- Philip Hammond is facing Tory revolt over raid on the self-employed and savers
- Tore up key manifesto pledge by hitting 2.5m with higher National Insurance
- Penalised business owners and savers slashing tax-free allowance on dividends
- Denied 'lying' to the British people over manifesto promise not to rise NI rates
- Said it's vital Britain continues to ‘live within its means’ as it prepares to leave EU
Grim-faced Philip Hammond flatly denied 'lying' to the British public today as he defended his £2billion raid on the self-employed as about 'fairness'.
The Chancellor insisted 'circumstances have moved on' since the pledge in the 2015 Tory manifesto that there would be no rise in national insurance rates.
Amid a full-blown Tory rebellion, he warned that the government's finances were still in a bad state and everyone needed to pay their way.
Mr Hammond littered his first Budget yesterday with jokes as he imposed swingeing hikes on around 2.5million self-employed - including many on low and middle incomes.
But the laughter quickly died away as Conservative MPs joined furious condemnation of the increase in 'Class 4' contributions - which was teamed with higher taxes on shareholders to raise billions of pounds of funding for social care and an education shake-up.
Philip Hammond flatly denied 'lying' to the British public today as he defended his £2billion raid on the self-employed
The Conservative manifesto from 2015 included a clear commitment that national insurance would not be increased
Mr Hammond fended off calls for a rethink today - although he stopped short of completely ruling one out.
Asked in a torrid round of broadcast interviews whether the Tories had 'lied' to the public in 2015, Mr Hammond bizarrely insisted the manifesto had not been breached because legislation passed after the election only protected the main class of NI contributions.
'We made it clear that it was the Class One National Insurance contribution that we were locking.'
Despite several specific references to NI in the manifesto, Mr Hammond claimed there had only been a 'broad commitment' to hold down tax levels.
He also argued that the changes to arrangements for the self-employed were needed to ensure 'fairness', pointing out that he was also carrying a review to improve elements such as their paternity rights.
'Britain's circumstances have moved on,' he told Good Morning Britain.
'We are now facing the challenge of leaving the European Union, of building a global Britain to exploit the opportunities in the future that this country can enjoy, and we need to invest to do that.
'I've had to ask the self-employed to pay a little bit more National Insurance in order to make a fair contribution for the services that they receive from Government.
He added: 'What I had to address yesterday was the challenge of financing our National Health Service, financing social care and investing skills in Britain’s future. Those are the things that we have to look at now.'
Mr Hammond told BBC Radio 4's Today programme that 85 per cent of the public who were in salaries jobs would be bewildered by the ferocity of the row over NI.
And he insisted only a small proportion of the self-employed would be worse off - saying 'many of them' would be on relatively high incomes.
Pressed repeatedly on whether he was ready to rethink the NI move, Mr Hammond made clear he thought it was 'reasonable'.
But he said: 'I'm always prepared to talk and listen to our backbenchers.'
The desperate defence came as Tory MP Anne-Marie Trevelyan indicated she is ready to take the unusual step of tabling an amendment to the Budget legislation - suggesting Mr Hammond faces a major revot.
The Chancellor unveiled the latest economic forecasts from the Office for Budget Responsibility as he delivered his Budget
No laughing matter: Philip Hammond is now facing an unprecedented Tory revolt over his £4.7 billion Budget raid on the self-employed and savers
On skittish form: Theresa May joking at Labour’s expense in the Commons
'We need to halt this particular decision now,' she told BBC Radio 4's Today programme.
HAMMOND'S SPRING BUDGET AT A GLANCE
The OBR upgraded its growth forecasts from 1.4 per cent to 2 per cent this year, while public sector borrowing estimates were slashed. But Mr Hammond signalled there will be no end to austerity.
Small businesses will get relief totalling £435million. Firms losing rate relief will have their monthly increase capped at £50 for a year, some 90 per cent of pubs will be given a £1,000 discount in 2017, and councils will get a £300 million fund to assist losers.
