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Philip Hammond makes U-Turn on Budget National Insurance rise for the self-employed

Article posted: 16th March 2017

The Chancellor, Philip Hammond, has faced a backlash from the Conservative backbenchers accusing him of breaking a general election manifesto commitment not to increase National Insurance, Income Tax or VAT. Mr Hammond admits that the reforms are seen as contrary to the "spirit" of the 2015 Conservative manifesto and claims that they were the "right approach" but they will now not take place in this Parliament. Writing to every Conservative MP detailing his Budget U-turn, his letter includes the following extracts:

“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.

Since the Budget, however, there has been much comment on the question of commitments made in our 2015 manifesto. Ahead of Autumn Statement last year, the Prime Minister and I decided that, however difficult the fiscal challenges we face, the tax-lock and spending ring-fence commitments we have made for this Parliament should be honoured in full.”

“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 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 measures set out in the Budget. There will be no increases in NICs rates in this Parliament. We will continue with the abolition of Class 2 NICs from April 2018.”

This leaves a £2 billion hole in the Budget, which the Chancellor has said he will fill through actions to be announced in the Autumn 2017 Budget, his second of the year. It will be interesting to see how this shortfall will be recovered over the next four years!

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