SCOTTISH MPs and MSPs described Philip Hammond’s decision to reverse his controversial planned hike in National Insurance for self-employed people as an “embarrassing U-turn” for the Chancellor.
He was heckled and jeered as he appeared before MPs to explain his move and was repeatedly urged to apologise by his Labour counterpart John McDonnell, who claimed Hammond should have spent less time writing “stale jokes” for his Budget speech.
SNP Banff and Buchan MP Dr Eilidh Whiteford, said: “After the Chancellor’s announcement last week I warned about the impact the Treasury’s decision would have on the self-employed, particularly in the north-east.
“It is an embarrassing U-turn for the Chancellor to be dragged kicking and screaming by his own colleagues to reverse his decision less than a week after making the announcement.
“More than 3000 people across Banff and Buchan would have been hit with a tax rise from April next year. This would have had a significant impact on people in rural Aberdeenshire who are self-employed. I’m glad common sense has prevailed.
“Growth in self-employment has helped to drive our labour market in recent years and this would have made many people think twice about striking out on their own. It was a completely counter-intuitive move.”
Hammond confirmed in a letter to Tory MPs that his planned Budget increase on self-employed people’s NI contributions had been dropped. The letter read: “It is very important both 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 the 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 measure set out in the Budget.”
Hammond had faced a backlash by Conservative backbenchers last week, who accused him of breaking a general election manifesto commitment not to put up National Insurance, income tax or VAT. His Budget announcement would have increased Class 4 NICs from 9 per cent to 10 per cent in April 2018, and to 11 per cent in 2019, to bring it closer to the 12 per cent currently paid by employees.
Highland SNP MSP Kate Forbes and colleague Maree Todd MSP had previously voiced concern that the proposed increase would hammer entrepreneurs in the Highlands and welcomed the decision to drop it.
Forbes said: “It’s a great relief to self-employed people in the Highlands that the Tories have done a U-turn and reversed plans to increase National Insurance Contributions. This would have suffocated entrepreneurs and enterprise in the Highlands and it was a gross disregard for the manifesto on which the Conservatives were elected last May.”
The decision would have had a devastating effect on SMEs, and the Federation of Small Businesses (FSB) in Scotland said there was relief that the Chancellor had “come to his senses”.
Andy Willox, FSB’s Scottish policy convenor, said: “Self-employed people from Plymouth to Peterhead will be breathing a sigh of relief that the chancellor has come to his senses.
“He’s made the right choice – obviously realising that it doesn’t make sense to squeeze the nation’s strivers while trying to deliver a business boom.
“We agree with him that politicians need to better support people who work for themselves. But the way to do that isn’t by hiking their tax bills.”
The Federation of Master Builders (FMB) said the Chancellor had made the right decision to row back on the plan to hammer the self-employed.
Brian Berry, FMB chief executive, said: “At a time when we need to do everything we can to ensure economic stability, this would have been a destabilising tax increase which would have hit large numbers of tradespeople on quite modest incomes.”
Prime Minister Theresa May later said she had every confidence in the Chancellor but McDonnell said she should also have spent less time “guffawing like a feeding seal”.
He added: “This is chaos. It’s shocking and humiliating that the Chancellor has been forced to come here to reverse a key Budget decision announced less than a week ago.”
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