He was in a victorious mood after managing to get European Union leaders to endorse changes to VAT, which he hoped would defuse a Conservative backbench revolt over the UK’s inability to scrap the tampon tax.
As for his secondary problem – a brewing Tory rebellion over £4bn of disability benefit cuts – the prime minister threw the critics a bone by hinting he could be prepared to soften the reforms.
But unknown to Cameron, a car was about to be sent out from the Buckinghamshire home of Iain Duncan Smith bound for Downing Street, carrying a devastating letter of resignation that said the proposed cuts to disability benefits were a “compromise too far”.
It told the prime minister in no uncertain terms that Duncan Smith disagreed not just with the proposed reforms to personal independence payment (PIP) but the leadership’s whole economic strategy that meant the books were being balanced on the backs of working age people, while pensioner welfare was left untouched.
The letter was received by No 10 officials at some point between 6pm and 6.30pm on Friday, leading to a phone call between the prime minister and his work and pensions secretary in which Cameron tried desperately to persuade him to stay and managed to secure a delay until they had a face-to-face meeting.
About 30 minutes later, the resignation was still under wraps but journalists in Brussels were surprised to start getting calls out of the blue saying the Treasury was junking its cuts to the personal independence payments (PIP) in their entirety – or “kicking them into the long grass”, according to a government source.
Downing Street sources insist the decision to ditch the cuts was taken earlier on Friday after private talks between the chancellor and prime minister – although they had not had time to discuss this with Duncan Smith.
The timing, however, creates the impression the announcement on scrapping the PIP reforms was rushed out to take some of the sting out of Duncan Smith’s criticism.
It did not take long for Duncan Smith to decide he was going public. In a second phone call, described as acrimonious, he made clear his decision was final. Reports suggest Cameron launched into a tirade, calling the resignation dishonourable and described him as a “shit” – although Downing Street deny that word was used.
A reply from Cameron was swiftly drafted in which he said he was “perplexed and disappointed” by the resignation given that Duncan Smith had designed and signed up to the disability benefit cuts, and agreed to the rollback.
Despite their polite introductions, the exchange of letters brimmed with resentment and hostility. But that mood was only to intensify over the subsequent 24 hours, as a briefing war saw the Treasury and DWP both try to pin the blame for the botched way the announcement about disability cuts was handled in the preceding week.
Treasury sources insisted the cuts to the benefit known as personal independence payment were not a budget measure but one that Duncan Smith had long planned, pointing out they were announced on the preceding Friday.
Downing Street also painted Duncan Smith’s departure as a move linked to his belief that the UK should leave the EU, in opposition to Cameron, and desire to spend more time on the campaign.
But sources close to the resigning cabinet minister said Duncan Smith was pressured into devising and announcing the cuts just before the budget, specifically so that they could be written into the Treasury’s “red book” and scored as billions of pounds in savings.
Friends of Duncan Smith also said the resignation was a long time coming and hardly surprising, as the prime minister claimed. He had repeatedly voiced frustration about cuts to working age benefits while those for pensioners were protected and thought about resigning over the unfair spread of the burden last year.
Only on Wednesday morning, at the pre-budget cabinet, had Duncan Smith fully realised that the reductions were going to be juxtaposed so starkly with tax cuts for higher earners. He initially defended the budget to Tory MPs in a round-robin letter but lost heart as it started to become clear that Downing Street was preparing to heap the blame for the furore on to him and take credit for rowing back on the measures. “He woke up on Friday morning entirely convinced and resolved,” a source says.
The row then turned from anonymous comments by aides and MPs into a full-blown public war between ministers late on Saturday night when Ros Altmann, a pensions minister, launched a personal attack on Duncan Smith. In a statement, she branded her former boss difficult to work for, claimed he had tried to stop her speaking out and argued his departure was all about the EU.
Duncan Smith’s side then launched a counterattack with the rest of his ministerial team – Priti Patel, an employment minister, Justin Tomlinson, a disabilities minister, and Shailesh Vara, who also works on pensions – undermining Altmann’s account and heaping praise on their colleague.
Duncan Smith himself waited to break his silence on the Andrew Marr Show, delivering an excoriating critique of Osborne’s entire approach to balancing the books.
Neither Osborne nor Cameron has appeared in public to answer those criticisms, although Downing Street released a statement stressing the government’s commitment to helping everyone in society, including the most disadvantaged.
Instead it was Amber Rudd, the energy secretary, who was sent out on to the airwaves to defend the government’s central missions as a “compassionate” and “one nation” project. Duncan Smith’s words were “disappointing” and people would resent his “high moral tone”, she said.
She was, however, outnumbered by the Tory voices piping up to add to criticism of No 10’s approach to politics and echoing wider concern about the impact of the cuts. Bernard Jenkin, the senior backbencher, suggested Cameron’s style was too much like a dictatorship, while Heidi Allen, one of the leading rebels over tax credits, went so far as to cast doubt on Osborne’s future as chancellor.
No Tory MPs have yet joined Labour’s call for Osborne to quit, but Duncan Smith’s resignation and the free-for-all of the EU referendum appear to have broken the spell of discipline over economic policy that the chancellor has had for so long over so many of them.
guardian.co.uk © Guardian News and Media Limited 2010