Battle lines drawn between No10 and No11 over Covid debt: Boris and Rishi on new collision course as Chancellor wants tough spending review while PM promised no return to austerity - in latest storm after rows over travel list and green agenda

The Government has been plunged into conflict as Boris Johnson and Rishi Sunak clash over travel restrictions and green reforms, with the Chancellor eager for a tough spending review and the PM looking to avoid austerity measures. 

Allies of Rishi Sunak have insisted he is focused on the health of the economy in his job as Chancellor following reports the Prime Minister has considered demoting him.

The Sunday Times reported that a furious Boris Johnson suggested the move after the leak of a letter from the Chancellor calling for the easing of travel restrictions ahead of the relaxations announced on Wednesday.

A senior source told the newspaper: 'He said: 'I've been thinking about it. Maybe it's time we looked at Rishi as the next secretary of state for health. He could potentially do a very good job there.'

'In an open meeting, after ranting about Rishi, he then suggested the Chancellor could be demoted in the next reshuffle.'

The newspaper reported that Mr Johnson is not expected to carry out his threat and noted the Prime Minister's reputation for off-the-cuff remarks made 'half in jest'.

A Treasury source said: 'The Chancellor is solely focused on securing the country's economic recovery and continuing to protect and create jobs.'

The leak of the comments, reportedly made in a meeting on Monday, will do little to help relations between No 10 and No 11.

The Chancellor is preparing for a tough spending review later this year as he attempts to repair the public finances following the coronavirus crisis.

That could put him on collision course with a Prime Minister who has promised there can be no return to austerity. 

And in another sign of division, the Prime Minister's green agenda hit a stumbling block amid growing fears that it will hit poorest households the hardest, with Rishi Sunak thought to be leading push-back against Johnson's commitment to go net-zero by 2050.

Boris Johnson is considering demoting Rishi Sunak, after the Chancellor called for the easing of travel restrictions before relaxations are announced next week, reports suggest 

There are fears it will spark a cost-of-living crisis with energy bills already on the rise and inflation spiking as Covid lockdowns ease.  

Boris Johnson 'lines up Michael Gove to replace Priti Patel as Home Secretary' 

Cabinet Office Minister Michael Gove is being tipped to replace Priti Patel as Home Secretary if the migrant boat crisis continues to escalate, sources have said.

The Prime Minister has grown increasingly frustrated with what he regards as the Home Office's failure to stem the wave of boats crossing the Channel, telling one Minister: 'What the f*** is the Home Office doing? When is she going to sort this out?'

Boris Johnson and Mr Gove, who have spent much of the past decade engaged in a private political psychodrama, are once again close allies. 

This has been helped by the elevation of Mr Gove's former aides Henry Newman and Henry Cook – who are close friends with Mr Johnson's wife Carrie – to key positions in Downing Street.

Mr Gove has also severed relations with Dominic Cummings, his former adviser, who has been waging a public briefing war against Mr and Mrs Johnson.

He has told friends that he is concerned about Mr Cummings's mental state after he gave an interview in which he claimed Mr Johnson had told him that his partner was driving him 'crackers' and suggested finding her 'a job with lots of foreign travel'.

A source said: 'Michael made clear that he doesn't think that it is Boris or Carrie who is crackers.'

Mr Johnson's frustration over the migrant boats crisis is shared by many Tory MPs – particularly those in the Red Wall seats of the Midlands and North, who say it keeps being raised 'on the doorstep'.

Senior Tories fear the crisis could prove politically ruinous in so-called Red Wall seats in traditionally working class areas of the north that flipped blue from Labour at the 2019 election, handing Mr Johnson a landslide victory. 

A Treasury review into the costs of meeting the net-zero 2050 goal has already been delayed twice from its original spring publication date.

According to the Sunday Telegraph, the delay is due to fears that analysis shows working class families bearing the heaviest share of the burden.

The first time the PM heard about Mr Sunak's leaked letter about travel restrictions was when details of it appeared in news outlets, meaning officials had not flagged it for his attention or put it in his ministerial red box, it is believed. 

Although a reshuffle is not expected imminently, the Sunday Times reported that Mr Johnson has previously considered International Trade Secretary Liz Truss as a potential chancellor, with Jacob Rees-Mogg as her deputy.

