Tax rise on national insurance "modest but welcome" says IFS on chancellor Philip Hammond's Budget

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Moves by chancellor Philip Hammond to increase national insurance tax on the self-employed are “modest but welcome”, according to an influential economics think tank.

Paul Johnson, head of the Institute for Fiscal Studies (IFS), said the tax increase will help “shore up the tax base and create a slightly less unequal playing field.”

The increase in tax on self-employed workers has been attacked as a broken manifesto promise by some Conservative backbenchers. Johnson said the IFS was “sticking our neck out” in backing the contradiction of a "foolish" and "absurd" pledge not to raise taxes.

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Johnson said the two per cent increase in national insurance contributions "closes a small fraction of the gap between employees and the self-employed," although the self-employed will still be at an advantage of "thousands of pounds."

He called for reform in the tax system with regard to the self employed. There has been a recent spate of court cases trying to determine the status of workers in the gig economy. Companies such as Uber and Deliveroo rely on the self-employed status of drivers to avoid paying national insurance contributions.

"It deserves a series public review," he said. The current system "distorts decisions, creates complexity and is unfair."

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Meanwhile, the think tank said the UK is set for "a third Parliament of austerity," after the government's Budget watchdog, the Office for Budget Responsibility (OBR), said the chancellor is unlikely to be able to eliminate the deficit in the next Parliament.

This could also include "yet another post-election tax rise," Johnson said.

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