Downing Street has directly intervened in a standoff between the defence secretary, Gavin Williamson, and the chancellor, Philip Hammond, over a pay rise for the armed services, according to Whitehall sources.



The move comes against the backdrop of an increasingly acrimonious row between Williamson and Hammond over a push for an extra £2bn a year in defence spending on top of the existing £35.3bn budget.

Gavin Williamson on dangerous ground in defence budget row Read more

Williamson is demanding the Treasury honour in full a 3% pay rise for the UK’s 137,000 service personnel, recommended by the independent armed forces pay review body. This would cost an estimated extra £200m a year.

But Downing Street is lining up with Hammond. The Treasury is prepared to honour “the spirit” of the recommendation but is looking for Williamson to compromise and recognise that there are also pay rises on the cards for the police, nurses, teachers, doctors, dentists and other public servants.

Downing Street has sent a compromise offer directly to Williamson. The details are not known but a previous proposal was to offer 3% in the first year with much lower rises in subsequent years.

The offer from No 10 is intended to test whether Williamson is willing to be a team player or whether he is becoming too entrenched, according to a Whitehall source.



“It is absolutely right for Gavin Williamson to fight for the armed forces,” the source said. “But he has to understand there are other public servants also in line for pay rises.”

A decision on pay will have to be made before parliament rises next month for the summer recess.

Williamson met Hammond last week but the meeting ended without any agreement on the overall budget or the pay rise. The two are scheduled to meet again next week after Hammond returns from a trip to Asia.



May and Hammond were last week believed to be irritated by what a Whitehall source portrayed as politicking by Williamson over the defence budget, exploiting his links to the media.

That mood would not have been helped by a Mail on Sunday story claiming Williamson could bring May down if he failed to secure a significant budget increase. Allies of Williamson denied he had issued any such warning.



In a speech at the London School of Economics on Tuesday night, the chief secretary to the Treasury, Liz Truss, had barbed remarks aimed at Williamson: “It’s not macho just to demand more money. It’s much tougher to demand better value and challenge the blob of vested interests within your department.”

Gen Lord Houghton, who stood down as chief of the UK’s armed forces in 2016, told BBC Radio 4 Today: “We stand at a strategic crossroads. We have got to come off the fence one way or another. It might be, and it is a wholly worthy opinion, that the United Kingdom should cease to be a world military power.”



In what also seemed to be a rebuke aimed at Williamson, he added: “To my way of thinking it would be a great shame if future of the defence budget and the armed forces of this country were somehow part of a political game for power and ambition. I hope that is not the case.”