Philip Hammond has informed the Treasury Committee that the government will not proceed with increases in National Insurance contributions for self-employed workers.
The Chancellor had announced the NIC increase during his budget statement, which drew opposition from MPs of all parties, almost immediately.
There were also claims that the government broke a key manifesto promise not to raise National Insurance, though No10 countered the claims by stating the promise did not cover Class 4 National Insurance Contributions, which accounts for the self-employed.
Chancellor Hammond today sent a letter stating he’s “writing to clarify the Government’s position with regard to the changes to National Insurance contributions (NICs) for the self-employed, announced in last week’s budget.”
Adding: “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 changes we face, the tax-lock and spending ring-fence commitments we have made for this Parliament should be honoured in full.
“I made this clear in the Autumn Statement speech. As far as National Insurance contributions are concerned, the locks were legislated for in the National Insurance contributions (Rate Ceilings) Act 2015.
“When that Bill was introduced, it was made clear that the lock would apply only to Class 2 contributions (employer and employee). The measures proposed in the Budget fall within the constraints set out by the tax-lock legislation and the spending ring-fences.
“However, in the light of the debate over the last few days it is clear that compliance with the “legislative” test of the Manifesto commitment is not adequate.”
Philip Hammond ended the statement by announcing: “There will be no increases in NICs rates in this Parliament.”
Political commentators and opposition MPs quickly responded to the statement, calling it a sharp U-turn by the government.
The Chancellor’s authority is shredded only a week since his first Budget after being forced to U-turn under Labour pressure.
— John McDonnell MP (@johnmcdonnellMP) March 15, 2017
Utter humiliation for Philip Hammond as he abandons his tax hike on the self-employed just a week after announcing it in the Budget pic.twitter.com/9CM24BLsW8
— Jack Blanchard (@Jack_Blanchard_) March 15, 2017
Philip Hammond announces full U-turn on National Insurance hike for self-employed workers, the Tory budget continues to fall apart
— Angela Rayner MP (@AngelaRayner) March 15, 2017
Sell Hammond: National Insurance increase scrapped by Psycho Phil and Chancellor admits it broke Tory manifesto promise. Mega U-turn
— Kevin Maguire (@Kevin_Maguire) March 15, 2017