Hospitals will get £325million to implement 'transformation plans' and another £100 million will be put into a new triaging projects in England.
The crisis-hit social care system will have another £3 billion pumped into it over the next three years, with £1 billion of this available in 2017/18. Mr Hammond ruled out a new 'death tax' to fund social care.
Another 110 new free schools will be opened, including a new generation of grammars. Free school transport will be given to children on free school meals who attend a grammar, and £216 million will go into repairing existing schools. New T-levels will be created to improve vocational education.
CIGARETTES AND ALCOHOL
There was no change to previously planned upratings of duties on alcohol and tobacco, but a new minimum excise duty will apply to cigarettes based on a packet price of £7.35.
TAX FOR SELF-EMPLOYED
Higher paid self-employed workers are to pay an average of 60p a week more in National Insurance contributions as part of changes to raise an extra £145million by 2021-22.
'I think we need to put this on hold so we can have a proper review and think in a holistic way.'
The Chancellor used his first Budget yesterday to lay the ground for life after Brexit with investment in social care, education and infrastructure.
Despite pocketing a £16.8 billion windfall from lower borrowing, he said it was vital that Britain continued to ‘live within its means’ as it prepares to leave the EU.
But the decision to penalise enterprise and thrift prompted an immediate Tory revolt on a scale unprecedented on Budget day, when MPs normally line up to praise the Chancellor.
Former Tory minister Andrew Murrison urged Mr Hammond to think again, telling MPs: ‘It is very important we do not disadvantage self-employment. This party always has been the party that supports “White Van Man” and it is vitally important that we do not disadvantage those individuals.’
Mr Hammond, who has faced criticism in the past for his gloomy outlook on Brexit, had attempted to strike an upbeat tone in his first Budget statement by praising the resilience of the British economy.
Unveiling higher than expected growth forecasts, he said the the UK had ‘continued to confound the commentators’ with its robust performance in the wake of the Brexit vote.
But the optimistic assessment was overshadowed by the row over the two tax hikes - and another raid on mobile phone calls. Figures published alongside the Budget also revealed that motorists face a 10 per cent rise in their car insurance premiums following a controversial compensation shake-up.
Mr Hammond’s decision to go after the self-employed stunned Westminster. He announced that national insurance rates paid by 2.5 million self-employed people would rise from nine per cent to 11 per cent over the next two years.
Some 1.6 million basic rate taxpayers will be an average £255 a year worse off.
The decision is a blatant breach of the 2015 Conservative Party manifesto, on which Mr Hammond was elected.
The Chancellor tore up a key manifesto pledge by hitting 2.5 million workers with higher National Insurance
The manifesto pledged four times that headline tax and National Insurance rates would not be raised. The document said there would be ‘no increases in VAT, National Insurance contributions (NICs) or income tax’. It warned that rises would ‘harm our economy’ and ‘reduce living standards’.
After the election, the ‘tax lock’ pledge was enshrined in law.
Incredibly, Treasury aides tried to claim that the pledge had not been broken as small print in the legislation after the election only specified ‘Class One’ NICs, not the ‘Class Four’ type raised by Mr Hammond yesterday.
A source said: ‘The manifesto commitment was detailed in the legislation – it was very clear that the tax lock refers to Class One contributions. That has not changed. The government has stuck to the manifesto.’
But former Tory pensions minister Ros Altmann, who took the tax lock legislation through the House of Lords, said the self-employed had every right to feel misled.
Baroness Altmann said: ‘I would never have expected us to do this. We said, in good faith that we wouldn’t raise National Insurance rates. But I didn’t think of the small print.’
The tax lock pledge was central to the Tories 2015 campaign
In the run-up to the election, Mr Cameron posted a message on Twitter saying: ‘Between May 2015 to May 2020, there will be no increases in National Insurance’. The word ‘no’ was underlined for emphasis.
