Boris Johnson reportedly told aides he could not afford the revamp of his Downing Street flat as the costs started to spiral.
It comes as ITV News exclusively reported the Tory party made a payment to the Cabinet Office to cover initial costs of work - which the prime minister is now repaying.
Scrutiny on the PM over the refurbishment of his No 11 flat has refused to abate despite Downing Street’s efforts to draw a line under the issue.
A No 10 spokeswoman said renovation costs of Mr Johnson’s living quarters, beyond those provided for by the £30,000 annual allowance, had been “met by the Prime Minister personally”, adding: “Conservative Party funds are not being used for this.”
But with Labour calling for answers on how the work was funded, the Daily Mail alleged Mr Johnson told colleagues the bill was escalating out of control, while his chief of staff Dan Rosenfield felt the refurbishment was a “crazy arrangement” and a “mess”.
The newspaper said when aides asked the Prime Minister how much the upgrades were costing, Mr Johnson replied: “Tens and tens of thousands – I can’t afford it.”
The Conservative Party leader has faced a flurry of questions regarding how the revamp was paid for following a fallout with former aide Dominic Cummings.
The former de facto chief of staff, who quit his post last year, said Mr Johnson wanted donors to “secretly pay” for the work in an “unethical, foolish, possibly illegal” move.
When pressed by reporters on Tuesday, No 10 declined to deny suggestions that the Prime Minister received a loan from the Conservative Party to cover the initial costs, before repaying the party.
Labour deputy leader Angela Rayner said Tory Party co-chair Amanda Milling needed to “come clean” about whether party funds had been used.
“No more cover ups, no more prevarication,” said Ms Rayner.
“Tell us who paid for the Prime Minister’s flat, and release all correspondence on this matter between the Conservative Party, Downing Street and the Cabinet Office.”
Prime ministers are allocated a budget of up to £30,000 per year to renovate their Downing Street residency, but newspaper reports have suggested Mr Johnson has spent up to £200,000 on the changes.
Cabinet Secretary Simon Case, head of the Civil Service, has been tasked with reviewing the refurbishment of the flat in No 11, while the Electoral Commission is also looking into the affair.
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The fresh claims about the flat come as Downing Street looked to sidestep allegations Mr Johnson told aides he would rather let coronavirus “rip” than impose a lockdown last year.
His official spokesman said instead that the PM's actions were being distorted in words that did not amount to a denial - unlike No 10’s strong rejection of the suggestion Mr Johnson said in October he would rather see “bodies pile high” than announce a third lockdown.
Meanwhile, Sir James Dyson mounted a defence of his contact with Mr Johnson during the coronavirus pandemic after a text message he sent was made public by the BBC last week.
The British entrepreneur said it was a “grotesque mischaracterisation” by the BBC to suggest he was a Tory backer, following his decision to message the Prime Minister about tax and other issues while designing extra ventilators at the height of the Covid-19 outbreak in spring 2020.
“The BBC’s characterisation of me as a prominent Conservative donor, or supporter, leveraging a position of power to extract favours from the Prime Minister, is completely untrue,” he wrote in The Daily Telegraph.
“I have met Boris Johnson only three times – always with officials – the last time in 2016. I have not attended any Conservative social events.”
On a BBC corrections and clarifications web page, the publicly-funded broadcaster responded to Sir James’ objections to the way he had been described.
“In our coverage of texts he had sent to the Prime Minister we referred in various outlets to Sir James Dyson as a prominent Conservative supporter or said he backed the Conservatives,” the website entry on Monday said.
“Sir James says this is factually incorrect. We are happy to set the record straight.