Hammond hits million with tax rise as he braces for Brexit

● Chancellor ‘clobbering white van man by raising bills for the self-employed ● Forecasts of strong economic growth for next five years help lift austerity gloom ● North Sea oil forecasts are revised down in a blow to independence campaigners

Philip Hammond has been accused of breaking a Conservative manifesto pledge and hitting entrepreneurs by raising National Insurance charges for the self-employed to pay for spending on health and education.

National Insurance for self-employed people will be brought closer into line with charges for employees, with tens of thousands of Scottish taxpayers being hit with an average £240 per year increase in their charges by 2019.

Across the UK, up to 2.5 million people will be affected, with opposition parties accusing the government of a “scandalous attack on aspiration” that would see “white van man” being “clobbered” by the taxman.

Independent economic forecasts on the eve of Brexit negotiations getting under way confirmed strong growth over the next five years, with the national debt set to peak next year at 88.8 per cent of GDP.

As he stored up a war chest for expected choppy waters ahead as the UK goes through the process of the EU, the Chancellor told MPS there was “no room for complacency”. In his slimmed-down 64-page Budget, he said there will be no increase in longterm borrowing and all new spending will be paid for by a crackdown on tax avoidance and increasing National Insurance, which will raise £2 billion by 2022.

Small business owners and investors with shareholdings outside Isas and pensions have also been hit, with the government cutting the tax-free dividend threshold from £5,000 to £2,000, raising another £2.6bn for the Treasury over five years.

Much of the revenue will be spent on social care and grammar school places in England, with the Scottish Government getting an additional £350m through the Barnett formula.

Lucy-rose Walker, chief executive of the start-up incubator Entrepreneurial Spark, which was founded in Glasgow, warned the measure would lead to fewer entrepreneurs taking the risk of starting their own business.

“Increasing National Insurance rates for the selfemployed could be a further step by the government to penalise those who are taking risks and starting a business, often giving up their regular pay cheques to take a chance at creating something great,” Ms Walker said.

“Removing the few remaining incentives of being selfemployed is counter-intuitive and will lead to fewer enterprises and consequently fewer jobs.”

The changes come despite a pledge in the 2015 Conservative manifesto, which promised the party would “not increase the rates of VAT, income tax or National Insurance in the next parliament”.

Treasury sources said the government had honoured the commitment by not raising National Insurance for those working for an employer.

Class 4 National Insurance will rise from 9 per cent to 11 per cent over two years, compared to the 12 per cent paid by employees in Class 1. The changes will begin to take effect in April 2018, and will be partly offset by the previouslyannounced abolition of Class 2 National Insurance.

Mr Hammond said the £5bn cost to the Treasury from lower National Insurance for the self-employed was “not fair to the 85 per cent of workers who are employees”.

The Treasury insisted the policy would target highearners, such as partners in law firms, with the average loss estimated at 60p a week and those earning less than £16,250 a year seeing a fall in their bills.

The Chancellor announced a review to examine how the government could help fund parental leave so selfemployed workers could take time off to start a family.

SNP economy spokesman Stewart Hosie MP said the Chancellor had been forced to raise taxes for the selfemployed because of cuts to corporation tax, which will fall to 17 per cent by 2020, the lowest in the G20, from 20 per cent now.

“In order to make amends today or to make the numbers stack up we have seen a scandalous attack on aspiration, on the self-employed, taxing them more,” Mr Hosie said.

“The party of aspiration taxing those who are selfemployed putting in active, real, hard disincentives to starting businesses, to employing people, to stepping out on one’s own. I think that is a decision which will come back to haunt this Chancellor.”

Scottish Labour Westminster spokesman Ian Murray said: “This is yet another broken manifesto promise from the Tories. This Budget proves once and for all that ordinary working people just cannot trust the Tories.”

In deciding to hike National Insurance contributions for the self-employed, Chancellor Philip Hammond has not only left himself open to accusations of breaking an election pledge, he has targeted self-starting workers in a very un-conservative fashion.

Despite the spectre of Brexit hanging heavy over his first Budget, Mr Hammond actually had some good news to impart, with economic growth set to be higher – and borrowing lower – than forecast in November’s Autumn Statement. But while there were silver linings to be had in an outlook clouded by further austerity, they were few and far between.

This was largely a bad news Budget, and those who make a living off their own back will be the hardest hit by the doom and gloom. Almost 2.5 million people will find themselves paying an extra £240 a year in National Insurance contributions, a policy which will raise just over £2 billion for the Treasury in four years.

The move has quite rightly been characterised as an assault on self-employed low and middle income earners and is compounded further by a decision to hit savers by cutting tax-free dividend allowances from £5,000 to £2,000.

Put simply, it will make life more difficult for very many hard-working families across Scotland and the UK as a whole.

While last year’s vote to leave the European Union was predicted to usher in a period of great uncertainty, the Chancellor said the UK economy “continued to confound the commentators with robust growth”. There were improved economic forecasts via the Office for Budget Responsibility, which revised up its growth forecast from 1.4 per cent to 2 per cent for 2017, predicting it will slow to 1.6 per cent in 2018 before returning to 2 per cent in 2021. Due to “a number of one-off factors”, borrowing was predicted to be £16.8bn lower than previously forecast, the Chancellor said.

But in a sign there could be choppier waters ahead, he has begun putting money aside for a Brexit war chest, funds which could have been spent on hard-pressed public services.

While Brexit is clearly dominating the Chancellor’s thoughts, the prospect of a second independence referendum cannot be too far behind. The Scottish Government will receive a £350m dividend under the Barnett Formula as spending increases south of the border on areas such as education.

Mr Hammond wasted no time in telling the House of Commons that the additional funding showed “we are stronger together in this great United Kingdom”.

In a further nod to Scotland, there was help for the embattled North Sea oil and gas industry, with plans to use tax incentives to make it easier for operators to sell oil and gas fields.

This was a Budget dominated by the continuing imperatives of austerity and the latent uncertainties of Brexit.

Chancellors usually like to give with one hand and take with another, but this was a Budget which felt greedier than most.