Downing Street and Treasury aides have often been at odds since the autumn over how to boost economic growth after the deepest recession since the war, say senior Whitehall sources.
The disclosure that Steve Hilton, the prime minister's policy guru, proposed abolishing maternity leave was the most powerful example of the battles that have been playing out behind the scenes in Whitehall.
"Steve Hilton comes up with lots of ideas – they do not all see the light of day," said one senior figure who is familiar with Hilton. "Some of his ideas work and some do not."
Tory sources blamed the Liberal Democrats for leaking Hilton's thoughts, a view which took hold when Vince Cable dismissed his ideas on the airwaves at lunchtime.
"That most definitely is not government policy," the business secretary told Radio 4's The World at One regarding Hilton's proposal to abolish maternity rights. "Steve is a fine blue skies thinker but this is not part of what we are going to do. We are looking at labour legislation in general but it has got to be sensible and balanced and I think that particular proposal isn't."
The leaking of Hilton's thoughts to the FT appeared to owe more to the investigative powers of the newspaper rather than to an operation by a particular faction in government.
But the fact that a series of Whitehall figures felt free to speak in dismissive terms to the FT about Hilton's ideas show that he has detractors at the heart of the government.
A number of Lib Dems around Nick Clegg regard Hilton as a refreshing but somewhat wacky thinker. Furthermore, some figures in the Treasury believe that Hilton's loose thinking was partly to blame for George Osborne's failure to create a coherent and compelling message for the Tories' election campaign.
There was much mirth among these groups when the FT reported that Hilton had suggested that maternity rights and all consumer rights legislation should be abolished to help revive the economy. Hilton even suggested that Britain should ignore EU labour rules on temporary workers, much to the annoyance of the No 10 permanent secretary, Jeremy Heywood.
"Steve asked why the PM had to obey the law," one Whitehall source told the FT of a meeting in March to discuss the government's growth strategy. "Jeremy had to explain that if David Cameron breaks the law he could be put in prison."
Hilton also suggested that Whitehall could do its bit to cut the fiscal deficit by abolishing hundreds of central government press officers and replacing them with a single person in each department who would blog. He also said that Jobcentres should be closed and replaced instead by community groups.
One source who works close to Hilton said that many of David Cameron's team were startled by his proposal in opposition to buy cloudbursting technology to provide more sunshine.
Hilton's fans rallied to his defence. One said: "Steve is brilliant. He has such a fresh and lively mind. He makes boring documents sparkle."
Another said it was important to understand the mindset of one of Cameron's closest allies who has known the prime minister since their days together at Conservative Central Office in the late 1990s. "You have to realise that Steve is an impatient revolutionary. He really will be furious if, at the end of our five years in government, we have not completely transformed this country and freed people up to run their own lives."
Hilton has been a central figure as No 10 and 11 have struggled since the autumn to develop a coherent strategy for growth. There were reports earlier this week that Downing Street's two neighbours and their aides were at odds over the government's core economic strategy – the elimination of the structural deficit over the course of this parliament. This was wrong.
But there have been tense discussions dating back to the spending review last autumn over how to stimulate growth. Hilton has lined up in the modernisers' corner as he lobbies for radical deregulation and a focus on innovative new industries. The Treasury welcomes many of Hilton's ideas but is more cautious and does not want to lose sight of the importance of established industries.
One Whitehall source spoke of "institutional differences" between Hilton's team at No 10, which was instrumental in the prime minister's "new economic dynamism" speech to the CBI last October, and the Treasury and the business department. They take what is described as a traditional and "quite corporatist view".
Hilton prevailed in that speech when the prime minister warned that the traditional model of business, in which goods are shipped around the world, has been "blown apart".
He was instrumental in writing this into the speech: "There has been a surge in new, young, high-growth, highly innovative firms. It wasn't long ago that Apple, Cisco and Google didn't even exist – now each one has a market value of over $100bn ... The impact this change is having on our economic landscape is unprecedented. In 1950, the average life of a company in the S&P index was 47 years. By 2020, it will fall to just 10 years."
Treasury sources say there are no differences with No 10. They point out that in the budget in March, the chancellor announced an entrepreneurial investment scheme and tax break for entrepreneurs. "George thinks it is great that Steve agitates and pushes his ideas," one source said. "Ideas are discussed and challenged in a process by people who all work very well together."
