National Insurance rise announced in Budget will restore fairness, says minister

Ministers have rejected calls for a re-think of Philip Hammond's £240 Budget hike in National Insurance contributions for 2.5 million self-employed amid Tory fears it will hit traditional supporters.

Labour said the rise was a clear breach of David Cameron's Conservative manifesto commitment that there would be no increases in income tax, VAT or National Insurance contributions (NICs).

The Treasury said the overall impact on the self-employed of the Government's NIC changes would be relatively small.

But in the Commons, a series of Conservative MPs rose to urge Mr Hammond to exercise caution, amid concerns about the impact on "white van man".

Treasury Chief Secretary David Gauke insisted, however, there would be no U-turn, saying the measure would restore fairness to the National Insurance system.

"I think people understand the fairness point," he told BBC2's Newsnight.

"At a time when - unlike what has happened in the past - essentially the benefits that the self-employed receive for their contributions are largely the same as employed people do, it is wrong that employed people pay a lot more in National Insurance contributions."

He rejected claims they had broken a manifesto pledge, arguing that when ministers had passed the Tax Lock Bill enshrining the commitment in law they had made clear they were focusing on the main rate of NICs paid by employers and employees.

"There were no complaints about that. The Labour Party explicitly acknowledged 'You have enacted your NICs tax lock,'" he said.

Despite ministers' confidence, there were concerns among some at Westminster that Mr Hammond could be heading into the kind of storm which forced his predecessor George Osborne into humiliating retreats over tax credits and the so-called "pasty tax".

The row broke out after a largely low-key Budget statement, marked by the announcement of £2 billion for social care in England and a £345 million package to help firms hit by revaluation of business rates.

Mr Hammond said that the rise in Class 4 NICs - from 9% to 11% over two years - was intended to address the "dramatically different" treatment of the self-employed and employees in the National Insurance system.

The increase will mean an average rise of £240 for 2.485 million workers, raising just over £2 billion in four years from April 2018.

However, the Treasury stressed that, taken together with a previously-announced decision to abolish Class 2 NICs, the amount raised would be just £145 million a year - the equivalent of 60p a week for 1.6 million self-employed people.

The move was roundly condemned by the Federation of Small Businesses which warned that it would deter new business start-ups.

In the Commons, Conservative former minister Andrew Murrison expressed concern that electricians, plumbers and plasterers would be among those hit.

"This party on this side always has been, I hope always will be, the party that supports white van man," he said.

Tory backbencher Tom Tugendhat called for a "re-think" while fellow Conservative Jacob Rees-Mogg said the Chancellor should be "very cautious" and urged him to look at the whole issue of NICs and income tax.

With Theresa May set to trigger Article 50 - marking the start of the formal process of Britain's withdrawal for the EU - in a matter of days, Mr Hammond said the Budget was intended to provide a "strong and stable platform" for the forthcoming negotiations.

He chose to use an improvement in the outlook for borrowing to store up a Brexit war-chest for the potential turbulence ahead rather than embark on a spending spree.

The Financial Times acknowledged Mr Hammond risked a Tory backlash when he "ripped up" the election promise and announced a tax rise.

FT.com managing editor Robert Shrimsley joked: "It's time we had a Chancellor with the courage to crack down on the lifeblood of the economy."