Philip Hammond DROPS hated National Insurance hike on self-employed in victory for The Sun campaign as Chancellor makes stunning U-turn on white van man tax raid
A letter to MPs said the Government will not proceed with the increase in contributions for the self-employed set out in last week’s Budget
PHILIP Hammond today grovels to Sun readers after scrapping his hated tax grab — to the delight of our army of White Van drivers.
In a personal missive, the humiliated Chancellor admits that he broke voters’ trust.
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Philip Hammond has today been forced to cancel his proposed tax risesCredit: Reuters
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He stresses: “Trust matters in politics.”
Yesterday in a spectacular Sun campaign victory, Mr Hammond did a U-turn and binned a £240 rise in National Insurance contributions for two million self-employed workers.
The plan — revealed just seven days earlier in the Budget — sparked nationwide uproar and led to an unprecedented climbdown.
While clearly breaching a 2015 election promise not to raise income tax, VAT or NICs, Mr Hammond said the aborted tax raid did meet the Tories’ new tax lock law.
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The Chancellor was forced to scrap the planned hikeCredit: Reuters
Yet he concedes today: “But for the Prime Minister and me, it’s not enough simply to stay within the letter of our tax lock law. It’s important that we meet the spirit of our commitment as well.”
Pledging never to make the same mistake again, the Chancellor adds: “I can say clearly to Sun readers that there will be no increases in National Insurance rates in this Parliament”.
Self-employed builder Terry Christie spoke for all strivers when he said it felt like a “big shadow” had been lifted off him.
Terry, 47, who has run his own block-paving business in North Tyneside for 20 years, said the past week had been filled with stress and worry.
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Mr Hammond said trust from the people was important to himCredit: PA:Press Association
He had been facing the possibility of redundancies over the NI hike.
Terry said: “It feels like there has been constant bad news with the recession and Brexit.
"All these things have had a massive effect on us, so this is the first bit of welcome news we’ve had for a long time.
“I have a fleet of vans and a few lads that work for me so it would have hit us hard and potentially there could have been redundancies.
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Today White Van men across Britain hailed the success of our campaignCredit: PA:Press Association
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Scores had lined up to urge the Chancellor to change his mindCredit: News Group Newspapers Ltd
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But Theresa May insisted this lunchtime that the Government had NOT broken their promisesCredit: Getty Images
"The week just gone has been terrible. I said to my wife I felt it was the final nail in the coffin.”
The NI plans sparked a full-blown Tory revolt as ministers lined up with backbenchers to attack it.
The U-turn came during an emergency 8am meeting between Mr Hammond and Theresa May.
The decision was taken by the pair jointly, aides insisted.
Mr Hammond broke the bombshell news in a letter to all Tory MPs just before Mrs May took Prime Minister’s Questions at midday.
Philip Hammond's letter to MPs about National Insurance
“I am writing to clarify the government’s position with regard to the changes to National Insurance Contributions (NICs) for the self-employed, announced in last week’s Budget
“As I set out last Wednesday, the gap between benefits available to the self-employed and those in employment has closed significantly over the last few years – most notably buy the introduction of the new state pension in April 2016, worth an additional £1,800 to a self-employed person for each year of retirement.
“It remains our judgment that the current difference in benefit entitle no longer justify the scale of difference in the level of total NICs paid in respect of employees and the self-employed.
“Colleagues will be aware that there has been a sharp increase in self-employment over the last few years.
“Most commentators believe that at least part of the increase is driven by differences in tax treatment.
“HMRC estimates that the cost to the public finances of this trend is around £5bn this year alone and the parallel increase in incorporation will cost more than £6bn a year by the end of the Parliament.
“This represents a significant risk to the tax base and thus to the funding of our public services.
“The measures I announced in the Budget sought to reflect more fairly the differences in entitlement in the contributions made by the self-employed and addresses the challenge of sustainability of the tax base.
“The Government continues to believe that this is the right approach.
“Since the Budget, however, there has been much comment on the question of the commitments made in our 2015 manifesto.
“Ahead of the Autumn Statement last year, the Prime Minister and I decided that, however difficult the fiscal challenges we face, the tax-lock and spending ring-fence commitments we have made for this Parliament should be honoured in full.
“I made this clear in the Autumn Statement speech. As far as National Insurance contributions we concerned, the locks were legislated for in the National Insurance contributions (Rate Ceilings) Act 2015.
