9 March 2017
Chancellor Philip Hammond delivered his first budget on Wednesday.
Theresa May’s Chancellor Philip Hammond, considered a safe pair of handed and dubbed “Spreadsheet Phil”, caused controversy on Wednesday when he delivered his first budget. Among the measures introduced were reforms of social care and technical qualifications, including the introduction of T-Levels to give technical education a similar standing to traditional academic studies.
But headlines have focused on a rise in National Insurance rates for self-employed workers, drawing negative headlines from across the spectrum.
National Insurance hike
The move will see the rate of National Insurance paid by self-employed workers shoot up over the next two years to bring it into line with that paid by other workers. But the news drew the ire of many as it sparked questions about the justice of the move, with the self-employed being asked to pay the same rate as others while lacking guarantees of sick pay and maternity leave.
The decision was even more controversial as it came into conflict with previous pledges made by the Conservative party’s leadership in the run-up to the 2015 general election, when David Cameron took an unexpected victory and won a slender parliamentary majority.
He had sparked a war with Labour leader Ed Miliband about the latter’s refusal to rule out tax hikes as the Conservatives had done, zeroing in on National Insurance as “a tax on jobs & growth”. Cameron has since left government, but Hammond and May were intimately involved in his top team – serving as Foreign Secretary and Home Secretary respectively – and their choice to raise the rate could leave many Tory voters feeling betrayed.
The government denies a U-turn, outlandishly claiming that their pledge had only applied to a particular class of worker rather than everybody in the country. Labour’s Deputy Leader Tom Watson slammed the excuse, joking that the party must have written the caveat “in invisible ink”.
And now Hammond has gone further, blaming the move on “new challenges” faced by the government – an unsubtle hint towards our decision to free ourselves from the clutches of the European Union. He brushed aside complaints of a U-turn by claiming that the prior pledge had only been a “broad commitment” which he had not broken.
Continued Brexit bashing is a lame excuse, especially given how resilient the economy has been since June’s referendum. Despite an unrelenting fear campaign and constant talk of a slowdown, economic growth in fact accelerated at the end of 2016 and even the OBR has now revised its 2017 growth forecast up, admitting that we will grow at 2% this year. They continue to pour gloom on the economy going forward, but their track record to date is far from enviable.
Bright spots and big questions
But the coverage has not been entirely negative. Despite headlines like “no laughing matter”, “Hammond’s £2bn tax raid”, and “spite van man”, the budget has won applause from some quarters. The Institute for Fiscal Studies has backed the National Insurance hike, claiming that the previous system skewed the labour market and created unnecessary complexity in the tax system.
Polling from Sky Data also paints a more complex picture with 57% of people supporting the measure – albeit before the huge wave of negative press.
But the budget nonetheless raises serious questions, particularly concerning the fidelity of this government. If they were willing to U-turn so dramatically on a key manifesto promise made less than two years ago, especially a promise on tax that is so central to Tory party orthodoxy, to what extent can the British people trust Mrs May to stick to her key pledges on EU withdrawal in the course of a long Article 50 negotiating period. She vowed to bring us out of the single market and give us back control of our laws. Will she deliver?