Chancellor Philip Hammond has defended his decision to raise national insurance contributions in the Budget, despite a Conservative manifesto pledge not to increase any tax contributions.
“There was a broad commitment to lock taxes so that there would be no tax increases and that is what we have done,” Hammond told the BBC.
However, up to 1.6m people will see their national insurance contributions rise by an average of £240 per year, while cutting the tax-free allowance on dividends, which are used by company directors.
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During his Budget Hammond resisted the temptation to make any large fiscal giveaways, even after being given some short-term leeway by the independent Office for Budget Responsibility (OBR) in the fiscal forecasts.
Hammond said the Brexit vote had changed the needs of the British economy, although he did not mention the word Brexit during the Budget and mentioned leaving the EU only twice.
“We face some new challenges which we have to rise to and I’m doing that within a very constrained environment where most taxes cannot be raised,” he said.
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He added: “We are navigating within those confines to prepare Britain for Brexit – make sure we are match fit for Brexit.”
Hammond dismissed accusations the Conservative party had broken its manifesto promise, repeated in speeches by senior leaders including former Prime Minister David Cameron, saying the possibility of tax rises on certain classes of national insurance had been raised in the House of Commons.
“Ministers made it clear in Parliament that the tax lock would apply to class 1 contributions,” he said. The government instead raised class 4 contributions.