It already seems like a lifetime since the Chancellor presented his controversial Spring Budget last Wednesday. It’s fair to say that Mr. Hammond probably feels a good few years older this week than last, but breaking a set-in-stone manifesto promise and incurring the combined wrath of the national press and Britain’s many million strong army of self-employed will do that to you. Of course, his announcement that Class 4 NIC payments for the self-employed will rise by 2% up to 11% by 2019 has since been reversed in one of the more embarrassing political u-turns of recent times, but doubts still remain.
That particular move, whilst positive on the surface, has danger lurking behind it. By nixing a commitment that would have raised significant funds, the Chancellor effectively finds himself with a rather large fiscal void to fill. As Brookson CEO Martin Hesketh alluded to in this piece shortly after the Budget, one could see it as some kind of Machiavellian pact. Whilst the NIC increase might have seemed punitive it likely would have superseded any other reform targeted at the self-employed. With that possibility now gathering dust, the door is open for the much-maligned public sector IR35 reform to work its way into the private sector. It’s unlikely that we’ll know more until the autumn, but the need for cash to plug the hole left by the NIC reversal is ominous.
Steve Wynne, CEO of Kingsbridge, noted as much: “I was delighted to see that the proposed changes to National Insurance were rolled back. It would appear that the government is actually responding to the concerns of our freelancers and contractors – a rarity in this day and age. However, I would strongly caution the Chancellor against penalising the self-employed in other areas to make up any shortfall. Rest assured that Kingsbridge will be keeping a very close eye on the matter as it moves forward.”
What did the rest of the industry make of a tumultuous week? We’ve rounded up a few of our favourite pieces below:
“IPSE is delighted that the Chancellor, following IPSE’s representations, decided to rethink its plans to raise NICs on the self-employed. Two-and-a-half million hard working people will sleep easier tonight.”
“A week after announcing an increase in National Insurance Contributions for the self-employed, the Government has U-turned and reversed the move.
In the Budget, Chancellor Philip Hammond announced a two percent increase on Class 4 NICs, but then came in for considerable criticism for reneging on a manifesto promise.”
Although this piece was published before the recent NIC turnaround, it provides a thorough overview of all of the measures in the Budget that could impact the self-employed:
“Today’s announcements are deeply concerning for contractors,” warns ContractorCalculator CEO Dave Chaplin. “The Chancellor has demonstrated that the Government doesn’t recognise the value of the UK’s self-employed. His insistence on reducing the gap in terms of tax paid between the employed and self-employed undermines the risks the UK’s contingent workforce undertake.”
“Philip Hammond has torn up his plans to raise National Insurance on self-employed people, in the biggest ever and most humiliating Budget U-turn for a generation.
In a letter to Tory MPs, the chancellor said he would not proceed with the increase in Class 4 NIC which he promised last week, “in light of the debate of the last few days.”