Sinead Moore 10 Mar 2017 12:10pm

PM won’t legislate on national insurance changes until autumn

Prime minister Theresa May has defended the chancellor’s decision to increase national insurance contributions for the self-employed but said legislation will not be introduced until autumn

Speaking at a press conference in Brussels, May was forced to address the controversial Budget decision, which has been slammed by both Labour and a number of backbench Tory MPs, who argued that it breaks the Conservative manifesto pledge not to raise National Insurance, VAT and income tax for five years.

May said the change to NI will require legislation of its own and will not be part of the Finance Bill.

Instead, it will be brought forward for legislation in the autumn after proposals for extra rights for self employed workers are published. Hammond announced in the Budget that the government would be consulting on improving rights for self-employed workers.

The Taylor Review on the changing nature of the labour market is also due to be published this summer.

“The decision on national insurance was taken in the context of a rapidly changing labour market in which the number of people in self-employment often doing the same work as people who are employed more traditionally is rising rapidly,” the prime minister said.

May said she believes the measure is fair as it “closes the gap in contributions between two people doing the same work and using the same public services.”

“This is a change that leaves lower paid self employed workers better off, it’s accompanied by more rights and protections for self-employed workers and it reforms the system of national insurance to make it simpler to make it fairer and to make it more progressive.”

Labour claimed May’s announcement to delay the legislation was a “U-turn”. Shadow chancellor John McDonnell said, “The fact the Prime Minister won’t fully support her own chancellor’s Budget measure, and has been forced by Labour to row back on it just 24 hours after he delivered his speech in Parliament, shows the level of disarray that exists at the top of government.

“What is even more alarming is that the Government didn’t stop and think before announcing such a tax hike. It should have been obvious that they would need to consult first, or at least wait until after their review on self-employment had finish, before announcing such drastic changes.

“As a result millions of ordinary working families will have been made to worry, and will now be holding their breath until the Government makes up their mind.

“Theresa May should simply show some leadership, rather than this partial U-turn, and just scrap these tax rises for low and middle earners altogether.”

The IFS welcomed the decision to increase national insurance contributions for self employed with Paul Johnson describing it as a “modest but welcome change designed to shore up the tax base and create a slightly less unequal playing field between the self-employed and employees.”

Johnson said David Cameron's 2015 general election manifesto pledge had been "foolish".

Johnson added, “A tax system which charges thousands of pounds more in tax for employees doing the same job as someone else needs reform. It distorts decisions, creates complexity and is unfair.”

“The incentives for companies to claim that people who work for them are self-employed rather than employees are huge.”

The IFS said the Budget announcements will reduce incentives to switch from employment to self-employment.