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Osborne Left Isolated by Number 10 as Tory Leadership Race Underway

26/01/2016 11:54 GMT | Updated 26/01/2017 10:12 GMT

Whilst finishing a panel debate in Davos on Saturday, Chancellor of the Exchequer George Osborne told journalists that a £130m ten-year tax bill from Google represented a "huge step forward" and a "major success". Going further, the Chancellor heaped praised onto the deal that he says "addresses perfectly legitimate public anger that large corporations have not been paying tax."

Many others - possibly including the Prime Minister David Cameron - seem to disagree; disowning the remarks and suggesting this is a sweetheart deal that does not represent a figure anywhere close to what is really owed by the tech giant.

With the weekend to digest the remarks, the Number 10 spokeswoman on Monday repeatedly refused to echo the sentiment, instead using only modest phrasing such as "positive step" and "step forward".

Is the Chancellor's greatest ally disowning the leader-in-waiting on the comment alone, or, is Osborne facing increasing isolation as the economy heads again into choppy waters whilst the leadership contest heats up?

In the aftermath of the "major success" gaffe, the Chancellor faced a torrent of ridicule from both Parties. Osborne's opposite number in Labour, John McDonnell, secured an urgent question to be asked in the Commons in order to establish the facts surrounding the deal.

Scoring points at the expense of the Chancellor, the Shadow Chancellor used the fermenting dissent in the Tory ranks to both hit back at claims of Labour in-fighting and to highlight Osborne's isolation, "The Chancellor has managed to create an unlikely alliance between myself, The Sun newspaper, the Mayor of London, and, according to reports, even Number 10."

Monday evening in Parliament, with Osborne unable to attend himself, Treasury minister David Gauke was left to field questions on the remarks. Gauke decided not to repeat the claims of his boss that the deal was a "major success" and instead opted for run-of-the-mill rhetoric, "The [corporation] tax rate is currently 20%. That applies to everybody. But in terms of the effective tax rate, that depends on the particular circumstances of any business."

Never one to miss an opportunity, the Chancellor's leadership contender Boris Johnson used his Telegraph column to deride the Chancellor as he builds support for his own bid to inherit the leadership when David Cameron resigns this term. Blaming Osborne for his failure to collect tax rather than the corporations failure to pay themselves, the mayor of London and Conservative MP said, "You might as well blame a shark for eating seals."

Osborne later used his Twitter account to distance himself from the quote, asserting the deal was merely "good".

As Tory MPs pick sides on the upcoming EU referendum and whilst renegotiations are still open, David Cameron is facing an uphill struggle to keep his party united - at least publicly. Disunity in the ranks over tax issues could be the thin end of the wedge and open larger chasms when the Prime Minister reports back the outcome of controversial EU discussions. Whilst Labour are reported to be in the midst of seemingly endless in-fighting - which Labour leader Jeremy Corbyn has denied - unity in the Tory ranks is all the more important for Number 10.

Or, maybe the Prime Minister has read the writing on the wall and taken heed of the Chancellor's warning of the "cocktail of threats" facing the UK economy in 2016. In stark contrast to the famously abysmal relations between Tony Blair and Gordon Brown, David Cameron and George Osborne have retained a strong relationship. Their legacy is interwoven and buoyed by a slow but steady fall in unemployment, wages catching up with inflation and comparatively stable economic growth compared to Eurozone and G7 counterparts.

Their joint push to invest heavily in China despite protests from Human Rights groups and even the White House (for supporting a Chinese version of the World Bank) is now in danger of looking like folly as Chinese economic growth stalls. Is Cameron worried he has put all his eggs in Osborne's basket? Has the risk reached the level at which the Prime Minister needs to disown the Chancellor's remarks in order to protect his own impending retirement legacy?

Cameron's announcement that he would retire as Prime Minister before 2020 after the unexpected general election majority win has heralded a leadership contest. For David Cameron, his legacy will be in the back of his mind for every decision throughout the next few years as the leadership contest to succeed him heats up, and he may wish to untangle himself from the Chancellor if the economy is in real peril.

At the very least, the disowning of the Chancellor's remarks by Number 10 demonstrates David Cameron wants a perceived level playing field in the leadership race, with the EU referendum and the economy the topics used by the likely leadership candidates to distinguish themselves.

Boris Johnson's opportunistic article about the seemingly small gaffe and Number 10's refusal to back it demonstrates a Tory leadership race is already underway.

How much longer David Cameron hold his party together - at least in the public eye - might turn out to be the final crown or curse of his own legacy.

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