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15 March 2017

Philip Hammond U-turns over National Insurance hike

One week after the Budget, the Chancellor has backtracked. 

By Julia Rampen

The Chancellor Philip Hammond has U-turned on his plan to hike Class 4 National Insurance contributions just one week after announcing it in the Budget.

Thinktanks applauded the hike as a tax aimed at the wealthiest self-employed workers, but they were drowned out by Tory MPs who felt it broke a manifesto promise and would discourage innovation, and opposition critics who pointed out self-employed workers lacked many perks of employees.

In a letter to Tory MPs, Hammond acknowledged that the move seemed to go against “the spirit” of the Conservative manifesto.

He wrote: “In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measures set out in the Budget. There will be no increases in NICs rates in this Parliament.”

Hammond also confirmed he would press ahead with the move to abolish Class 2 Nics, another category of self-employed tax, and that he would fund the U-turn by measures announced in the Autumn Budget.

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In a double victory for the self-employed, Hammond also pledged to widen a planned consultation about parental benefits for the self-employed to look at other areas of different treatment. 

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While white van men may be the biggest winners of this U-turn, it also is something of a point scoring exercise for the former Tory Chancellor, George Osborne. 

Osborne, seen as the main proponent of the Remain campaign’s “Project Fear”, was sacked from the Cabinet after the Brexit vote and has become a figurehead for the government’s backbench Tory critics. 

In his Budget speech, Hammond announced that “the abolition of self-employed Nics, introduced by my honourable member for Tatton [as the former Chancellor is now known], would further increase the gap between employment and self-employment”. He then proceeded to scrap the other part of Osborne’s pledge to reform Class 4 Nics and hike them instead.

The move will be welcomed by Tory backbenchers suspicious of tax rises on principle and sticklers for the manifesto. James Duddridge tweeted: “Welcome news that the government will NOT raise national insurance contributions in this Parliament as per the manifesto.”

However, one Tory MPwas unimpressed by Hammond’s reverse ferret.

Labour MPs meanwhile enjoyed a bit of fun at Hammond’s expense.