Comment Budget faux pas from Hammond
bles Budget. They included the decision to charge VAT on hot takeaway food, a policy known as the “pasty tax” because it meant the price of a pasty from Greggs was set to increase. Cornish MPs were particularly upset. Mr Osborne significantly altered the plans, effectively axing the policy, within months,
Mr Hammond’s Budget mistake is the proposed increase to National Insurance paid by self-employed people.
There’s some logic to his decision. As Mr Hammond explained to MPs, the Treasury collects £6,170 in National Insurance from an employee earning £32,000, thanks to payments made by them and by their employer.
But a self-employed person earning the equivalent amount will pay just £2,300 – significantly less than half as much.
Traditionally, this was justified by the fact that self-employed people got less out of the system, including smaller state pensions.
However, this has changed as a result of government reforms to ensure more people get the full state pension.
So shouldn’t self-employed people pay more National Insurance?
Well, it’s a good case in theory. The trouble is that he’s putting up taxes on people who in most cases aren’t exactly rich and may have very little in the way of job security.
If you have a job, you’re more or less guaranteed to get paid at the end of the week or month. If you get made redundant then, depending on how long you’ve been employed, you’re likely to receive a payment which at least cushions the blow a bit. If you’re ill, you can stay off work and still get paid.
A self-employed plumber or plasterer who turns up with their tools to decorate your living room or fix the radiator may be in a far more precarious position. What’s more, they’re exactly the sort of people the Conservatives are meant to support.
Mr Osborne once delivered a speech to a Conservative conference in which he talked about “the shift-worker, leaving home in the dark hours of the early morning, who looks up at the closed blinds of their next-door neighbour sleeping off a life on benefits.”
He said the Tories “speak for that worker. We speak for all those who want to work hard and get on.”
If you’re self-employed, then you may not be a shift worker, but you’re definitely the type of person Mr Osborne approved of.
And this is something Mr Hammond seems to have forgotten. There was no sense, in his announcement, that he understood that white van man is his sort of person, a Tory sort of person, someone the Conservatives want to be seen to support, and who might well be inclined to support the Conservatives in return, with a little persuasion.
Most self-employed people are men, but it’s also important to note that half a million women are also self-employed, and their numbers are growing.
In some cases, according to a study by think tank the New Policy Institute, they will be working part time.
Setting up a one-woman business, as a cleaner, a carer or a plumber, is a way for some mothers to continue earning while setting their own hours and allowing them to juggle being a mum with earning a living.
Are these the people the Government wants to penalise?
The pasty tax didn’t last long. The same could happen to the tax on the self-employed.
Mr Hammond’s first Budget may swiftly be followed by his first U-turn.
that he’s putting up taxes on people who in most cases aren’t exactly rich and may have very little in the way of job security