'The PM keeps talking about Liz Truss,' a source said. 'He's always got on quite well with her. He thinks she's controllable.'  

Mr Johnson was said to have questioned the motives of whoever leaked the letter, which looked to have been designed to undermine the Government's agreed policy.  

The Prime Minister said he was particularly annoyed because he actually agreed with the Chancellor that the rules should be relaxed to allow people to enjoy their holidays. 

One of the allies said: 'The Prime Minister shared Rishi's views. It didn't need to be written. It was designed to be leaked. 

'Boris regarded it as a failure of political judgment. He hadn't even received the letter – and said that maybe Rishi "could do a very good job" at Health instead of the Treasury.'

The revelation comes amid growing tensions between No 10 and No 11, as Mr Johnson finalises a set of expensive new policies to be announced in September. 

Mr Johnson is close to agreeing the details of a new £10 billion-a-year 'health tax' to tackle the backlog in NHS appointments caused by the pandemic and start to reform the care system for the elderly.

Sources say Mr Johnson and Mr Sunak are 'ironing out a few wrinkles' to finalise the plan, which will see National Insurance rise by at least one per cent for workers and employers. Money raised will be added to Mr Javid's Health Department budget.

The Sunday Times reported that a furious Prime Minister suggested the move after the leak of a letter from Mr Sunak , who warned that Covid rules were damaging the UK's economy and ensuring it was lagging behind neighbours in the EU

Talks are continuing about how funds will be allocated between NHS needs and social care reform, and what the cap on care costs should be.

Boris and Rishi at war over green agenda

Boris Johnson's green agenda has hit yet another stumbling block amid growing fears within government that it will hit poorest households the hardest.

Chancellor Rishi Sunak is thought to be leading push-back against Johnson's commitment to go net-zero by 2050, fearing it will spark a cost-of-living crisis with energy bills already on the rise and inflation spiking as Covid lockdowns ease.

Senior Tories fear the crisis could prove politically ruinous in so-called Red Wall seats in traditionally working class areas of the north that flipped blue from Labour at the 2019 election, handing Mr Johnson a landslide victory.

A Treasury review into the costs of meeting the net-zero 2050 goal has already been delayed twice from its original spring publication date.

According to the Sunday Telegraph, the delay is due to fears that analysis shows working class families bearing the heaviest share of the burden.

A source told the paper: 'Obviously, with anything like this, those with less money are going to be disproportionately hit more. That's common sense.

'That's why work is ongoing to ensure the best solutions to ensure we hit the 2050 target without extraordinary costs to ordinary working class families.'

The cost of hitting the net zero target is thought to be around £1.4trillion, according to a previous report by the Mail on Sunday.

That includes £400billion spent on making buildings carbon neutral, £300billion on upgrading vehicles to electric, £500billion to de-carbonise power generation and £46billion to clean up industry.

Mr Johnson is thought to favour issuing households with cheques worth hundreds of pounds to compensate for the costs of going green.

But Mr Sunak - who is already searching for ways to pay off the UK's £400billion Covid bill - is said to have baulked at the cost to the Treasury of those plans, which is thought to be around another £400billion.

The likely compromise is that people will be expected to pay the first £50,000 towards their care, with the State picking up the rest. 

However, Mr Sunak has stressed to No 10 that people living in areas where property prices are low will find it onerous to raise that sum.

Mr Johnson will be working on his plans for the autumn while taking a two-week break in the UK. 

He will also be drawing up environmental policies ahead of hosting the COP26 climate change summit in Glasgow from October 31 to November 12 and announcing a winter plan on Covid-proofing the economy and the NHS.

A fresh crackdown on crime will also be announced, including measures to break 'county lines' drugs gangs and an explosion in cocaine use among the middle classes. 

Mr Johnson and Mr Sunak will thrash out reforms to the 'triple lock' pension guarantee as the Government faces paying an extra £4 billion, and the Chancellor will conduct a spending review.

The Prime Minister hoped to make some announcements before Parliament broke for the summer recess, but was stymied by having to self-isolate after coming into contact with Mr Javid after he tested positive for Covid.

