The government drops its plan to hike National Insurance for the self-employed

Britain’s Chancellor of the Exchequer Philip Hammond stands outside 11 Downing Street before delivering his budget to the House of Commons in London, Britain March 8, 2017.Reuters/Neil Hall

LONDON — The UK government has dropped its plan to increase National Insurance contributions for the self-employed.

The change to how much National Insurance self-employed Brits would pay was announced in Chancellor Philip Hammond’s budget last week despite the Conservative Party’s 2015 manifesto promising to freeze all NIC rates.

The change would have affected an estimated 2.84 million self-employed people and was predicted to raise an extra £145 for Treasury by 2020-2021.

Hammond announced the u-turn in a letter to MPs released on Wednesday morning.

The letter, published less than half an hour before May is set to do battle with Labour leader Jeremy Corbyn in this week’s Prime Minister’s Questions, reads:

“Since the Budget, however, there has been much comment on the question of commitments made in our 2015 manifesto. Ahead of the Autumn Statment last year, the Prime Minister and I decided that, however difficult the fiscal challenges we face, the tax-lock and spending ring fence commitments we have made for this Parliament should be honoured in full.”

It goes on to say:

“The measures proposed in the Budget fall within the constraints set out by the tax-lock legislation and the spending ring-fences. However, in light of the debate over the last few days it is clear that compliance with the “legislative” test of the Manifesto commitment is not adequate.

“It is very important to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made. 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 the NICs rates in this Parliament.”

Here is the letter:

Chancellor of the Exchequer

Chancellor of the Exchequer

This is a developing story…