Philip Hammond: National Insurance U-turn to 'keep public's trust'

Philip HammondImage source, PA

Chancellor Philip Hammond has defended making a U-turn on increasing National Insurance contributions for some self-employed workers.

Writing in The Sun, he said the government sets "great store in the faith and trust" of Britons and hoped the reversal showed "we are listening".

Mr Hammond said it was important he and the prime minister met the "spirit" of the Tories' 2015 manifesto pledge.

Labour called the climb-down "shocking and humiliating".

The chancellor had faced a backlash by Conservative backbenchers, who accused him of breaking a general election manifesto commitment not to put up National Insurance, income tax or VAT.

In his letter to readers of The Sun, Mr Hammond wrote: "Trust matters in politics. And this Conservative government sets great store in the faith and trust of the British people."

He said people had questioned whether the planned increase in National Insurance for the self-employed was consistent with the tax pledges in the manifesto.

"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," he continued.

"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."

The Sun was one of the most outspoken newspapers against the increase when it was announced, because of the effect it would have on its "White Van Man" readers.

Media caption,
The chancellor was asked who alerted him to the manifesto breach

Mr Hammond's Budget announcement would have increased Class 4 NICs from 9% to 10% in April 2018, and to 11% in 2019, to bring it closer to the 12% currently paid by employees.

In a Commons statement, the chancellor told MPs: "There will be no increases in National Insurance rates in this Parliament."

Mr Hammond said he would use the Autumn Budget to set out further measures to "fund in full" the £2bn lost from NICs.

Media caption,
Theresa May explained the reasons for the change of plan at PMQs

Shadow chancellor John McDonnell described the climb-down as "chaos".

"It's shocking and humiliating that you have been forced to come here to reverse a key budget decision announced less than a week ago," he said.

Asked by former SNP leader Alex Salmond "who" had realised the Budget was in "flagrant breach" of a manifesto commitment, Mr Hammond replied: "I think it was Laura Kuenssberg on the BBC shortly after I said it in the Budget speech."

Mr Corbyn said the government should "apologise" for the stress the announcement had caused Britain's 4.8 million self-employed people.

Media caption,
John McDonnell said the government should apologise for the "blunder"

The SNP's Westminster leader Angus Robertson accused ministers of a "screeching, embarrassing U-turn".

Liberal Democrat leader Tim Farron, an advocate of Britain remaining in the EU, questioned whether the chancellor would "now U-turn on another broken election commitment to keep us in the single market".

Chris Bryce, CEO of the self-employed body IPSE, welcomed the U-turn, saying "hard working people will sleep easier tonight".

Stephen Herring, the Institute of Directors' head of taxation, said the National Insurance "saga can only be described as chaotic".