THE Chancellor Philip Hammond has backed down over his planned Budget hike in National Insurance Contributions (NICs) for the self-employed.
In a letter to Conservative MPs, the Chancellor said he would not proceed with the planned increase in Class 4 NICs which he announced just a week ago. “There will be no increases in NICs rates in this Parliament,” he said.
Here's Philip Hammond's letter to Conservative MPs - says U-turn was made in light of "clear view" that NICs rise broke manifesto pledge pic.twitter.com/9Y5egELq21— Stephen Jones (@SteveJonesPA) March 15, 2017
Mr Hammond had faced a furious backlash by Conservative backbenchers, who accused him of breaking a general election manifesto commitment not to put up NICs, income tax or VAT, while hitting traditional Tory supporters. In his letter, the Chancellor said: “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 the 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 measure set out in the Budget.”
Mr Hammond said that he would still go ahead with the abolition of Class 2 NICs – which is also paid by the self-employed – from April 2018, which his predecessor George Osborne announced.
However he said that a planned consultation – due to be carried out over the summer – looking at the different parental benefit entitlements enjoyed by employees and the self- employed would be widened to look at other areas of different treatment.
It will be carried out alongside the review by RSA chief executive Matthew Taylor, a former adviser to Tony Blair, of the implications of different ways of working for employment rights.
“Once we have completed these pieces of work, the Government will set out how it intends to take forward and fund reforms in this area,” Mr Hammond said.
The Chancellor had argued that the increase in Class 4 NICs had been necessary to address the growing unfairness in the National Insurance system in the treatment of employees and the self-employed.