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| Philip Hammond ditches national insurance rise for self-employed | Philip Hammond ditches national insurance rise for self-employed |
| (35 minutes later) | |
| Philip Hammond has dropped plans to increase national insurance contributions (NICs) for the self-employed, conceding that it breached the wording of the Conservatives’ manifesto. | Philip Hammond has dropped plans to increase national insurance contributions (NICs) for the self-employed, conceding that it breached the wording of the Conservatives’ manifesto. |
| In a letter to Conservative MPs, the chancellor stuck by his argument that the change would have made the tax system fairer, but said he had decided “in the light of the debate of the last few days” to drop the changes. | In a letter to Conservative MPs, the chancellor stuck by his argument that the change would have made the tax system fairer, but said he had decided “in the light of the debate of the last few days” to drop the changes. |
| Hammond will give a statement to MPs on Wednesday, after prime minister’s questions (PMQs). | Hammond will give a statement to MPs on Wednesday, after prime minister’s questions (PMQs). |
| The rise sparked a fierce backlash among Conservative MPs, who were concerned that the measure, which was due to be implemented in April next year, would undermine entrepreneurs and hit “white van man”. | The rise sparked a fierce backlash among Conservative MPs, who were concerned that the measure, which was due to be implemented in April next year, would undermine entrepreneurs and hit “white van man”. |
| The issue dominated exchanges at PMQs, with Theresa May insisting the U-turn did not mean she accepted the NICs rise went against the 2015 manifesto. | The issue dominated exchanges at PMQs, with Theresa May insisting the U-turn did not mean she accepted the NICs rise went against the 2015 manifesto. |
| Answering a question from the Conservative backbencher Huw Merriman, May said: “We made a commitment not to raise tax and we put our commitment into the tax lock, and the measures we put forward in the budget were consistent with those locks. | Answering a question from the Conservative backbencher Huw Merriman, May said: “We made a commitment not to raise tax and we put our commitment into the tax lock, and the measures we put forward in the budget were consistent with those locks. |
| “But as a number of my parliamentary colleagues have been pointing out in recent days, the trend towards greater self-employment does create a structural issue in the tax base, on which we will have to act.” | “But as a number of my parliamentary colleagues have been pointing out in recent days, the trend towards greater self-employment does create a structural issue in the tax base, on which we will have to act.” |
| The government would await the Taylor report on the future of employment, May said, but would not raise NICs in the parliament. | The government would await the Taylor report on the future of employment, May said, but would not raise NICs in the parliament. |
| Jeremy Corbyn responded by saying May was presiding over “a government in a bit of chaos here”, which had produced “a budget that unravels within seven days”. | Jeremy Corbyn responded by saying May was presiding over “a government in a bit of chaos here”, which had produced “a budget that unravels within seven days”. |
| May responded to the Labour leader: “I normally stand at this dispatch box and say I won’t take any lectures from the right honourable gentleman. When it comes to lectures on chaos he’d be the first person I’d turn to.” | May responded to the Labour leader: “I normally stand at this dispatch box and say I won’t take any lectures from the right honourable gentleman. When it comes to lectures on chaos he’d be the first person I’d turn to.” |
| The Conservative backbencher Stephen McPartland, who objected to the changes, welcomed Hammond’s climbdown. “It’s fantastic news, and shows he’s a strong chancellor, because he can admit when he’s made a mistake. I’m delighted with the announcement and I really look forward to working with him to deliver for self-employed people going forward.” | |
| May had been forced to defend the rise at a press conference in Brussels on Thursday, but she promised that the government would not legislate to introduce the changes until the autumn. That would allow MPs to consider the measure alongside other planned changes, including improved maternity and paternity rights for the self-employed. | |
| Class 4 national insurance rates were due to rise from 9% to 10% next April, and 11% in 2019. Hammond said in his budget speech that would help to address the fact that employees were taxed more heavily than the self-employed. | Class 4 national insurance rates were due to rise from 9% to 10% next April, and 11% in 2019. Hammond said in his budget speech that would help to address the fact that employees were taxed more heavily than the self-employed. |
| In his letter, he underlined that rationale, saying: “The measures I announced in the budget sought to reflect more fairly the differences in entitlement in the contributions made by the self-employed and addresses the challenge of sustainability of the tax base. The government continues to believe that this is the right approach.” | In his letter, he underlined that rationale, saying: “The measures I announced in the budget sought to reflect more fairly the differences in entitlement in the contributions made by the self-employed and addresses the challenge of sustainability of the tax base. The government continues to believe that this is the right approach.” |
| The Treasury defended the measure last week as not breaching the detail of the “tax lock” legislation introduced after the 2015 general election to implement the Conservatives’ manifesto pledge not to increase national insurance rates. | The Treasury defended the measure last week as not breaching the detail of the “tax lock” legislation introduced after the 2015 general election to implement the Conservatives’ manifesto pledge not to increase national insurance rates. |
| But in his letter, Hammond conceded that the move did not comply with “the spirit” of the manifesto pledge. “It is very important both to me and the prime minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made,” he said. | But in his letter, Hammond conceded that the move did not comply with “the spirit” of the manifesto pledge. “It is very important both to me and the prime minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made,” he said. |
| The measure was due to raise £645m a year by 2019-20, to help fund new schools and social care. Hammond will now face questions about how he will make his budget plans add up. In his letter to Andrew Tyrie, the Tory chairman of the Treasury select committee, he said he would announce how the extra funds would be raised in the autumn statement. | The measure was due to raise £645m a year by 2019-20, to help fund new schools and social care. Hammond will now face questions about how he will make his budget plans add up. In his letter to Andrew Tyrie, the Tory chairman of the Treasury select committee, he said he would announce how the extra funds would be raised in the autumn statement. |
| Rachel Reeves, the former shadow work and pensions secretary, who sits on the Treasury select committee, accused the government of an “extraordinary U-turn after a shoddy announcement”. | |
| She said Hammond “now needs to show where the £2bn shortfall is going to be made up”. | She said Hammond “now needs to show where the £2bn shortfall is going to be made up”. |