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Chancellor Philip Hammond has been accused of putting self-employed people through turmoil over the last week after the government proposed and then scrapped a measure to raise National Insurance contributions for the self-employed.
John McDonnell, Labour’s shadow chancellor, called the initial Tory proposal “a clear cut and cynical breaking of a manifesto promise”.
The measure, which would have raised £2bn for the government over the current parliament, was today scrapped just a week after it was announced at Philip Hammond’s first annual Budget.
Mr McDonnell said the blunder could have been avoided if Mr Hammond had spent “less time writing stale jokes for his speech and the prime minister less time guffawing like a feeding seal” during last week’s Budget.
Mr McDonnell added:
This blunder has consequences. The £2bn raised was tackling the social care crisis. We need to know where these desperately needed funds will come from now.
Mr Hammond admitted the decision meant his Budget was no longer “fiscally neutral” with the £500m a year lost through the NIC reform having to be found through measures announced at an Autumn spending update.
Still, he stuck by his claim that discrepancies in tax treatment for different types of workers represented a “significant risk to the tax base”.
“Addressing this unfairness is the right approach”, he said, adding the NIC measures were within the Tory Party’s promise to “ring fence” people from tax rises but was not in line with the “spirit of the commitment”.
“We are listening to our colleagues and this demonstrates our determination to fulfil both the letter and spirit of the manifesto commitment.”