Budget 2017: Pre-Brexit battleplan backlash over tax rise for self-employed

Chancellor of the Exchequer Philip Hammond making his Budget statement to MPs in the House of Common

Chancellor of the Exchequer Philip Hammond making his Budget statement to MPs in the House of Commons. UK Parliament/Mark Duffy/PA Wire - Credit: PA

Chancellor Philip Hammond stood accused of breaking a Conservative manifesto pledge after putting a controversial tax hike for the self-employed at the heart of his pre-Brexit budget.

He 'made no apologies' for raising additional revenues by hiking the national insurance bill of thousands of people in the region as he found an extra £2bn to help combat the growing social care crisis, and £345m to mitigate the impact of the business rates revaluation.

But the chancellor immediately faced accusations he was reneging on a key plank of his party's 2015 election manifesto which promised not to raise the tax for state benefits.

His debut budget, which came weeks before prime minister Theresa May's self-imposed Article 50 deadline, was designed to store up a war-chest for expected choppy waters ahead as the UK goes through the process of Brexit.

But East of England MEP Alex Mayer said it had failed to provide a clear plan for a prosperous Britain after Brexit or to protect working people, claiming the Conservatives were 'directionless, distracted, and disorganised' over their Brexit plans.

You may also want to watch:

But Mr Hammond said the Budget set out a plan for a 'brighter future' as the UK leaves the European Union.

Despite better-than-expected growth forecasts Mr Hammond insisted he would not borrow more.

Most Read

While the British economy is expected to grow by 2pc this year - an increase on the previous Office for Budget Responsibility (OBR) prediction of 1.4pc, the budget watchdog is less optimistic about growth prospects in the subsequent two years. It downgraded its forecast from 1.7pc to 1.6pc in 2018 and 2.1pc to 1.7pc as Brexit takes place in 2019.

Borrowing was revised downwards by £16.16bn for 2016/17 to £51.7bn. And the OBR tweaked deficit forecasts down in each of the next five years, reaching £16.8 billion in 2021/22.

The chancellor's national insurance fundraiser, which will see 2.5 million self-employed people taxed an average £240 a year more, immediately came under fire following his budget statement.

Labour vowed to oppose what it termed an 'unfair £2 billion sole-traders' tax on the self-employed low and middle income earners', while Liberal Democrats branded the move a 'jobs tax'.

Mr McDonnell MP, Labour's Shadow Chancellor, said the Chancellor had clawed £2bn in tax from the self-employed on low and middle incomes while giving £70 billion of tax giveaways to the top.

But the Treasury stressed that the move, which will increase the Class 4 National Insurance contributions (NICs) paid by the self-employed from 9pc to 11pc over two years from April 2018, was fair.

The Treasury stressed that, taken together with a previously-announced decision to abolish Class 2 NICs, the overall additional revenue totals just £145 million a year - the equivalent of 60p a week for 1.6 million self-employed people.

The abolition of Class 2 NICs by Mr Hammond's predecessor George Osborne in the 2016 Budget had been due to save 3.4 million people an average £134.

Mr Osborne said at the time that it would 'allow millions of self-employed individuals to keep more of their money and invest it back into growing their business'.

While some MPs on Mr Hammond's own benches voiced doubts about the national insurance tax hike, they praised the chancellor for moves to mitigate the impact of the business re-evaluation.

Suffolk Coastal MP Therese Coffey, who took a delegation of businesses to the Treasury in the lead up to the budget, said she was delighted the Chancellor has listened to the calls.

'At last month's meeting I explained the particular issue in Southwold and Aldeburgh and asked the Chancellor to consider the case to help small independent traders facing very high increases. I was pleased to hear he was using my figures in the Treasury the next day and it is good news we now have this £300m discretionary pot to help our small businesses.'

Justice secretary and South-West Norfolk MP Elizabeth Truss said the investment of £2bn to support adult social care in England was 'welcome news'.

But Liberal Democrat health spokesman and Norfolk MP Norman Lamb said the social care funding was a 'woefully inadequate response' to the impossible pressure the NHS and care services are under and there would still be a £2bn social care black hole next year.

Become a Supporter

This newspaper has been a central part of community life for many years. Our industry faces testing times, which is why we're asking for your support. Every contribution will help us continue to produce local journalism that makes a measurable difference to our community.

Become a Supporter