Budget: Tax hike 'anti-enterprise'
Chancellor under attack over hit on self-employed
The measure, which breaks a 2015 Tory manifesto pledge on NI contributions, would result in 1.6 million people paying £240 on average more every year.
Mr Hammond risks a backlash from Tory backbenchers who will feel nervous about how the plan will be received in their constituencies.
Class 4 contributions will rise by 1%, and by a further 1% in 2019. Combined, they will cost each self-employed person 60p per week and raise £145m “for public services.”
Confirming an exclusive report by Daily Business on Saturday, Mr Hammond said someone earning £32,000 through employment, together with their employer, was paying almost three times more in NI contributions than someone in self-employment. Both used the same public services and this differential was no longer justified, he said.
But his proposal was condemned as anti-enterprise, discouraging individuals from taking a risk, and for failing to acknowledge the extra burdens taken on by self-employed workers.
Tory MP John Redwood warned against “taxing work, growth and enterprise and success” while his colleague Jacob Rees-Mogg said the UK’s flexible labour market had helped support levels of employment after the 2008 recession.
He said: “I see the logic for why government wants to do this – unfairness – but question is not so much in terms of revenue but whether it having a structure that encourages self-employment is overall beneficial and whether that is a price worth paying.”
Labour accused the government of “breaking their promises” and “clobbering” the self-employed.
Business leaders were equally critical. Lucy-Rose Walker, chief executive of the incubator Entrepreneurial Spark, said: “Increasing National Insurance rates for the self-employed could be a further step by the Government to penalise those who are taking risks and starting a business.”
Andy Willox, the FSB’s Scottish policy convenor, said: “Today the Chancellor chose to put extra pressure on hundreds of thousands of Scottish self-employed people.
“Increasing the tax burden on plumbers, cleaners and musicians, while decreasing corporation tax isn’t the right move. Many people who work for themselves have relatively modest incomes and don’t get paid holidays and sick pay like employees.”
Chas Roy-Chowdhury, head of tax at the Association of Chartered Certified Accountants (ACCA), said: “While it is great to see that the government has listened to the concerns of the business community with regard to business rates and the upcoming rollout of Making Tax Digital (MTD), ACCA is concerned that an increase in the NIC for the self-employed will be harmful for UK growth and entrepreneurship.”
Small firms were given a reprieve on quarterly reporting as Mr Hammond conceded a need to delay plans to digitise company returns.
The Making Tax Digital programme, due to be introduced next April will now be postponed for one year for firms below the VAT threshold. This will cost the Treasury £280m.
There was a shock for the spirits industry as Mr Hammond raised duty in line with inflation.
On the economy Mr Hammond said it had continued to “confound the commentators with robust growth.”
He said the government was “building the foundations of a stronger, fairer and more global Britain”.
The UK was second only to Germany, there were record numbers in jobs and unemployment is at an 11-year low, he said.
But GDP has been downgraded to 1.6%, 1.7%, 1.9% in subsequent years, then 2% in 2021-22
Inflation is set to forecast to rise to 2.4% in 2017-18 before falling to 2.3% and 2.0% in subsequent years
He said the country needed to continue its plan to bring down the country’s debt which now stood at £1.7 trillion, or £62,000 for every household in the country. The annual interest payments of £50bn are more than the budgets for defence and the police combined.
Mr Hammond confirmed further tax help for the oil and gas sector.
There is a new minimum excise duty on cigarettes based on a packet price of £7.35.
Vehicle excise duty rates for hauliers and the HGV Road User Levy are frozen for another year.