A source said: 'September is going to be a packed month as normal service hopefully resumes. Boris will hit the ground running when he comes back from holiday.'

The plan to raise NI has run into opposition from the Cabinet and sections of the Tory backbenches, who say it breaks a manifesto pledge on tax rates. But Mr Johnson also promised to reform a system that forces older people to sell their homes to pay for care. 

Tensions between No 10 and the Chancellor over social care bubbled over after the Prime Minister told Mr Javid, when he was appointing him in the wake of Matt Hancock's resignation as Health Secretary, that a condition of him winning the job was to join forces to push Mr Sunak to find the money to tackle the NHS backlog and social care reform.

A total of 5.3 million people are waiting for routine operations and procedures on the NHS in England, and Mr Javid has warned that the figure could reach 13 million.

After the backlog has been dealt with, the money raised by increasing NI would be used to reform the social care system.

After Mr Johnson told Mr Sunak that he was broadly prepared to accept the plan drawn up ten years ago by Sir Andrew Dilnot – which limited to about £50,000 the amount that families have to pay towards care – Mr Sunak said there was not enough money to cover it and the only way to fund the plan would be a new tax.

Some Tory backbenchers are backing an alternative plan that limits personal contribution towards care costs to 30 per cent of the value of a person's home, which would keep the net cost to the taxpayer at about £2 billion a year.

ROCKY RELATIONSHIPS BETWEEN PRIME MINISTERS AND THEIR CHANCELLORS

'Blair found himself powerless to move against his Gordon Brown at a time when the economy seemed to be performing well', says Professor Richard Toye

The link between the Prime Minister and their Chancellor is probably the most important and potentially problematic of all ministerial relationships.   

After World War Two, the continued expansion of the state and the growing demands of the media required of a more activist stance on economic policy from Prime Ministers, historian Professor Richard Toye writes.

The government was newly committed to maintaining full employment as the decline of Britain's presence as a great power on the world stage generated a narrative of failure which governments tried to push against. 

In 1958, Harold Macmillan's entire team of Treasury ministers resigned over the Prime Minister's unwillingness to implement spending cuts that Peter Thorneycroft, his Chancellor, believed were necessary to fight inflation. 

The way in which Macmillan succeeded in shrugging this off as 'little local difficulty' became a legendary example of his 'unflappability'. 

But when he sacked Selwyn Lloyd, another Chancellor, it was portrayed as a sign of panic in the face of political and economic bad news. 

Margaret Thatcher had shown an aptitude for keeping her ministers in line, but that ability was tested after falling out with her second Chancellor, Nigel Lawson in 1989. 

Alan Walters, Thatcher's personal economic adviser, had published a newspaper article clashing with Lawson's views, sparking demands from the Chancellor that she sack Walters. 

Thatcher refused, and Lawson resigned, along with Walters.

It signalled the end for Thatcher, as by the end of the following year, she herself had been forced from office. 

'The rise of the mass media has increasingly meant that personal differences between Chancellors and Prime Ministers are played out in the full glare of publicity,' Professor Toye writes 

Professor Richard Toye writes that the clash is evidence that 'getting rid of a Chancellor is no panacea for a Prime Minister in trouble'.

The same also rings true for John Major after he dislodged Norman Lamont in the aftermath of 'Black Wednesday'. The decision did not save his party from electoral oblivion in 1997, when Tony Blair's 'New Labour' stormed into government with a huge majority. 

But, paradoxically, Professor Toye adds, 'Blair found himself powerless to move against his Gordon Brown at a time when the economy seemed to be performing well, despite a problematic relationship between the two which Blair recalled as being like that of ''some quarrelling, married couple''.'

Professor Toye writes in a Government blog, Prime Ministers and Their Chancellors: 'The broader lesson to be drawn from the history of Prime Ministers and their Chancellors over the past 150 years is that, although difficulties may arise in part because of failed personal chemistry, how these problems play out is affected by the economic environment, the nature of the state, and public expectations about the types of issues that governments are expected to solve. 

'In addition, the rise of the mass media has increasingly meant that personal differences between Chancellors and Prime Ministers are played out in the full glare of publicity.'