Philip Hammond accused of breaking Tory 'tax lock' manifesto pledge after National Insurance hike

Posted On: 
8th March 2017

Philip Hammond has been accused of breaking a key Tory manifesto pledge after announcing a rise in National Insurance contributions for the self-employed.

Philip Hammond preparing for his Budget
Credit: 
PA Images

The move will see nearly 2.5m people left paying £240 a year more in "Class Four" NICs, raising an extra £2bn for the Treasury by 2022.

But the Conservative manifesto ahead of the 2015 election promised that NICs would not rise as part of a five-year "tax lock".

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It said: "No increases in VAT, National Insurance contributions or Income Tax."

Both David Cameron and George Osborne made the policy clear on their Twitter accounts.

 

 

Under the changes announced by Mr Hammond, Class Four NICs for the self-employed people would rise from 9% to 10% next Apri,l and again to 11% in 2019.

The Chancellor said the move was necessary as the current system made an unfair distinction between those who work for companies and those who work for themselves.

“Such dramatically different treatment of two people earning essentially the same undermines the fairness of the tax system,” he said.

“Employed and self-employed alike use our public services in the same way, but they are not paying for them in the same way.

“The lower National Insurance paid by the self-employed is forecast to cost our public finances over £5bn this year alone.

“That is not fair to the 85% of workers who are employees.”

In a chaotic post-Budget briefing, Treasury officials insisted that the announcement did not break the manifesto pledge.

They said the NICs Act passed in 2015 - after the general election - made clear that only Class One NICs were being frozen.

The Chancellor's spokeswoman said: "The legislation is the place for this type of detail, not the manifesto. It is very clear in the legislation.

"This government is committed to its manifesto commitments."

She added: "The tax system has to be sustainable. This is how we can put money into social care and the NHS.

"This was a gap between the tax burden that the employed were paying compared to the self-employed. It is right that this gap is redressed.

"This government has stuck to its manifesto commitments."

But Lib Dem leader Tim Farron branded the Budget an "omNICshambles".

He said: "This slimmed down budget is only 64 pages long but shows the slimmed down ambition of this government. They are short of cash, short of ideas and short on ambition.

"This government is giving tax cuts to the richest and tax hikes for hard-working entrepreneurs. Targeting the self-employed by hitting white van man with a tax hike betrays Theresa May’s pledge to help the just about managing."

“Philip Hammond has used his first Budget to claw £2 billion in tax on those self-employed who are on low and middle incomes. But he continued to boast about the £70 billion worth of tax giveaways at the top announced by his predecessor.

Shadow Chancellor John McDonnell described the NIC hike as a "sole traders tax". 

He said: "Philip Hammond has used his first Budget to claw £2bn in tax on those self-employed who are on low and middle incomes. But he continued to boast about the £70bn worth of tax giveaways at the top announced by his predecessor.

"Labour will oppose this unfair £2bn sole traders tax on the self-employed low and middle earners."