Channel – and another from Scotland to Northern Ireland. Or his project involving a series of tunnels beneath the Isle of Man connecting Scotland, Northern Ireland and England.
In one of the rare glimpses into his psyche that the deeply private Mr Johnson has given, he revealed in 2019 that he likes to paint pictures of buses as a form of relaxation.
You can imagine him painting the new Royal Yacht, too. His fascination with buses, bikes and ships does not extend to the finer points of economics.
Shortly after Mr Johnson became Prime Minister, a Tory MP who was at a meeting attended by Mr Johnson told me that when the discussion turned to the complex economics of ‘quantitative easing’, the natural wordsmith Mr Johnson ‘stared out of the window’.
Number-crunching geek Mr Sunak was doing book-keeping for his mother’s pharmacy in his teens and probably does three-figure multiplications in his head to wind down at weekends.
Recent political history is littered with bitter conflicts between prime ministers and chancellors: Margaret Thatcher and Nigel Lawson; John Major and Norman Lamont; Tony Blair and Gordon Brown; Theresa May and Philip Hammond. The sheer scale of Brexit and Covid have masked the glaring differences in style and substance between Mr Johnson and Mr Sunak.
You can imagine him painting the new Royal Yacht, too. His fascination with buses, bikes and ships does not extend to the finer points of economics
Not any more.
A Conservative minister told me of an intriguing comment Mr Johnson made privately last year about his approach to Cabinet reshuffles.
He recalled: ‘Boris said, ‘I don’t want hungry young lions round the Cabinet table, I prefer tired old beasts.’
Of course, as with so much of what the Prime Minister says, it needs to be taken with a large pinch of salt: but there appears to be some truth to it.
Today there is just one hungry lion of substance at the Cabinet table: Rishi Sunak.
It was said that to keep the people happy a Roman emperor had to give them ‘bread and circuses’. Mr Johnson is good at laying on entertaining spectacles. Mr Sunak is worried that after all the Prime Minister’s ‘circuses’ have been paid for, there will be no money left to put bread on the table.
And not everyone is won over by Mr Johnson’s fixation with grand projects.
If he had listened to MPs who urged him to call off the £100billion HS2 rail link, the Tories may have avoided their shattering defeat in last week’s Chesham and Amersham by-election.