Philip Hammond announces full U-turn on National Insurance hike for self-employed workers

The Chancellor said a "clear view" had emerged among Tory colleagues over the matter

Joe Watts
Political Editor
Wednesday 15 March 2017 12:39
Comments
Chancellor Philip Hammond stands with Prime Minister Theresa May
Chancellor Philip Hammond stands with Prime Minister Theresa May

Chancellor Philip Hammond has announced a humiliating U-turn on the Government's plan to hike National Insurance Contributions.

Mr Hammond wrote a letter to his party's MPs saying that following a backlash from the Conservative benches the measure would be ditched.

Even this morning ministers were still defending the tax rise, while Theresa May used a press conference to back it herself in a bid to save the policy.

The climb-down comes after the rise, which could have hit some 2.5 million people, had been fiercely opposed by many Tory backbenchers who saw it as breaking a key manifesto pledge.

In a letter to Tory MPs Mr Hammond said: "It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit of the commitments that were made.

"In the 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 measure set out in the Budget."

Theresa May then stood up in the Commons to confirm the move, undoubtedly the most embarrassing she has had to make.

Philip Hammond defends his maiden Budget

Mr Hammond used the first part of his letter to continue to say that the NICs increase "sought to reflect more fairly the differences in entitlement" between employed and self-employed people, adding that the Government still believes it is the right approach.

But he went on to admit that the "debate" over the move in recent days had made clear that people did not feel the change was consistent with the Tories 2015 election manifesto.

While the Chancellor's back-peddling will please some Tories, it angered others who had been fending off attacks on the Government's behalf.

Minister Rory Stewart had been sent in to a television interview to defend the policy just minutes before the U-turn was announced, while ex-frontbencher Ed Vaizey took to Twitter to say: "Blimey. I've been vigorously defending it."

Labour leader Jeremy Corbyn told the Commons: "Seems to me like the Government are in a bit of chaos here.

"A budget that unravels in seven days, a Conservative manifesto with a very pensive Prime Minister on the front page saying there would be no increase - a week ago an increase was announced."

Liberal Democrat Leader Tim Farron said: "The Conservatives have bodged every budget since the election and have lost the right to call themselves the party of business. They are simply not thinking about the 'just about managing' who are struggling with the Brexit squeeze."

SNP Westminster leader Angus Robertson described the move as a "screeching embarrassing U-turn" to cheers and shouts from MPs in the Commons, before adding: "We once had a prime minister who said that the lady is not for turning. My goodness."

The Conservative 2015 election manifesto clearly stated four times the Tories would not increase NICs once in power, in a move that may have helped convince millions to vote for the party.

Deflecting questions over whether the move breaks the promise last week, Ms May said that legislation published after the election made clear that only employed, and not self-employed workers, would be protected.

The move to change rates for some 2.5 million class four NICs payers would see those hit having to pay an extra £240 a year, though the Government said an accompanying move to abolish the class two category would reduce the number of people losing out to 1.6m and that no one earning less than £16,200 will be worse off.

Nonetheless, it sent a shockwave along the Tory back benches with a string of MPs appearing on TV and radio to question whether the hike was hitting “our people” – entrepreneurs and small business owners.

Moreover they feared claiming a manifesto commitment had not been breached because the policy’s small print had been published after the election, would anger voters affected.

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