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Philip Hammond Does a Quick U-Turn on U.K. Insurance Payments Top British Official Scraps Plan to Overcome Shortfall
(about 7 hours later)
LONDON — In an about-face that cast a damaging blow to his government’s carefully cultivated image of competence, Britain’s chancellor of the Exchequer, Philip Hammond, withdrew on Wednesday a plan to raise revenue from some self-employed Britons, just one week after it was announced in a budget statement. LONDON — Only last week, Philip Hammond, Britain’s chancellor of the Exchequer, joked about the nickname he has won for dull, technocratic, attention to detail — “Spreadsheet Phil” — as he outlined his budget to lawmakers.
The move followed criticism from lawmakers in Mr. Hammond’s Conservative Party who had said that the measure broke a 2015 campaign pledge and penalized some of their supporters. On Wednesday, Mr. Hammond was back in Parliament, this time withdrawing some of those financial plans, in an embarrassing about-face that raised questions not just about his carefully crafted image of competence but also that of the government of Prime Minister Theresa May.
The extraordinary speed with which the measure was withdrawn highlighted the extent to which attacks have shaken the government of Prime Minister Theresa May as it prepares Britain to exit the European Union, a process known as Brexit. Mr. Hammond acknowledged the widespread opposition. He said in a letter to lawmakers and then later in Parliament that he would scrap the plans, announced just seven days ago, to raise more revenue from some self-employed British workers.
Mrs. May had already been put on the defensive on Monday when Scotland’s first minister, Nicola Sturgeon, said she would seek a new referendum on Scottish independence because of the prime minister’s handling of Britain’s departure from the bloc. The move came after criticism both from tabloid newspapers and from some lawmakers in Mr. Hammond’s Conservative Party, who had said that the measure broke a 2015 campaign pledge and penalized some of the party’s strongest supporters.
There was more controversy on that issue, too, on Wednesday, when David Davis, the minister in charge of negotiating the terms of the British exit, told lawmakers in a committee hearing that the government had no official assessment of the economic cost of failing to strike a new trade deal with the rest of the European Union. The extraordinary speed in withdrawing the measure highlighted the extent that attacks had shaken the Conservative government as it prepares Britain to exit the European Union, a process known as “Brexit.” Confronted for once by the typically supportive and pro-Brexit tabloid media and by a rebellion among her backbench lawmakers, Mrs. May’s government buckled.
Mrs. May and Mr. Davis have warned that Britain may have to walk away from negotiations if it cannot get the agreement it wants. She had already been put on the defensive on Monday when Scotland’s first minister, Nicola Sturgeon, said she would seek a new referendum on Scottish independence because of the prime minister’s handling of Britain’s departure from the bloc.
But the political heat may have been felt most directly by Mr. Hammond, whose rapid U-turn surprised lawmakers. Nicknamed Spreadsheet Phil because of his dry personality and focus on detail, Mr. Hammond was regarded as one of the more sure-footed members of the government. There was more controversy on that issue, too, on Wednesday, when David Davis, the minister in charge of negotiating the terms of the British exit, told lawmakers in a committee hearing that the government had no official assessment of the economic cost of failing to strike a trade deal with the European Union after it left the bloc.
In announcing the change in a letter to lawmakers released Wednesday morning, Mr. Hammond acknowledged the criticism of his plans. What made that inexplicable to opponents, and even a few supporters, is that Mrs. May and Mr. Davis have warned repeatedly that Britain might walk away from negotiations if it cannot get the agreement it wants.
“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,” he wrote. He did not say how the shortfall in public funds would be made up. But the political heat may have been felt most directly by Mr. Hammond, whose shift surprised lawmakers. In announcing the change of policy in the letter to lawmakers released Wednesday morning, Mr. Hammond wrote: “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.” He did not say how the shortfall in public funds would be made up.
Speaking in Parliament, the leader of the opposition Labour Party, Jeremy Corbyn, said that the government was in “chaos” and that the budget had begun to unravel in seven days. In his budget statement last week, Mr. Hammond said that the government would increase the rate of national insurance contributions — the taxes that finance health care, the state pension and other benefits — for roughly 1.6 million self-employed workers.
In the budget statement last week, Mr. Hammond said that the government would increase the rate of national insurance contributions — the taxes that finance health care, the state pension and other benefits — for many of the roughly 1.6 million self-employed Britons. Currently, their contributions are levied at a lower rate than others pay, which Mr. Hammond has said was “not fair to the 85 percent of workers” who are not self-employed.
Currently, their contributions are levied at a lower rate than for others, something that Mr. Hammond had said was “not fair to the 85 percent of workers” who are not self-employed. However, the increase in national insurance appeared to breach the manifesto of the Conservative Party, which promised before the 2015 election that it would not increase the income tax, the value-added tax or national insurance payments.
However, the increase in national insurance appeared to breach the manifesto of the Conservative Party, which promised before the 2015 election that it would not increase income tax, value-added tax or national insurance payments. Addressing lawmakers in the House of Commons on Wednesday, Mr. Hammond made matters worse when he appeared to suggest that the breach of a manifesto commitment had first been identified by a journalist. He later backtracked and suggested that he had been referring to the first person to challenge him publicly on the issue.
“I think credit where credit is due, I think it was Laura Kuenssberg on the BBC, shortly after I said it in the budget speech,” Mr. Hammond told lawmakers, when challenged on who had raised the matter.
In any event the story, and the blame game that has accompanied it, exposed tensions between Mr. Hammond, who occupies No. 11 Downing Street, and his neighbor, Mrs. May, in No. 10.
“For a chancellor to abandon his main budget policy within a week is nothing more than extraordinary,” wrote the right-leaning Spectator magazine. “It suggests a staggering lack of communication, forethought and basic political competence.”
The budget “was followed by a briefing war between No. 10 and No. 11, as allies of Mr. Hammond and Theresa May blamed each other for the mess. In the end, the prime minister won and the chancellor was ordered into a retreat as humiliating as any in postwar political history,” the article argued, adding that Mr. Hammond’s reputation for competence “is now in shreds.”
But the Sun newspaper, which had campaigned against the increase, claimed it had forced Mr. Hammond to backtrack.