Fresh Government U-turn as planned National Insurance cut is shelved for a year

Posted On: 
3rd November 2017

The Government has admitted that its plan to cut National Insurance Contributions for self-employed workers will be delayed for another year.

Chancellor Philip Hammond will lay out his autumn budget on 22 November
Credit: 
PA Images

The policy to scrap the so-called "Class 2" contributions of £2.85 a week, or £148 a year, was announced by then-Chancellor George Osborne in 2016 and was due to roll out in April next year.

In a written statement last night however, Treasury officials revealed the cut would not take effect until 2019.

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The move is set to affect the 3.4m self-employed people on profits between £6,025 and £8,164 a year, but will reportedly fill a hole of £200m for the Treasury ahead of this month’s budget.

Mr Osborne last night voiced his disapproval over the latest U-turn by Tory ministers on Twitter.

The move comes after the Government faced ridicule for dropping plans to up Class 4 NICs in March's budget, following pressure from within and beyond the Tory party.

In a written statement released last night, Treasury spokesman Andrew Jones insisted the latest delay was a result of ministers seeking to avoid “unintended consequences”, rather than a ploy to make further cuts to Government spending.

“The Government has decided to implement a one year delay to allow time to engage with interested parties and Parliamentarians with concerns relating to the impact of the abolition of Class 2 NICs on self-employed individuals with low profits,” he said.

"The Government has committed to abolishing Class 2 NICs to simplify the system, so it is therefore right to take the time to ensure that there are no unintended consequences for the lowest paid.

Shadow Chief Secretary to the Treasury, Peter Dowd, accused ministers of using a written statement to “sneak out” the move, rather than address MPs in the Commons.

"The government has clearly tried to sneak this admission of their own failure out just before recess. This should have been announced in the House by a Treasury Minister,” he said.

“This announcement only further highlights the chaos that there is at the centre of the Government right now, as clearly these proposals had not been thoroughly thought through before they were announced.

"But above all the Government needs to make sure that those currently paying Class 2 NICs, including many low-earning self-employed people, are not hit hard as a result of their abolition and replacement.”

Former Business Secretary Sir Vince Cable said the move amounted to “a slap in the face for self-employed workers.”

“Small business owners are already being hit with a double whammy of rising prices and higher borrowing costs.

“Now they’re being told that a planned tax cut will be delayed by another year.