Chancellor blocking Theresa May's £10bn farewell spending

BIRMINGHAM, ENGLAND - NOVEMBER 20: Prime Minister Theresa May and Chancellor of the Exchequer Philip Hammond visit an engineering training facility on November 20, 2017 in Birmingham, Untied Kingdom. (Photo by Andrew Yates - WPA Pool/Getty Images)
Outgoing prime Minister Theresa May and chancellor Philip Hammond. Photo: Andrew Yates – WPA Pool/Getty Images

Chancellor of the exchequer Philip Hammond is clashing with outgoing prime minister Theresa May over her plans to make spending promises in her final weeks in office that could end up costing £10bn.

May, who steps down as Conservative leader on Friday, will remain as prime minister until her party elects a successor, something that is expected to happen in late July.

According to the Financial Times, May wants to use her remaining weeks in Downing Street to deliver on the parts of her agenda that were stifled by Brexit, including a multibillion pound programme to transform England’s schools and colleges.

But Hammond is opposed to the spending, and instead thinks his £26.6bn of fiscal “headroom” should only be used for spending or tax cuts once a no-deal Brexit has been taken off the table.

A source told the Financial Times that the prime minister wanted to make spending announcements every week on issues such as mental health, parental leave, and the technology sector.

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While Hammond has told government departments that they should expect to increase spending only in line with inflation, May wants to announce an above-inflation boost to English schools.

This would focus on failing schools, teacher training, teacher retention, and a review of the way the national schools budget is allocated.

A spokesperson for Downing St told the Financial Times that May “will continue to focus on trying to deliver for the people of this country.”

Hammond reportedly believes that big spending decisions should only be made after a formal spending review, which would now be overseen by the incoming prime minister.

But there is a possibility that he may allow May some flexibility, even if leadership contenders would prefer that the decision is left to the next leader.