The planned rise in national insurance contributions announced by Phillip Hammond and the subsequent turnaround of policy in recent days has severely impacted government fiscal credibility. The increase in national insurance contributions would hit the self-employed with a tax increase of 1% in 2018 and 2% in 2019. The chancellor targeting the self-employed is a departure from his predecessor’s actions were in line with the conservative manifesto effectively altered the way the self-employed were categorised to their benefit. This departure from the manifesto the current government claims to represent has rightfully drawn much criticism from the media and the opposition and the change in tack while welcome has proved embarrassing to the conservatives and shows a significant change between the Cameron and May cabinets. It is however a welcome example of the media holding the government accountable a facet of democracy which has been sorely missed under Corbyn’s leadership of the opposition. Corbyn failed to pull capitalise on the situation as Labours plans to return to borrowing to fill the gap in the budget allowed Theresa May to win yet another bout at Prime Minister’s questions.
Despite this the cancelling of this measure was not only debilitating to the Chancellor’s credibility but also leaves a hole in the budget which needs to be filled. The Chancellor’s rises would have addressed the significant advantages of self-employed workers over employees, the impact this reversal will have over the rest of the budget is thought to be a 145-million-pound addition to the gap in the budget which looks set to be plugged in the autumn. A popular option which remains is the closing of inheritance tax loopholes. Therefore the result of the Chancellors U-turn may be that instead of a fairer fiscal system we end up with one which is more restrictive in regards to inheritance and less in conjunction with the public will, as a Yougov poll suggested that 65% of British Adults are of the opinion that the ceiling for inheritance tax should be raised. The attitude that the Chancellor has taken towards his U-turn is that the measures to raise NIC’s were valid but not compatible with previous election promises. This stance seems to be the product of an insecure government trying to find itself and with the current miniscule majority and constitutional doubt flying from all angles the stalemates and U-turns look set to continue.
By Jordan Newton
Photograph: Getty Images