Downing Street blocks Philip Hammond from national insurance tax rise to hit deficit target
Theresa May's spokesman said the Government is ‘not going back’ to a tax hike for the self-employed
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Your support makes all the difference.Downing Street has ruled out any rise in self-employed people’s national insurance contributions, making it harder for Chancellor Philip Hammond to hit his deficit reduction targets.
Theresa May's spokesman said the Government would not revisit any proposal to hike the NICs for the self-employed after a backlash against the idea earlier this year.
The Conservative manifesto had been equivocal on the issue, but No 10 now blocking any change means Mr Hammond will have to look to other tax rises, spending cuts or borrowing to make up any loss.
With the Chancellor’s Budget coming later this year, Ms May’s spokesman said of the self-employed NICs plan: “It has been looked at and we are not going back to it.”
He explained that there had been no work done on the proposal since the election, which saw Ms May stand on a manifesto that was not clear whether the NICs rise would go ahead afterwards.
Mr Hammond first announced plans to increase NICs for self-employed people in his March Budget, but they were ditched by Ms May following a major backlash from her own benches and pressure from Labour.
The planned increase in class 4 NICs for self-employed workers, would have affected some 2.5 million workers and brought in some £2bn to the Treasury over four years.
The Tory manifesto did confirm a promise to increase the income tax personal allowance to £12,500, to increase the higher rate of income tax to £50,000, to ensure residents can veto council tax increases and to not increase the level of VAT.
Corporation tax is also still due to fall to 17 per cent by 2020, the lowest rate of any developed economy, potentially costing billions of pounds.
As well as the tax giveaways, the poor election result has meant Mr Hammond must keep spending on the pensions triple lock and the winter fuel payment, as the cost of a deal with the Democratic Unionist Party to prop up Ms May's majority in the Commons – not to mention the extra £1bn that the Treasury has passed to Northern Ireland as part of the agreement.
His room for manoeuvre is further restricted by increasing pressure to ease austerity, in particular to lift the cap on public sector pay which could cost some £5bn by 2020.
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