In another message, Mr Cameron wrote: ‘I’ve ruled out raising VAT. Why won’t Ed Miliband rule our raising National Insurance contributions?’
The decision to penalise enterprise and thrift prompted an immediate Tory revolt on a scale unprecedented on Budget day, when MPs normally line up to praise the Chancellor
The Conservative Campaign Headquarters also posted on Twitter: ‘The reality is Labour need to raise National Insurance to make their sums add up - and hard-working people will pay.’
Mr Hammond is also likely to face pressure over the decision to slash the tax-free allowance for dividends. The move will affect 2.2 million people, including 1.4 million savers, of whom 400,000 are pensioners.
In future, the allowance will be cut from £5,000 a year to £2,000. The average loss will be £320 a year.
Former Tory business minister Anna Soubry predicted Mr Hammond may have to make a U-turn on the policy, saying: ‘This will not be popular and many will argue it’s unfair.’
In an ominous development for Mr Hammond last night, Conservative MPs lined up to ask him to think again about the rise in National Insurance.
Former Tory Cabinet minister John Redwood said Mr Hammond said the self-employed added ‘crucial’ flexibility to the economy, which should be rewarded.
He added: ‘We need to make sure it is as easy as possible to get into self-employment and, where people are successful, as worthwhile as possible.
‘I don’t think we should be going out of our way to tax work, enterprise and success. I know we have to do some of it, but I think our taxes on it are quite high enough.’
In an ominous development for Mr Hammond last night, Conservative MPs lined up to ask him to think again about the rise in National Insurance
The Chancellor, who was delivering his first Budget, said the moves were needed to pay for investment in social care, education and infrastructure
Tory MP Tom Tugendhat called for a ‘rethink’, adding: ‘The political tradition I come from is one of small government, low taxes, one that seeks to encourage entrepreneurship and enterprise. And while these are small figures they speak of a tone that is not entirely helpful and in that I would urge a rethink.
‘The self-employed, the start-up, those who are taking a risk – they are the ones we should be encouraging, yes through support but also through the tax system.’
RED BOOK IS SHRINKING
The spring Budget red book was just 68 pages – half of what it normally is.
Last year the key document, which spells out the Treasury’s changes, ran to 148 pages.
Under Labour, the average length was 264 pages.
But a Treasury committee report in 2012 found that under the Tory government the average red book had been reduced to 110 pages. Committee members pointed out that it had ‘more factual and less subjective material’.
Philip Hammond’s Budget speech lasted 55 minutes – the shortest since George Osborne’s in 2014.
The longest continuous Budget speech was by William Gladstone in 1853 – four hours and 45 minutes.
Fellow Tory Jacob Rees-Mogg said the move was a ‘mistake’. And Anne-Marie Trevelyan said she was ‘worried’ about the move, saying: ‘The self-employed are the risk-takers, the next generation of business leaders, who get no statutory sick leave or holiday pay.’
The Treasury insisted that the move was about restoring ‘fairness’ between the self-employed and those in salaried jobs, who pay National Insurance at 12 per cent.
A source said a self-employed worker on £25,000 a year currently pays £363 a less in NIC than someone in a salaried job.
Aides to Mr Hammond pointed out that the self-employed would qualify for the new flat rate state pension, ending an historic disadvantage. A Treasury spokesman said the move was worth £1,800 a year to the self-employed.
The Treasury also said the losses to the self-employed would be partially offset by previously announced cuts to ‘Class two’ NICs, which will reduce the number of losers to 1.6 million.
Mr Hammond also announced a review that could lead to the self-employed winning new maternity and paternity rights, which are currently extremely limited.
He told MP there had been a ‘dramatic increase’ in the number of people working as self-employed - and that the reason for doing so should not be ‘differences in tax treatment’.
The disparity between the rates paid by the self-employed and employees ‘undermines the fairness of our tax system’, he said.
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