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Philip Hammond must act fast to avoid a repeat of the pasty tax row

8 March 2017

4:09 PM

8 March 2017

4:09 PM

The government is in trouble over the National Insurance increase for the self-employed. Journalists are busy pointing out that the Tory manifesto explicitly said that there would be no increases in National Insurance. But Philip Hammond’s allies are—rather absurdly—claiming that the Budget keeps this manifesto promise as the post-election tax lock law only refers to Class One National Insurance contributions, and what is being raised is Class 4 ones.

This is the wrong ground for the government to fight on; and they’ll end up losing if they remain camped out here. It is rather ironic that a Budget which promises to clamp down on misleading special offers that take advantage of consumers has ended up with the government telling voters to check the small print of its manifesto promises.

The government would be much better off making the case that this change is needed as the number of self-employed people is rising more rapidly than expected and they are now entitled to more benefits than before. I suspect that this rise might also have been more palatable if announced at the same time as a government commitment to offer paid maternity and paternity leave to the self-employed, which Hammond said the government would consult on this summer.

Philip Hammond is an economic Chancellor, not a political one. He has the same aversion to anomalies in the system as a Treasury civil servant, hence today’s move on self-employed National Insurance and dividend taxation. But lots of Tories will be uncomfortable with this National Insurance hike. They see the self-employed as their people—the embodiment of the vigorous virtues and natural low-tax allies.

Hammond will have to start making a better case for this shift if it is not to go the way of the 2012 attempts to clear up anomalies about VAT on pasties and caravans.


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