Chancellor drops controversial tax rise

Chancellor Philip Hammond has dropped the planned rise in national insurance contributions for the self-employed just a week after it was announced in his first Budget.

In a letter to the Treasury select committee, Hammond said that he and the prime minister had decided it was “very important” to stick to the “spirit” of the Conservatives’ 2015 election manifesto - which committed to no rises in personal taxation.

Hammond said the u-turn would be funded by measures to be announced in the autumn Budget.

Hammond provoked the ire of tabloid newspapers and his own Conservative backbench MPs with the planned increases to national insurance contributions (NIC) for the self-employed, which was branded as a tax on “white van man”. Hammond said that to make the system “fairer”, national insurance would rise for the self-employed from 9% to 10% from April next year, before rising to 11% in 2019.

Construction firms had warned that the tax raid would push up the cost of projects – but some had said it would drive a welcome change towards more directly-employed workers on sites.

According to government figures, four in 10 construction workers are self-employed - a much higher proportion than 15% of the workforce as a whole.

Several employers had welcomed the move, arguing the change could help address inefficiencies in the sector by encouraging firms to employ and train more workers on their books rather than subcontract their labour.

Steven Hale, managing director of engineers Crofton Design, said: “If you are self-employed, nobody will train you with new skills, so the skills base in the industry falls through the floor.”