Chancellor's Budget begins to unravel after tax hike - so what happens now?

By Grimsby Telegraph | Posted: 15 Mar 2017

The Chancellor spent weeks putting together his Budget – and watched it unravel in just hours. Parliamentary Correspondent Patrick Daly asks, what next for the proposed self-employed tax rise?

IT CAN'T have taken Treasury press officers very long to understand how badly the Budget had been received.

Huddled behind the large table situated next to the entrance to the press gallery of the House of Commons, the Chancellor's spokeswoman and her colleague battled away as the storm of fiery questions came flying towards them, one after the other.

Political correspondents from The Telegraph, the Financial Times, The Sun and the Huffington Post stepped up in turn, demanding to know how the Chancellor could increase National Insurance contributions by 2 per cent for the self-employed when the Conservative manifesto promised the party would do no such thing.

It was certainly an uncomfortable scene to watch. With each revelation from lobby colleagues – some were openly quoting from the manifesto – the pack of journalists seem to furrow down on the press officers in their sight. It was evident straight away – 15 minutes or so after the Chancellor had given his speech – that the headlines in the next day's papers were not going to be positive.

Those close to the Government spin operation called the confrontation "bloody", with the Treasury forced to revert to its unpopular reply to each barbed question that it hadn't broken the manifesto promise.

MP Melanie Onn talks tax rises, the NHS and social care funding

The spin doctors said the legislation which resulted out of the manifesto pledge, the National Insurance Contributions Act 2015, had safeguarded against tax rises for company employees – it had said nothing about ruling-out increases for the self-employed, said the officials.

But it felt like the Government was operating on a technicality – the self-employed had been duped into voting Tory, if that were the case.

The move – and the anger which followed the announcement – led to the Prime Minister confirming that, while she backed the proposals, she would wait until the autumn, when Downing Street has the results of the Taylor review into employment practices and the future of employment-based taxation, before legislating on the National Insurance rise.

Cleethorpes MP Martin Vickers was one of those who had expressed discomfort at the Budget proposal, telling the Grimsby Telegraph exclusively last week that he was "not overjoyed" by the Budget announcement.

The backbench Tory, pictured, said he welcomed Theresa May's intervention into the argument.

"I'm pleased that the PM has delayed the proposed increase," he said.

"It is a logical step to have the Taylor review published and to consider its recommendations and then examine these proposals in line with that report.

"I'm very contented with that. I think it was an unnecessary political hit for a tiny amount of money, in the great scheme of things, and I'm delighted that we have decided to put it on hold."

The "tiny amount of money" –£145 million a year for public services – raised from the changes to how the self-employed are taxed (the abolishing of the class 2 for national insurance contributions, which was a flat-rate, while increasing the class 4 rate by 2 per cent by 2019) might not sound small, but, considering social care needed £1 billion just to keep the service going for one year, it is relatively small fry.

Mr Vickers' praise for the brakes being applied by Downing Street was a sentiment echoed by the Humber's business community.

A spokesman for the Hull & Humber Chamber of Commerce said the representative body "welcomed" the PM's offer to look into the issue "before committing to legislation in the autumn".

"There are delicate balancing issues given the difficult backdrop of a huge national debt," he added.

Great Grimsby MP Melanie Onn, however, expressed her disappointment that the Chancellor had targeted the self-employed– often electricians, plumbers and other 'white van' trades – when, she said, the Treasury had money at its disposal.

She was particularly critical that more was not made of The Treasury's "£2.4 billion in unallocated business rate tax receipts" that remain just that – unallocated.

The Labour MP said: "It is a mark of the Tories' seven years of failing to get a proper grip on the nation's finances – they have failed to put the UK economy first which is why we are still £1.7 trillion in debt.

"They promised the deficit would be paid down by 2018 but now we know that promise will be broken – just like the one that said they wouldn't put up taxes.

More news: New owners of Cleethorpes restaurant promise 'exciting plans'

"Those who are self-employed will bear the brunt of the Tory broken promise on increasing National Insurance contributions."

There were divisions amongst the Tory ranks as to whether the self-employed tax rise was worth it when it raised so little. Many on the backbenches felt it would hit its own voters most, especially amongst the aspiring blue-collar electorate.

But along with divisions in the party, there was also disharmony among Government departments, with Downing Street and the Treasury seemingly briefing against each other.

The Sunday newspapers contained – as is often in these cases – unattributed sources from both Whitehall stomping grounds laying blame at the others' feet for the Budget mess.

While Tony Blair and Gordon Brown often warred with each other over the leadership, it was felt that, during the early New Labour years, their rivalry and one-upmanship made for strong policy.

With David Cameron and George Osborne's supposed Downing Street love-in, MPs complained that not enough care was taken to scrutinise each other's ideas – hence the "omnishambles" Budget in 2012 where Mr Osborne forgot that people actually quite like a warm sausage roll, and unveiled the derided pasty tax.

Now, it seems Mrs May and Mr Hammond's operations, which are said to have a more "business-like" relationship than past governments, have forgotten something all the more key – the relationship the Government has with the public.

As many Tory MPs pointed out, with trust in politicians at an all-time low, it is hardly advisable to do something that the party promised not to do less than two years ago in order to win the next election.

Labour were quick to capitalise on the visible cracks in Mrs May's operations. Time spent "squabbling" could have been better spent putting the policy right, argued the town's MP.

Ms Onn said: "Rather than the Tories squabbling between Number 10 and Number 11 Downing Street, they would do better to concentrate on putting the needs of businesses and families like those in Great Grimsby, some of whom are having a tough time making ends meet and feel they are working hard for little reward."

The Tories have prided themselves on being the party for working people – a slogan George Osborne was at pains to repeat, and often, when he was Chancellor.

Mr Hammond, who has sought to distance himself from his predecessor, may want to start muttering that sentiment to himself more often in order to avoid another PR disaster and press mauling as ferocious as the one he has just encountered.

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