Sep.10
2017

Tories delay pledge to cut national insurance for the self-employed

A Conservative manifesto pledge to abolish national insurance contributions for low-paid self-employed workers is to be delayed for a year, saving the Treasury £200 million.

In a move that has been criticised by George Osborne, the former chancellor, Philip Hammond is to postpone plans to get rid of the tax for workers earning less than about £8,000 a year. Those workers affected will be about £130 a year worse off as a result.

The changes were slipped out in a written ministerial statement by Andrew Jones, the exchequer secretary to the Treasury.

A Treasury spokesman denied that the delay was to save money, saying that the measure might not result in any savings at all. “This is simply about giving us more time to consult with those who are concerned about the changes and getting the detail right,” he said. “It is therefore right to take the time to ensure that there are no unintended consequences for the lowest paid.”

He said it was also to address concerns that it could affect some workers’ eligibility for a full state pension.

Mr Osborne, who introduced the measure in his last budget as chancellor, expressed dismay at the delay.

“Not sure why the government have delayed this tax cut for self-employed people announced in my 2016 budget,” he said.

The national insurance payments affected are known as Class 2 NICs paid by self-employed people with profits between £6,025 and £8,164 a year.

The delay was also criticised by the Association of Independent Professionals Self Employed. Simon McVicker, its director of policy, said: “The government doesn’t seem to know what to do with the self-employed.

“In March they tried to raise Class 4 NICs before backtracking, they introduced a dividend tax and then changed it as soon as they could, and now they can’t deliver on a significant commitment.

“The abolition of Class 2 NICs was a speck of bright light in an otherwise gloomy picture for the self-employed.”

Peter Dowd, Labour’s shadow chief secretary to the Treasury, said that the government had “clearly tried to sneak this admission of their own failure out just before recess”.

He added: “Clearly these proposals had not been thoroughly thought through before they were announced. But above all the government needs to makes sure that those currently paying Class 2 NICs, including many low-earning self-employed people, are not hit hard as a result of their abolition and replacement.”

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