PM steps in over Hammond's NIC hike

An intervention by prime minister Theresa May due to an outcry over chancellor Philip Hammond’s Budget plan to raise NIC on the self-employed has been welcomed.

The Freelancer and Contractor Services Association says the PM is right to “pause to reflect” on the impact of raising Class 4 NIC, so the Taylor review can report first, probably in June.

But Mrs May has only said that the vote on the NI increase, which Mr Hammond promised last week at Budget 2017 to take effect from April 2018, will not be held until the autumn.

“Let me if I may just talk about the Budget yesterday, because we did make some difficult decisions”, the prime minister acknowledged on Friday.

“The decision on national insurance was taken in the context of a rapidly changing labour market in which the number of people in self-employment, often doing the same work as people employed more traditionally is rising rapidly.”

The PM did not apologise for breaking the Tories’ NIC manifesto pledge, which a No.10 Downing Street source told Saturday’s Financial Times that the Treasury had absent-mindedly “forgotten” about, when drafting the plan.

Nor did Mrs May say the increase in National Insurance will be reconsidered, although such a rethink is being called for by a reported 30 MPs and Britain’s biggest-selling tabloid, The Sun.

The MPs, including the Conservative’s own Tom Tugendhat and Anne-Marie Trevelyan, are said to reject No.11 Downing Street’s claims that the plan does not, technically, break the manifesto pledge.

In fact, the chancellor’s spokesperson claimed to the i newspaper after the Budget that the 2015 pledge not to raise NIC was only meant in relation to employees, not people who work for themselves.

In her intervention since then, Mrs May reassured that the Class 4 NIC hike will be accompanied by “some changes to the rights and protections” for the self-employed.

But this does not seem to have pacified the MPs. On the contrary, potential sweeteners to the bitter pill of higher NIC like new pension rights and maternity protections seem to have angered the MPs, for being regarded as a diversionary tactic or a tacit admittance of wrongdoing.

And it is not only Mr Hammond who is being blamed. According to the Guardian, a Tory backbencher says a number of MPs are pointing the finger at the chief secretary to the Treasury, David Gauke, who has long experience at the department.

The MPs are buoyed by David Cameron, as the former PM was seen after the Budget in a video next to defence secretary Michael Fallon, appearing to comment to him on Mr Hammond’s announcement: “breaking a manifesto promise; how stupid can you get?”

Others apparently blame the previous chancellor, who is understood to be behind the 2015 pledge not to raise NI, although allies of George Osborne apparently say he looked at a similar increase during his chancellorship, but decided to leave it alone.

Another ex-chancellor Lord Lamont, who Mr Hammond poked fun at on Thursday for being sacked subsequent to his own 1993 Spring Budget, said at the weekend that the NIC hike announcement was a “rookie error.”

The comment will dismay the current chancellor, colleagues of whom the FT has quoted as saying that No 10 staffers have distanced themselves from Mr Hammond, describing it as “not a good place for him to be.”

Announced at chapter 3.5 of Budget 2017, the staged rise of National Insurance Contributions from 9p to 11p is projected to raise £2.06billon by adding as much as £700 extra onto the Class 4 payments of almost 2.5million sole trader individuals.

Editor's Note: Image credit-  Foreign and Commonweath Office


12th March 2017

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