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Chancellor scraps Class 4 NIC hike following outcries

by Scott Brown | Mar 16, 2017
  • Philip Hammond has abandoned plans to raise National Insurance for self-employed workers in the UK. The Chancellor caused a wave of outrage when he announced in the Budget that National Insurance contributions for the self-employed were to be raised by 2%.
    Phillip Hammond

    Breaking the manifesto pledge

    Hammond was accused of breaking a manifesto pledge made in 2015 when he announced the tax hike in the Budget. Class 4 National Insurance Contributions (NICs) were set to increase from 9% to 10% in April 2018 and to 11% in 2019, to bring it closer to the 12% currently paid by employees.

    The Chancellor showed no sign of backing down at the time, despite the decision causing dismay in large sections of the press and backbenchers. “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 said.

    A surprising U-turn

    As a growing number of Tories demanded a U-turn, the Chancellor finally backed down. Yesterday, he wrote to the Conservative MP’s stating that he will indeed abandon the increase. He stated: "In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measures set out in the Budget. There will be no increases in NICs rates in this Parliament."

    While the move, one of the most significant budget U-turns in recent times, is welcomed by Tory members and the public alike, it leaves Hammond lacking credibility.  He announced that he would use the Autumn Budget to set out measures to fund the £2 billion loss from NICs.

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