Advertisement

  1. ITV Report

Minister: 'Self-employed tax-rise will restore fairness'

Credit: PA

Ministers have rejected calls to reconsider Philip Hammond's tax-rise in National Insurance contributions for the self-employed amid Tory fears it will hit traditional supporters.

The Treasury said the overall impact on the self-employed of the Government's NIC changes would be relatively small.

Labour said the rise was a clear breach of David Cameron's Conservative manifesto commitment that there would be no increases in income tax, VAT or National Insurance contributions (NICs).

Treasury Chief Secretary David Gauke insisted, however, there would be no U-turn, saying the move would restore fairness to the National Insurance system.

"I think people understand the fairness point," he told BBC2's Newsnight.

"At a time when - unlike what has happened in the past - essentially the benefits that the self-employed receive for their contributions are largely the same as employed people do, it is wrong that employed people pay a lot more in National Insurance contributions."

National Insurance contributions for the self-employed will now be 10%. Credit: ITV News

He rejected claims they had broken a manifesto pledge, arguing that when ministers had passed the Tax Lock Bill enshrining the commitment in law they had made clear they were focusing on the main rate of NICs paid by employers and employees.

"There were no complaints about that. The Labour Party explicitly acknowledged 'You have enacted your NICs tax lock,"' he said.

In his first Budget, he put up National Insurance for 1.6 million people by an average of £240 a year.

This 1% increase is set to rake in £145 million a year from the high-earning self-employed.

It will take National Insurance contributions for the self-employed from 9% to 10% - and this will rise to 11% by 2019.

This is in contrast to the Tories 2015 manifesto on which Mr Hammond was elected which says the Conservatives will "commit to no increases in VAT, National Insurance contributions or Income Tax".

The Chancellor also pledged £2 billion investment to tackle the social care crisis in England - declaring the Tories the "party of the NHS".

An extra £100 million was allocated for more GPs to work in A&E during the winter months to help cut waiting times.

The Tories declared themselves the 'party of the NHS' in the Budget. Credit: ITV News

Despite an often joke-filled address, Mr Hammond told the Commons there was "no room for complacency" as he defended plans not to spend increased revenues amid buoyant revised growth figures and improved forecasts for this year's public finances.

Labour leader Jeremy Corbyn accused the Chancellor of producing a "Budget of utter complacency" which ignored the state of the economy, public services and the lives of millions of people.

Key measures at a glance:

  • An extra £2 billion to be spent on social care in England over the next three years to help councils and ease pressure on the NHS
  • Most pubs are to be given a £1,000 discount on business rates as part of a £435 million package aimed to ease the burden on small businesses
  • National Insurance contributions paid by self-employed to increase by 1% to 10% in 2018 and 11% by 2019
  • A clampdown worth £820 million on tax avoidance, including action to stop businesses converting capital losses into trading losses
  • Councils to be given a £300 million "discretionary relief" fund to give to hard-pressed firms in their areas
  • £5 million "returnship" fund to enable people to go back to work after a career break
  • Free childcare for three and four-year-olds doubled to 30 hours a week
Most pubs are to be given a £1,000 discount on business rates. Credit: ITV News

Mr Hammond also revealed the forecast for growth for the UK economy this year has gone up from 1.4% to 2%, but forecasts have been downgraded for the next three years.

The Office for Budget Responsibility's sharply upgraded growth forecasts came as it dramatically lowered borrowing forecasts in 2016-17.

1.4%
The Office for Budget Responsibility's forecast growth for 2017 in the Autumn Statement.
2%
The Office for Budget Responsibility's revised forecast growth for 2017 in the Budget.

In 2018 growth is forecast to slow to 1.6%, before picking up to 1.7%, then 1.9%, and back to 2% in 2021, the Chancellor said.

The OBR forecasts borrowing in 2016-17 to be £51.7 billion, £16.4 billion less than than predicted in November.

£68.1bn
The Office for Budget Responsibility's 2016-2017 borrowing forecast in the Autumn Statement.
£51.7bn
The Office for Budget Responsibility's revised 2016-2017 borrowing forecast in the Budget.

By 2021-22 the deficit is forecast to have shrunk to £16.8 billion.

Mr Hammond said the Budget set out a plan for a "brighter future" after Brexit built on the "foundations of a stronger, fairer, more global Britain".

He said the UK economy had "continued to confound the commentators" by delivering "robust growth" which he said would provide a "strong and stable platform" for the impending negotiations to leave the EU.

The Chancellor defended his commitment not to embark on a greater investment programme.

Philip Hammond made a series of jokes in his first Budget speech but was accused of complacency by Labour. Credit: Philip Hammond made a series of jokes in his first Budget speech but was accused of complacency by Labour.

"The deficit is down, but debt is still too high," he said. "Employment is up, but productivity remains stubbornly low."

He added: "Too many of our young people are leaving formal education without the skills they need for today's labour market. And too many families are still feeling the squeeze, almost a decade after the crash."

Funding for a further 110 free schools was announced in the Budget. Credit: ITV News

Labour's Mr Corbyn said the Budget showed Mr Hammond was "entirely out of touch with that reality of life for millions".

"This morning, over one million workers will have woken up not knowing whether they'll be working today, tomorrow or next week," he said.

Mr Corbyn said the measures showed "utter complacency about the crisis facing our public services and (was) complacent about the reality of daily life for millions of people in this country".

More on this story