Budget 2017: Hammond rejects charge he broke Tory manifesto promise

Philip Hammond has said the government will press ahead with its plan to increase national insurance contributions (NICs) for the self-employed, as he defended his most prominent budget measure against charges it broke a manifesto promise.

In a series of interviews on Thursday morning, the chancellor argued that the proposal to unify NICs for the employed and self-employed was fair and did not renege on the Conservatives’ 2015 election pledge.

Speaking on BBC1’s Breakfast, Hammond rejected the idea he had broken a promise and said the issue was dealt with in legislation after the Tories’ election victory. “No one objected, no one raised any issues about it,” he said of the parliamentary discussions. “We regard that issue as dealt with – we dealt with it in 2015.”

Asked about the issue on BBC Radio 4’s Today programme, Hammond said the 2015 manifesto had been “a broad commitment to lock taxes”, but that circumstances had changed, particularly over leaving the EU.

“As the chancellor now, I am working within an extremely constrained environment where we face some new challenges in this country,” he said.

Most taxes could not be raised, the chancellor added, and spending pressures were increasing: “We are navigating within those confines to try to prepare Britain for Brexit.”

Hammond’s decision on NICs has concerned some Conservative MPs, including Anne-Marie Trevelyan, the member for Berwick-upon-Tweed, who on Thursday called on him to reverse the move.

“We need to halt this particular decision now,” Trevelyan told Today. “I think we need to put this on hold so we can have a proper review and think in a holistic way.”

Labour also said it would oppose the change, with the shadow chancellor, John McDonnell, saying he hoped sufficient Conservative unrest could push Hammond into reversing.

“Certainly the Labour party will oppose this,” McDonnell told Breakfast. “I think other parties will as well. We may be able to persuade enough Conservative MPs to ask the chancellor now to think again.”

Speaking on Today, Hammond said he would hear such views, but indicated he was not about to be persuaded to change the policy. “I’m always prepared to talk to backbenchers, to listen to backbenchers, but I’ve made a decision here to make the national insurance system a little bit fairer,” he said.

Under David Cameron the party went to the polls promising no increases in income tax, VAT or NICs for the duration of the 2015-2020 parliament, while accusing Labour of planning to do just that.

Asked earlier on ITV’s Good Morning Britain if Cameron had been lying, Hammond said he believed subsequent legislation had changed the situation. “We dealt with this issue back in 2015 when we legislated for the tax locks we talked about during the election campaign,” the chancellor said.

“We introduced them into parliament, we debated them, we had a proper discussion about what the extent of these locks and ringfences were, and we put it all into legislation. And that is behind us.”

A spokesman for the prime minister reiterated the chancellor’s argument that the NICs increase was aimed at equalising the tax liability between employees and the self-employed and pointed to legislation introduced after the 2015 general election that implemented its manifesto tax pledges – but did not mention class 4 NICs.

“There’s been a lot written about this this morning. The chancellor has addressed this widely this morning. The government was clear in the legislation that was brought in that it covered class 1 national insurance, which covers 85% of workers. There were no amendments as that bill was passed, no concerns were raised at the time.”

On whether the government had broken a manifesto promise, he again referred to the bill, saying: “There were no concerns raised at the time, it was recognised broadly that it met the commitments that were set out.”

Asked whether the government could review the policy, amid growing disquiet on the Conservative backbenches, he reiterated that the NICs rise was about “restoring a sense of fairness” in the tax system.

“Self-employed workers now have access to the full state pension; that makes them £1,800 a year better off, so having equalised the state pension it was right that the contributions that go towards that are equalised as well.”

Pressed on whether the change was central to Wednesday’s budget, he said: “It’s a part of the budget that addresses an issue of fairness”.

In his budget, Hammond said he would raise the rate on class 4 NICs paid by the self-employed from 9% to 10% next year, with a further increase to 11% in 2019, providing a £1.7bn stimulus to the economy.

During his budget speech the chancellor talked about the need to raise more money for social care and the NHS. But speaking on Thursday, he also said the economy needed to be primed for the uncertainties of Brexit, a subject he had more or less avoided the previous day.

“What I had to address yesterday was the challenge of financing our National Health Service, financing social care, and investing in skills for Britain’s future,” Hammond said, adding that “circumstances have moved on” with the imminent departure from the EU.

Asked if the change amounted to a broken promise, Hammond stressed the need for prudence in the run-up to Brexit. “We are embarking on a journey here, leaving the European Union and making our way in the world, and we have to get this country match fit,” he said.

This meant more tax or national insurance increases could not be ruled out for now, he added. “At this point in our cycle we have to be prudent, we have to make sure that we’ve got fuel in the tank as we go through this next couple of years period so that we’re resilient, our economy is resilient, we can deal with anything that comes along.”

Hammond was also asked on Today about his decision to not keep to George Osborne’s commitment to run a budget surplus by 2020, again saying this had not proved practical.

“Our circumstances have changed since the general election, the world has changed around us, and we have to deal with the world as it really is,” he said.

“I could have stuck to my predecessor’s target of having the budget in balance by the end of this parliament, but that would have required us to to squeeze the economy extremely hard.

“Frankly, it would be a very poor government that said: ‘I’m going to ignore what’s happening in the real world, I’m going to close my eyes and plough on with the plan that we set out before the world around us changed.’

“The decision to leave the European Union has changed the game. Britain needs to prepare for the opportunities and challenges that lie ahead.”