Chancellor Hammond backs down on planned National Insurance hike

Thursday, March 16, 2017


Chancellor Philip Hammond has scrapped his planned Budget hike in National Insurance Contributions for the self-employed, a week after announcing the measure in the Budget.


In a letter to Conservative MPs, the Chancellor said he would not proceed with the planned increase in Class 4 NICs.


The plans would have involved raising national insurance contributors on some classes of the self-employed from 9 per cent to 11 per cent by 2019.


The move to raise Class 4 contributions – intended to bring in £2billion – would have hit almost 2.5million people with a £240 rise.


It sparked much criticism from Tory backbenchers, who accused Mr Hammond of breaking an election pledge, and business leaders.


 A week later, the Chancellor confirmed there would be no increases in NICs rates in the current parliament.


He wrote: “It is very important, both 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.”


Meanwhile, the planned abolition of Class 2 contributions – also paid by the self-employed – from April 2018 will still go ahead. 


Writing in The Sun newspaper, Hammond defended the climb-down, which Labour described as “shocking and humiliating”.


“Trust matters in politics. And this Conservative government sets great store in the faith and trust of the British people,” the Chancellor wrote.


“After the 2015 general election, we acted to put these manifesto pledges into law and explained at that time that, when it came to National Insurance, this would apply to the main rate of National Insurance.


“But for the Prime Minister and me, it’s not enough simply to stay within the letter of our tax lock law. It’s important that we meet the spirit of our commitment as well.


“By making these changes, I hope we have shown that we are listening to people and demonstrating our determination to keep to both the letter and the spirit of our commitments.”

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