How the Conservatives pledged no rise in national insurance, then raised it

Matthew Weaver
Prime Minister Theresa May laughing along with Philip Hammond ahead of the budget announcement. Photograph: PA

The Conservatives’ pledge not to raise national insurance or income tax for five years was a central plank of the party’s successful general election campaign in 2015.

The chancellor, Philip Hammond, spent much of Thursday morning evading questions about whether he breached that pledge by hiking national insurance contributions for the self-employed in his budget.

The original pledge could not have been clearer. Former prime minister David Cameron promised a “tax lock” – to not raise income tax or national insurance for five years. “We will legislate within 100 days to say these taxes can’t go up,” he said.

Cameron spelled out the promise in a campaign tweet:

The Conservative party’s 2015 manifesto was unequivocal, promising four times that a Tory government would not increase national insurance. It did not mention the self-employed and offered future chancellors no wriggle room.

On page three, it said:

We will not raise VAT, national insurance contributions or income tax but we will raise the 40p income tax threshold to £50,000.

On page six, it promised to “commit to no increases in VAT, national insurance contributions or income tax.”

On page nine, it explained how it planned to do this:

Our approach is focused on reducing wasteful spending, making savings in welfare, and continuing to crack down on tax evasion and aggressive avoidance. This means that we can commit to no increases in VAT, income tax or national insurance. Tax rises on working people would harm our economy, reduce living standards and cost jobs. Instead, as we reduce the deficit, we will cut income tax, as we have done over the last five years: during the next parliament, we will increase the tax-free personal allowance to £12,500 and the higher rate threshold to £50,000, so you keep more of your hard-earned money.

And for the avoidance of doubt, on page 27, it said:

A Conservative government will not increase the rates of VAT, income tax or national insurance in the next parliament.

After the election, the first Queen’s speech of the parliament underlined the commitment not to increase national insurance.

Legislation will be brought forward to ensure people working 30 hours a week on the national minimum wage do not pay income tax, and to ensure there are no rises in income tax rates, Value Added Tax or national insurance for the next five years.

The tax lock was duly passed.

Jolyon Maugham, a tax barrister who advised Labour, warned at the time that the tax lock pledge was “meaningless ... political showmanship” that could be easily repealed.

Sure enough, Hammond’s budget proposes to do just that by raising national insurance contributions for the self-employed. The budget will raise the rate on class 4 NICs paid by the self-employed, from 9% to 10% next year, with a further increase to 11% in 2019, providing a £1.7bn stimulus to the economy.

In a series of broadcast interviews on Thursday, Hammond claimed his budget was in line with “a broad commitment to lock taxes”.

But he conceded that circumstances had changed, notably Britain’s decision to leave the EU. “We are navigating within those confines to try to prepare Britain for Brexit,” he told BBC Radio 4’s Today programme.

Hammond dodged the question of whether the proposed increase in national insurance for the self-employed amounted to a broken promise. “We are embarking on a journey here, leaving the European Union and making our way in the world, and we have to get this country match fit,” he told ITV’s Good Morning Britain.

And he told Today: “As the chancellor now, I am working within an extremely constrained environment where we face some new challenges in this country.”

He claimed that bringing the national insurance contributions of the self-employed into line with the employed would make the system “a little fairer”.

By using Yahoo you agree that Yahoo and partners may use Cookies for personalisation and other purposes