Philip Hammond has abandoned plans to raise national insurance for self-employed workers in this Parliament after admitting that it breached the “spirit” of the manifesto.
The Chancellor provoked a furious reaction from Tory backbenchers after using his Budget to announce plans to raise NI contributions for the self-employed by 2 per cent.
Mr Hammond has written to Tory MPs saying that while the changes are justified the Government has chosen not to go forward with the rise in “class 4” national insurance contributions.
It represents a huge blow to Mr Hammond and is one of the most significant Budget u-turn in modern times.
He said in the letter: “It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made.
“In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measures set out in the Budget. There will be no increases in NICs from April 2018.”
Mr Hammond argues that in the long-term the reform remains the “right approach” and says that his Budget “sought to reflect fairly the differences in entitlement in the contributions made by the self-employed”.