“When that Bill was introduced, it was made clear that the lock would apply only to Class 1 contributions (employer and employee).
“The measures proposed in the Budget fall within the constraints set out by the tax-lock legislation and the spending ring-fences.
“However, in light of the debate over the last few days it is clear that compliance with the ‘legislative’ test of the manifesto commitment is not adequate.
“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 NIC measures set out in the Budget.
“There will be no increases in NICs rates in this Parliament.
“We will continue with the abolition of Class 2 NICs from April 2018.
“The cost of the changes I am announcing today will be funded by measures to be announced in the Autumn Budget.
“I undertook in the Budget speech to consult over the summer on options to address the principal outstanding difference in benefit entitlement between employed and self-employed: parental benefits.
“We now intend to widen this exercise to look at the other areas of difference in treatment alongside the Government’s consideration of the forthcoming report by Matthew Taylor, CEO of the RSA, on their implication if different ways of working for employment rights.
“Once we have completed these pieces of work, the Government will set out how it intends to take forward, and fund, reforms in this area.
“I plan to make a statement in the House later today.”
Afterwards, the PM sat beside Mr Hammond for moral support as he then detailed the climbdown in a special Commons statement.
In a catastrophe for the Treasury, it opens up a £2billion black hole in Mr Hammond’s spending plans — which he pledged to fill in the Autumn Budget.
But last night relieved Tory MPs praised Mr Hammond for listening to their deep concerns.
Backbencher Matthew Offord said it made him “a listening Chancellor”.
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Our front page after Mr Hammond announced his £240-a-year tax raid
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We launched a campaign to demand the tax be axed
Another Tory MP, Jacob Rees-Mogg, said the U-turn reveals the Chancellor has “wisdom”.
Privately, Tory MPs were still fuming, with one describing the aborted tax hike as “a f***ing disaster” that has made Mrs May and Mr Hammond look “slippery”.
Another, Andrew Bingham, warned the Chancellor never to forget Britain’s lifeblood army of entrepreneurs.
Tory backbencher Stephen McPartland heaped praise on The Sun after we campaigned against the rise.
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David Cameron appeared to say the move was 'stupid'Credit: Ruckas
He said: “It’s the Sun Wot Won It — it’s absolutely fantastic news and a big victory for The Sun, for White Van Man and all self-employed.”
Tory MP Richard Drax urged Mr Hammond to come up with the missing £2billion by slashing overseas aid.
The SNP demanded he promise not to find the cash by “picking the pockets” of struggling workers again.
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Theresa May initially backed the move, saying it would help reduce the gap between the employed and self-employedCredit: Getty Images
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Philip Hammond's letter confirming the climbdown
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The Chancellor made the move today after days of opposition
Labour called on both the PM and the Chancellor to apologise for the Budget gaffe — branding the U-turn “chaos”.
Shadow Chancellor John McDonnell said: “Large numbers of self-employed people have been put through the mangle. No one should be so arrogant they can’t say sorry.”
Downing Street insisted the PM still retained full confidence in Mr Hammond as her Chancellor, and the pair had not discussed his resignation.
Quizzed whether Mrs May now has concerns over his judgment, the PM’s official spokesman insisted: “No”.
'Well done Sun for backing us'
By Dan Ware, White Van Man
DRIVING down the road in my Transit yesterday, I couldn’t believe it when I heard that Philip Hammond had caved in! Well done to The Sun for sticking up for Britain’s hardest-working people. The five million self-employed are the people who literally keep this country going. We don’t get holiday pay, or state handouts when we’re sick — and when times are hard we can’t go down to the Jobcentre. In return we pay less National Insurance than workers who get all those rights. That’s why I was livid when the Chancellor announced that he was putting up our National Insurance to make things “fairer”. How could it be fair to make people earning just over £16,000 a year pay more? It wasn’t a huge amount – around £240 a year on average – but it was the principle. So I was delighted to support The Sun’s campaign and display a Stop Hammond’s White Van Scam bumper sticker on my van. Every self-employed person I know was backing the campaign and hoping against hope that Hammond would back down. I can’t believe it only took a week. Well done to The Sun. I am also delighted that the Government is going to stand by George Osborne’s pledge to end Class I National Insurance tax. That move will save every single self-employed trader £2.80 a week. Again, it’s not a lot but it all adds up at a time when it is harder than ever to make ends meet.
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