The self-employed will be spared a tax rise after a government U-turn over National Insurance contributions (NICs).
Chancellor Philip Hammond yesterday scrapped plans to increase NICs for the self-employed after pressure from Conservative MPs and accusations that he was breaking the 2015 manifesto pledge.
Last week Philip Hammond announced that Class 4 NICs for the self-employed were set to rise over the next two years.
Yesterday he told MPs in a Commons statement: “There will be no increases in National Insurance rates in this Parliament.”
Guy Nicolson, Cabinet member of Hackney Council for Planning, Business and Investment, spoke to the Hackney Post after the policy reversal.
He said: “This was an extremely ill-thought through proposal that proves yet again the short-sightedness that seems to prevail across Theresa May’s Government. This is the leadership that is supposed to negotiate our departure from the European Union and renegotiate our position in the single market.
“So far they have displayed a complete lack of forward planning, vision and diplomacy – I fear for the future of the United Kingdom and the economies of our regions.”
Florence Magee, head of Artist Development at the London Creative Network, said an NIC increase would make the organisation’s self-employed clients financially worse-off.
London Creative Network is part of SPACE, which provides workspace for visual artists and creative businesses in Hackney and runs professional development programmes. Over 90 percent of clients on their professional development programmes are self-employed.
Magee said: “This is in an already challenging climate where spiralling living costs in Hackney mean that most Hackney-based artists have to radically change how they work and live just to remain in the borough.”
Magee said SPACE were “supporting a stand-still of NI contributions, as was proposed in the government’s manifesto”.
Diane Abbott, MP for Hackney North and Stoke Newington tweeted yesterday: “Tories are in chaos & Budget lies in tatters. They’ve U-turned on £2bn tax rise, leaving a black hole in their plan.”
— Diane Abbott MP (@HackneyAbbott) March 15, 2017
Those who are self-employed currently pay two types of National Insurance contributions: Class 2, which is a flat rate paid by workers who make over £5,965 a year in profit; and Class 4, which is a proportion of profits paid when workers make over £8,060 a year.
George Osborne announced last year that Class 2 contributions will be abolished from 2018.
Some 11.9 percent of Hackney’s population aged 16-64 are self-employed, according to Nomis. This compares to 13.5 percent in London as a whole and 10.4 percent in Britain.
Comparable figures on Hackney Council’s website show that 9.7 percent of Hackney’s working-age population were self-employed in 2006.
The government is also waiting on a report by Matthew Taylor, a former adviser to Tony Blair, into new employment practices, due to be released in the summer. This may lead the way to the self-employed gaining more rights.
Hammond told MPs yesterday: “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 the 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 NIC measure set out in the Budget.”
Labour’s shadow chancellor John McDonnell described the climb-down as “chaos”.