IFS backs Hammond’s national insurance plans

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The Institute for Fiscal Studies has backed Philip Hammond’s increase in national insurance contributions for the self-employed, dismissing the manifesto pledge not to raise any of the major taxes as “foolish”.

The independent think-tank said the existing tax system — which charges thousands of pounds more in tax for employees doing the same job as the self-employed — needed reform.

Paul Johnson, director, said: “It distorts decisions, creates complexity and is unfair.”

He said:

If politicians continue to make silly manifesto pledges about not changing taxes and the rest of us resist sensible changes such as this we will end up with the tax system we deserve — inefficient, inequitable, complex and increasingly unable to raise revenue in the face of a changing economy.

But he described the changes unveiled by the Chancellor as “baby steps in the right direction”, adding that a much more thorough review was needed.

The IFS had called for changes to the tax system for self-employed workers in its “Green Budget” last month, saying that the current system “is unfair and creates myriad problems, including avoidance opportunities that require complex legislation and suck in the talents of civil servants and accountants”.

Reporting by Vanessa Houlder

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