The Prime Minister has insisted that the tax loophole, worth millions of pounds to actors, should be put on a statutory footing, despite attempts by the Chancellor to close it.
According to senior Government sources, Mr Blair intervened to back Chris Smith, the Secretary of State for Culture, and David Blunkett, the Secretary of State for Education and Employment, in a row with the Treasury over the tax status of performers. He supported their argument that the arts would suffer if the loophole were closed, against the Chancellor's attempt to raise money for government coffers.
Actors are classified as self-employed for tax purposes, and employed for National Insurance. This means that they get the double perk of being able to set expenses against their tax bill while avoiding responsibility for NI contributions.
Mr Brown had planned to alter the rules to classify actors as either employed or self-employed. However, Mr Blunkett and Mr Smith argued strongly against it, the latter saying that the "creative industries", which generate wealth for the UK, would suffer. The Employment Secretary feared actors would be a burden on the state.
Downing Street ruled that the status quo should be maintained as law. But the decision has infuriated the Treasury. One government insider said Mr Blair seemed unwilling to offend those who supported his party in the run-up to the general election. Jeremy Irons, Sinead Cusack and Richard Wilson are among Labour's high-profile supporters. "The Treasury wanted to ... treat actors the same as other people. But the decision was taken to enshrine the anomalous position to keep `luvvies' happy."
The Government has already acted to protect the music industry from dire effects of the welfare-to-work policy, young musicians now being able to get training as part of the New Deal. The Tories said the new move smacked of further "New Labour cronyism".