Philip Hammond hints Tories could ditch pledge not to raise income tax, NI or VAT

Posted On: 
21st April 2017

Philip Hammond has hinted that the Tories could drop their commitment not to raise VAT, income tax or national insurance in their general election manifesto.

Philip Hammond speaking in Washington DC today
Credit: 
PA

The Chancellor was forced into an embarrassing U-turn in March when he set out plans to hike Class 4 national insurance contributions, with Conservative MPs complaining that he had broken a manifesto commitment.

The pledge was part of the Tories’ manifesto in the run-up to the 2015 election, and a number of senior Conservatives claimed Labour would “clobber” working people by increasing NICs.

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Speaking in Washington today, Mr Hammond said the tax lock policy had limited the Government’s fiscal options.

“Let me say first of all that I’m a Conservative, I came into politics not to see taxes rising but to see the burden of taxation falling as our economy grows and that remains my very clear political ambition," Mr Hammond told BBC News.

 

"All Chancellors would prefer to have more flexibility in how they manage the economy and how they manage the overall tax burden down than to have their hands constrained, but what we put in the manifesto will be decided over the next few days and we will publish that in due course and we'll see where we've got to after a proper debate about how we're going to go ahead and do these things."

Asked whether the policy had left him "boxed in", Mr Hammond replied: “Obviously the more commitments you make in a manifesto the less flexibility you have and that means because you are committed to doing certain things you are unable to do other things that may appear as higher priorities during the course of the Government."

Getting rid of the tax lock would signal another break from George Osborne’s economic policy.

Mr Hammond has already abandoned his predecessor’s target of balancing the books by 2020, warning that the “rollercoaster” of withdrawing from the EU called for a more flexible approach.

Instead he told the Tory conference last year he would handle the public finances "in a pragmatic way that reflects the new circumstances we face".

Mr Hammond’s hint today came shortly after Theresa May committed a future Tory government to maintain spending 0.7% of gross national income on foreign aid.

Speaking at a campaigning event in her Maidenhead constituency, the Prime Minister said the focus would be on how best to spend the money the UK donates overseas.

"Let’s be clear, the 0.7% commitment remains and will remain," she said.

“What we need to do though is look at how that money is spent and make sure that we are able to spend that money in the most effective way."