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Mmounting tensions between Boris and Rishi over spending pledges

Boris Johnson and Rishi Sunak are on a collision course over his big-spending habits today as Tories voiced alarm about the UK’s spiralling £2.17trillion debt mountain.

The Chancellor is believed to be increasingly alarmed about the commitments being made – with claims that the PM announced a huge effort on climate change at the G7 summit without informing him.

There is also an ongoing spat about Mr Johnson’s insistence on sticking to the state pension ‘triple lock’, which could mean the payments rocket this year because furlough and the impact of the pandemic has warped wage figures.

And Mr Sunak is apparently refusing to foot the £200million bill for a national yacht announced by Mr Johnson – with Ben Wallace’s Ministry of Defence and Liz Truss’s Trade department also balking at the cost.  

A potential flashpoint had been due to come tomorrow with Mr Johnson, Mr Sunak and Health Secretary Matt Hancock due to meet to discuss proposals on social care that are expected to cost £5billion a year.

However, the session has been ‘taken out’ of ministerial diaries for reasons that remain unclear. 

The issue of spending is at risk of drawing another ‘hawks’ and ‘doves’ dividing line through the government, with the need to make good on ‘levelling up’ promises from the PM clashing with anxiety about the dire state of the public finances. Mr Sunak has been among the strongest voices on the need for a speedy unlocking, although he was said to be ‘relaxed’ about the latest delay to Freedom Day. 

Mr Johnson has rejected the concept of austerity, suggesting it was a mistake after the credit crunch – but others are concerned that inflation and interest rates could throw the country into chaos unless the deficit is closed quickly.    

Business Secretary Kwasi Kwarteng appeared to deal a rebuke to the Chancellor today, insisting the government should rely on economic growth rather than tax hikes to fill the Covid black hole in the public finances. 

One plugged-in senior Tory told MailOnline that ‘every day seems to bring a new spending commitment’ from the PM and Mr Sunak is right to stamp his ‘authority’.

The backdrop to the budgeting row is suspicion over Mr Sunak’s ambitions among some allies of Mr Johnson, who believe he is positioning for the leadership with slick PR and schmoozing of backbenchers. 

Boris Johnson

Boris Johnson (right) and Rishi Sunak (left) are on a collision course over his big-spending habits today as Tories voiced alarm about the UK’s spiralling £2.17trillion debt mountain

Kwasi Kwarteng issued a veiled rebuke to the Chancellor insisting driving growth and not tax rises is the 'best way' of balancing the books

Kwasi Kwarteng issued a veiled rebuke to the Chancellor insisting driving growth and not tax rises is the ‘best way’ of balancing the books 

UK’s new £200m yacht will be funded ‘through’ the MoD, says No10 

The UK’s new £200million national yacht will be funded ‘through’ the Ministry of Defence, Downing Street said today. 

There have been signs of wrangling between departments over the new flagship, with ministers unwilling to foot the bill out of their own budgets. 

The PM’s spokesman told reporters: ‘This new national flagship will boost British trade and drive investment into the economy.

‘The procurement process, which is being done through the MoD, will reflect its wide-ranging use and so it will be funded through the MoD, as set out previously.’

The No 10 spokesman declined to comment on how the MoD could afford a yacht costing a reported £200million, given its own equipment budget blackhole of £17billion.

Pressed on reports the vessel could be classified as a ‘warship’ and could have guns attached, Boris Johnson’s spokesman said: ‘We will set out the exact detail in due course but this is a trade ship, it is not a military vessel.’

Asked whether that meant it would not be a warship, he replied: ‘That’s correct.’

In a round of interviews this morning, Mr Kwarteng insisted driving growth is the ‘best way’ of balancing the books amid claims Mr Sunak is looking at a pensions raid to raise revenue. 

But he suggested reducing reliefs such as the £1million lifetime allowance was ‘not necessarily the way forward’. 

And he said he is ‘pretty sure the triple lock will stay’ – despite alarm in the Treasury that state pensions will rise at least 6 per cent this year due to the warping effects of furlough.

Asked about tax rises to cover the huge cost of coronavirus, he told Sky News: ‘I am hopeful as business secretary as you can imagine that we can grow the economy. 

‘That in the past has always been the best way to raise tax revenue… the tax revenue from a thriving economy can pay down some of the debt.’

Asked about the option of a raid on pensions reliefs, he said: ‘I don’t think that is necessarily the way forward.’

On the state pension, he said: ‘Obviously it is a decision of the Chancellor, but I am pretty sure the triple lock will stay.’

Treasury sources said changing pensions tax relief is ‘certainly not something the Chancellor is actively looking at’. 

Officials are believed to be examining plans to save £4billion by suspending the triple lock on pensions for a year.

However, Mr Johnson wants to keep the lock in place, even though it would grant pensioners a 6 per cent or higher rise at a time when working-age people are facing a financial squeeze.

asked about the possibility of a one-year suspension of the manifesto pledge, the Prime Minister’s spokesman said: ‘We are fully committed to the pensions triple lock.’

Mr Johnson was challenged about the triple-lock reports during a visit to a laboratory in Hertfordshire today.

He told broadcasters: ‘I’m reading all sorts of stuff at the moment which I don’t recognise at all about the Government’s plans.’

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 more evidence 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 PM’s spokesman told reporters that funding would be provided ‘through’ the MoD.

‘This new national flagship will boost British trade and drive investment into the economy,’ he said.

‘The procurement process, which is being done through the MoD, will reflect its wide-ranging use and so it will be funded through the MoD, as set out previously.’

The No 10 spokesman declined to comment on how the MoD could afford a yacht costing a reported £200million, given its own equipment budget blackhole of £17billion. 

Mr Johnson urged G7 nations to sign up for a ‘Marshall Plan’ to help drive global green growth at the summit in Cornwall, but there was no UK money announced and the Treasury was apparently not consulted. 

A former minister told MailOnline: ‘We are spending more than we can afford. It is not unreasonable to ask where is the money coming from.

‘Everyone wants to be fair to pensioners. But I don’t think even pensioners would want to take advantage of the pandemic.

‘The problem is the pandemic has given the impression there is a magic money tree… Rishi needs to assert a bit of authority.’  

Mr Sunak has already laid out plans for tax rises in the coming years to fill the massive black hole in the government finances. 

The Chancellor has told colleagues that he does not think families should face any further rise to personal taxation to pay for the extra spending.  

The national debt mountain now stands at £2.17trillion, and is higher as a proportion of GDP than after the credit crunch

The national debt mountain now stands at £2.17trillion, and is higher as a proportion of GDP than after the credit crunch

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

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

There are fears that without greater restraint from No 10, the manifesto pledge not to raise income tax, national insurance or VAT during this parliament will become strained.

Mr Sunak is, however, said to be open to cutting the money for state pensions.

Treasury officials are also believed to be working up plans to cut the £1million pensions lifetime allowance, bring in a single tax relief rate, or tax employer contributions 

An online sales tax is likely to be unveiled this autumn. 

Taxes on gambling giants are also in development, with a Whitehall tussle under way over whether the levy targets profits or turnover. 

There are claims today that the Cabinet is demanding more of a say in spending plans to rein in Mr Johnson. 

‘The cabinet has to be involved in all the big decisions that reflect what the party stands for, the cabinet needs to be more involved in those decisions,’ one Whitehall official told the Guardian.

‘All cabinet ministers have to be part of making decisions that are part of a bigger picture. If you aren’t taking decisions as a collective it is very hard to go out and sell a coherent argument.’  

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.’


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