Advertisement

  1. ITV Report

Theresa May signals potential U-turn on National Insurance rise

Theresa May signals potential row-back on self-employed tax hike. Credit: AP

Theresa May has signalled a potential row-back on the Budget's tax hike on the self-employed, saying the Chancellor will listen to concerns and that MPs will vote on it, but she also insisted it makes the system "fairer".

The Prime Minister and Philip Hammond both faced a backlash over the plans, prompting Mrs May to explain that the changes would not be voted on by MPs until the autumn.

The vote would happen after a paper which sets out the full effects of the changes for self-employed workers is published.

Shadow Chancellor John McDonnell said that the "partial U-turn" shows that the government is in "disarray", and a number of Tories have raised concerns about the £2 billion hit on the self-employed.

One minister said that the government should apologise for breaking an election manifesto commitment.

At a press conference in Brussels, the prime minister said that the Budget meant making "difficult decisions" but insisted that the change was vital to close the gap between the self-employed and those employed on a traditional basis.

The main rate of Class 4 National Insurance Contributions (NICs) will increase by 1% to 10% in April 2018, and increase again to 11% in April 2019.

The prime minister prepares to address the media at an EU Summit in Brussels. Credit: AP

The Prime Minister said the changes to National Insurance would not be in the Finance Bill, but contained in separate legislation.

"What we will do this summer is publish a paper which will explain the full effects of the changes," she said.

That will contain details about the reforms to National Insurance Contributions (NICs) "along with some changes we plan to make on rights and protections for self-employed workers, including on issues like pension rights and parental rights and maternity pay".

She added: "The Chancellor will be speaking, as will his ministers, to MPs, business people and others to listen to the concerns."

Mr Hammond has come under fire over the rise because the Conservative manifesto promised there would be no increase in National Insurance.

Labour's Mr McDonnell said: "The fact the Prime Minister won't fully support her own Chancellor's Budget measure, and has been forced by Labour to row back on it just 24 hours after he delivered his speech in Parliament, shows the level of disarray that exists at the top of government."

Theresa May arriving at the EU conference. Credit: AP

But ministers - including the Prime Minister and Chancellor - have stressed that the legislation for that manifesto promise only extended to employees' NICs.

Mrs May said: "We did make some difficult decisions in the Budget yesterday.

"But those decisions allowed us to fund an ambitious new approach to technical education, to open more than 100 new free schools and meet the growing demand for social care, as well as investing in the long-term productivity of the economy and it did so while maintaining our commitment to balance the country's books.

"The decision on National Insurance was taken in the context of a rapidly changing labour market in which the number of people in self-employment - often doing the same work as people employed more traditionally - is rising rapidly."

She said the shift towards self-employment was "eroding the tax base" and making it harder to pay for public services "on which ordinary working families depend".

"This goes some way towards fixing that," she insisted.

Chancellor Philip Hammond with the Duchess of Cambridge a day after his Budget. Credit: PA

Mr Hammond's move received support from leading economic commentators, but a Conservative backlash against the proposals gathered pace - with one minister suggesting he would apologise for the broken manifesto promise.

Government whip Guto Bebb said he would "apologise to every voter in Wales that read the Conservative manifesto in the 2015 election" while former work and pensions secretary Iain Duncan Smith called for a review of the changes.

With at least 10 - and reports of up to 20 - Conservative backbenchers voicing misgivings about the Budget measure, Labour made clear that it hopes to force a U-turn in the face of the threat to Mrs May's narrow 17-seat Commons majority.

Mr Hammond said he was "prepared to listen to backbenchers" on the issue, and a Downing Street spokesman declined four times to rule out a review of the decision.

Mr Bebb, a Wales Office minister, told BBC Radio Cymru: "I believe we should apologise."

Shadow chancellor John McDonnell described the NICs announcement as a "shocker" and told BBC1's Breakfast: "Certainly the Labour Party will oppose this. I think other parties will as well. We may be able to persuade enough Conservative MPs to ask the Chancellor now to think again."

Liberal Democrats called on the Chancellor to delay the implementation of the NICs changes until after the Taylor Review reports.

Leader Tim Farron said Mr Hammond's "omNICshambles Budget" was "already unravelling and the Tories will pay a heavy price for it".