The Tories should fix their National Insurance error and move on

Telegraph View
British Prime Minister Theresa May and German Chancellor Angela Merkel attend the EU summit in Brussels, Belgium, March 9, 2017.  - YVES HERMAN 

This has been a poor week for the Government. Rarely is a Budget so badly received; rarely does it inflict so much reputational damage so quickly. The Tories’ woes are encapsulated in a new poll commissioned by The Daily Telegraph. It shows that not only do the voters believe that raising National Insurance Contributions (NICs) for the self-employed was wrong but that they no longer regard the Conservatives as a tax-cutting party. If the Government is still in any doubt that it must reverse course, these shocking figures should help make up its mind.

The Chancellor might have sold the tax increase as “fair” and “progressive” (a term usually used by the Left) but the public disagrees. Over half (55 per cent) say it should have honoured its manifesto commitment not to hike NICs. Nearly half (47 per cent) say the Budget has made them trust the Government less. And 46 per cent of the population are now less likely to vote Conservative. Perhaps most damaging of all, half those interviewed say they no longer regard the Tories as a low-tax party. That figure jumps to 62 per cent among non-Conservative voters.

How can this possibly be the case? The Conservative Party is nothing if it is not Britain’s low-tax party, the natural home of those who want to keep more of their own money. Since the Second World War, with a few notable exceptions, the party has striven to reduce direct taxation in order to make work pay more. This helped turn the party from a platform for the patrician elite to a meritocratic force for social advancement. If the Tories lose their reputation for looking after producers, workers and wealth creators then their historic constituency will be under threat. At present, that threat is disguised by two things: Labour’s dismal performance and the popularity of Brexit. But these conditions can change, particularly if Brexit is undermined by bad policy.

The poll figures show that it is not enough for the Tories to kick the NICs error into the long grass. Writing for this newspaper, former chancellor Lord Lamont recalls raising National Insurance in 1993, which had a tremendous political cost, and calls for Mrs May to learn from his experience and return to Thatcherite principles. Lord Lamont advises, rightly, that the only way to make amends is to implement a traditional Tory idea: “The self-employed should have lower NICs, not equal benefits.”

The 11 Conservative constituencies most at risk from a self-employment backlash

In other words: ditch Philip Hammond’s bad policy. The Tories must show that they understand their core constituency’s anger at being misled, apologise and move on. Above all, they need to understand why people are so upset: Britain’s aspirational middle-classes are not interested in the pet theories of Left-wing think tanks and narrow spreadsheet-based analyses of the distributional impact of tax hikes. They want a Government that is on their side and dedicated to making the economy more competitive.

Next week will see another Brexit showdown in the Commons. Things are advancing quickly: the economy needs to be fully prepared for leaving the EU, especially for the possibility that the Europeans offer a bad deal and the UK is forced to go with no deal instead. Particularly in those circumstances, it would be the height of foolishness to saddle the nation with increased tax and regulation – especially the kind of employment regulation that the Government hints will be recommended in the forthcoming Taylor Review. To make Brexit work, to prepare the country to compete in the wider world, Britain needs to liberate its productive potential. The Prime Minister talks of making a society that works for everyone. That is how the Government can do it: by accelerating growth and letting people keep more of their earnings.

Budget winners and losers

It is a contradiction for the Government to talk of preparing for Brexit while setting a Budget that undermines aspiration – a contradiction, too, to claim to speak for the Just About Managings while raising their taxes. There must be no bitter, Major-era style rows now. Just a mature recognition that something went wrong, a change in policy and a Government that gets back on track.

Philip Hammonds day of Budget doubt

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