Budget in tatters as Hammond humiliated over U-turn
CHANCELLOR Philip Hammond tore up a key element of his first Budget yesterday when he bowed to pressure and axed plans to increase National Insurance contributions for self-employed workers.
Theresa May and the Chancellor decided to perform the U-turn just a week after the tax hike had been unveiled and then denounced as the breaking of a manifesto pledge.
Mr Hammond now faces the challenge of making up the loss in government income ahead of the new Autumn Budget.
Shadow Chancellor John McDonnell launched a scathing attack on his Conservative counterpart, saying: “This is a humiliating reversal for the Chancellor forced upon him by Labour’s opposition. His authority is now shredded after just one Budget, and he tore up a manifesto commitment to do it.”
But the Farmers’ Union of Wales gave the U-turn a strong welcome.
President Glyn Roberts said: “This increase would have hit farmers across the UK badly... We therefore thank the Chancellor for revoking this nonsensical increase.”
Mr Hammond sent a letter to Conservative MPs setting out why he abandoned the policy.
Stressing the importance of manifesto commitments, he said: “It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made. In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 [National Insurance contributions] measures set out in the Budget.”
Former Shadow Welsh Secretary and Pontypridd Labour MP Owen Smith said the move to scrap the increase was “a good decision by a weak government and a lame-duck Chancellor”.
JUST a week after delivering his first Budget, Chancellor Philip Hammond has suffered the humiliation of having to scrap a planned increase in National Insurance Contributions (NICs) for self-employed workers which critics claimed broke a key manifesto pledge.
Labour described the U-turn as “shocking and humiliating” and claimed the Government now faced a £2bn “black hole” in its Budget plans.
Mr Hammond admitted the Budget was no longer “fiscally neutral”.
Theresa May sat beside Mr Hammond as he announced the U-turn to the Commons but the SNP sought to exploit tensions between the Chancellor and the Prime Minister.
Dundee East MP Stewart Hosie said it was almost as if the “days of Gordon Brown and Tony Blair never really went away”.
The U-turn was confirmed in a letter to Conservative MPs released just 20 minutes before Prime Minister’s Questions. Mrs May and Mr Hammond are understood to have decided on the move earlier the same morning.
It had been claimed that the 2% increase in Class 4 NICs for the selfemployed breached a commitment there would be no increase in NICs, income tax or VAT. Ministers had argued that it only applied to the main Class 1 NICs paid by employees and their employers.
But Mr Hammond told the Commons: “Reducing the unfairness of the difference in the tax treatment of those who are employed and those who are self-employed remains the right thing to do, but this Government set great store in the faith and trust of the British people, especially as we embark on the process of negotiating our exit from the European Union.
“By making this change today, we are listening to colleagues and demonstrating our determination to fulfil both the letter and the spirit of our manifesto tax commitments.”
He said a planned consultation – due to be carried out over the summer – looking at the different parental benefit entitlements enjoyed by employees and the self-employed would be widened to look at other areas of different treatment.
It will be carried out alongside the review by RSA chief executive Matthew Taylor, a former adviser to Tony Blair, of the implications of different ways of working for employment rights.
Shadow Chancellor John McDonnell claimed the Government was in “chaos” and called on Mr Hammond to apologise.
Islwyn Labour MP Chris Evans pressed for an assurance that this was “not simply a stay of execution” and there would not be “another Tory tax hike in three years’ time”.
Mr Hammond said he was “not setting out today the Conservative manifesto for the next general election”.
Delyn Labour MP David Hanson said he did not want to have to “wait 30 years to read the minutes of the Cabinet meeting” and asked whether the decision to increase NICs had been “unanimous”.
He urged the Chancellor to scrap plans to fund new “free schools” in England.
Mr Hammond told him he would have to “wait 30 years” and that all cabinet decisions are unanimous.
Swansea West Labour MP Geraint Davies raised concerns that the manifesto – which also raised ruled out increases in VAT and income tax – was written before there had been an economic impact assessment of Brexit.
He feared the economic costs of leaving the EU would “fall wholly on public services and the poor”.
Former SNP First Minister Alex Salmond asked whether it was the PM or the Chancellor who first realised that the manifesto pledge had been breached.
Mr Hammond said: On the question of who first raised the issue of the manifesto, I think, to give credit where credit is due, that it was Laura Kuenssberg on the BBC shortly after my comments in the Budget speech.”
He later clarified she was “the first person after I spoke to raise the issue”.
But Pontypridd Labour MP Owen Smith asked him to him to pass on his thanks to Ms Kuenssberg “for pointing out to him that it was a duff decision and to the Prime Minister for forcing him to reverse it before breakfast”.
Warmer words came from Glyn Roberts, President of the Farmers’ Union of Wales.
He said: “This increase would have hit farmers across the UK badly, and that at a time when they are already having to