Philip Hammond urges Boris Johnson to tell ‘difficult truths’ before Budget

Tory former chancellor Philip Hammond has urged the Prime Minister to tell the public “some difficult home truths” ahead of next week’s Budget.

The ex-occupant of Number 11, who was a close ally of Theresa May, also said the Government should ditch “very extravagant” promises from its manifesto.

His intervention comes as recent reports suggested Chancellor Rishi Sunak is poised to extend the jobs furlough scheme and the stamp duty holiday until June to coincide with when Boris Johnson hopes to be able to lift all coronavirus restrictions.

The Chancellor, according to the Daily Mail, could be preparing a relaunch of the summer’s Eat Out to Help Out scheme.

The paper said Treasury officials were also considering introducing vouchers for high street shoppers and bringing in lower alcohol duty for restaurants and pubs in recognition that the hospitality sector will continue to be impacted by restrictions until early summer.

The latter move would be coupled with higher levies on supermarket booze to help local traders, according to the Mail.

Lord Hammond of Runnymede told the BBC he broadly supported financial assistance measures during the pandemic, but remains concerned about Downing Street’s priorities in the future.

“My fear is that, as a populist government, giving money away is always easier than collecting it in,” the 64-year-old said.

“And the Government will be tempted not to move quickly back to normalising the relationship between government and citizen, the balance between taxing and spending, as we move out of the crisis and into the next phase, which is dealing over the longer term with the legacy of this Covid crisis – what the economists called the scarring effect on the British economy.”

Lord Hammond was appointed to the Lords by Mr Johnson despite being stripped of the Tory whip as an MP in 2019 for joining with those attempting to block a no-deal Brexit.

His warning came two days after Labour claimed Mr Sunak’s “economically illiterate” plans risk “crushing” Britain’s pandemic recovery under a “mountain of debt”.

Shadow Treasury minister Bridget Phillipson warned that some firms face having to start paying back Covid loans before lockdown restrictions are fully lifted, putting them at risk of going bust.

The Government, meanwhile, has flagged that Mr Sunak may not need to raise taxes to reduce the budget deficit built up by the pandemic.

Financial Secretary to the Treasury Jesse Norman told MPs last month that any post-Covid recovery could be strong enough to avoid tax rises.

But the Times has suggested Mr Sunak is considering hiking corporation tax as high as 25%, up from 19%.

The paper said that with Mr Sunak’s US counterpart, Janet Yellen, suggesting recently that corporation tax in the US might rise from 21% to 28%, a six-point rise would still allow the UK to claim to have the lowest level of corporation tax in the G7 group of developed nations if he increases it in the autumn in a staggered fashion.

Lord Hammond, in his maiden speech last month, called on Whitehall to give “greater focus” to the financial services industry in its post-Brexit talks with the EU.