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Spring Budget latest: Hammond’s National Insurance U-turn

Phillip Hammond admits he broke voters’ trust and abandons recent National Insurance hike

LONDON 16th March - A week after the spring Budget was announced, Chancellor Phillip Hammond has announced that he will not be raising Class 4 National Insurance contributions (NICS).

Hammond stated that the government would not go ahead with the proposed increases after they were criticised for breaking a 2015 Conservative manifesto pledge.

The commitment stated that the government would not put up National Insurance, income tax or VAT.

Admitting that he broke the trust of voters in his Spring Budget announcements, Hammond has reversed the policy, further stating that he hopes the U-turn will show the public that the Government “are listening”.

Theresa May scrapped the controversial policy after a backlash by Conservative backbenchers last week.

In a Commons statement, he told MPs that “There will be no increases in National Insurance Rates in this Parliament”.

“Trust matters in politics. And this Conservative Government sets great store in the faith and trust of the British people” he said.

Explaining the change in a letter to The Sun, Hammond wrote:

“After the 2015 general election, we acted to put these manifesto pledges into law and explained at that time that, when it came to National Insurance, this would apply to the main rate of National Insurance”

“But for the Prime Minister and me, it’s not enough to simply stay within the letter of our tax lock law. It is important that we meet the spirit of our commitment as well.”

“By making these changes, I hope we have shown that we are listening to people and demonstrating our determination to keep both the letter and the spirit of our commitments.”

“In the light of what has emerged is 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.”

According to Hammond “most commentators” attributed the “sharp increase” in the number of self-employed people in the UK to the “differences in tax treatment”.

The budget announcement would have seen an increase in Class 4 NICs from the current 9% to 10% in April 2018 and to 11% in 2019 to bring it closer to the percentage (12%) currently paid by employers.

Mr Hammond said that he would use the Autumn Budget to set measures to “fund in full” the £2bn lost from National Insurance contributions.

Shadow Chancellor John McDonnell described the U-turn as chaotic stating that it is “shocking and humiliating" that Hammond was "forced to come here to reverse a key budget decision announced less than a week ago”.

Mr Corbyn however, said that the government should issue an apology for the stress that the announcement had caused the 4.8 million self-employed people in the UK.

And Liberal Democrat leader, Tim Farron, questioned whether Hammond would “now U-turn on another broken election commitment to keep us in the single market”.

How has this affected you as a small business? let us know in the comments below? 

Melanie Luff

About the author

Mel wrote for all titles in the Dynamis stable including, and as well as other global industry publications.


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