"accused of diverting money away from blue sky research towards government scientific priorities" Everyone who is even tangentially in contact with science funding knows this is true, and has been true for years. Cuts to blue-sky research are not new.
I think if they have come out and say “yes we are cutting blue sky research” they would have gotten away with it. Instead they try to hide it and then blame others (eg “over abundance of ambition” WTF is that) is what gotten them into this pickle.