How nine City experts reacted to Philip Hammond's NIC u-turn

 
Emma Haslett
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Critics said the new rules will target traders and the self employed (Source: Getty)

It's official: Philip Hammond has bowed to criticism and scrapped his controversial plans to hike National Insurance Contributions for the self-employed.

Reactions from have varied, from confusion to outright glee. Here's how nine of the City's most important organisations reacted.

Read more: Hammond's U-turn on National Insurance hike plans - read his letter in full

1. Watch out for other tax hikes

Whilst the U-turn will be welcomed by the millions of self-employed workers, the Chancellor will likely seek to raise revenues by another route and could do so by increasing the additional rate of Class 4, which currently applies at the rate of two per cent for profits over £43,000.

- Suzanne Briggs, Blick Rotheberg

2. Awkward...

​"This U turn poses some awkward questions about the government's ability to get through even moderately unpopular policies. The National Insurance increase for the self-employed was a modest and redistributive measure which would have helped bring the self-employed National Insurance rates closer into alignment with the increased state pension benefits they now enjoy.

- Tom McPhail, Hargreaves Lansdown

3. Get rid of all NICs

The principle of aligning what the self-employed and employed pay is right, but cutting NICs for the latter rather than raising those for the former would have been a much better way of achieving this.

Better still the Chancellor should have scrapped National Insurance Contributions altogether, including those paid by employers. They are a tax on jobs and wages and getting rid of the burden they place on working families would significantly help lower-income households.

- Julian Jessop, Institute of Economic Affairs

4. It's chaos

The whole National Insurance saga can only be described as chaotic. The irony is that there are good reasons to look at levelling the playing field for employees and the self-employed, as the tax on direct employment is disproportionally higher.

However, it would have been much better if... the government had waited for the conclusions of its own review of modern employment, and reformed wholesale how different forms of work are taxed. Instead [it] announced it would raise one tax in isolation, only to cancel it a week later.

- Stephen Herring, Institute of Directors

5. This will damage Hammond's credibility

Such a high profile Budget 'U-Turn' will damage the credibility of the measured and methodological 'spreadsheet Phil’. The former chancellor, George Osborne, had a reputation as a maverick capable of both an 'omni-shambles' Budget, but also credited with revolutionising retirement with his 2014 surprise pension reforms. Hammond had been positioned as a more considered, consultative successor.

- Jon Greer, Old Mutual Wealth

6. The self-employed may still be punished

The true cost of this decision may still be borne by the self-employed. It’s clear that the chancellor will look to recoup money from other sources and many tax reliefs will be in his sights. The likes of business property relief – used by many sole traders and partnerships to hand down family businesses free of inheritance tax – could now be under threat and any sense of relief among self-employed people could become a sense of foreboding once the autumn Budget draws near.

- Sean McCann, NFU Mutual

7. Celebrate strivers

Hitting small business owners with an extra £2.1bn in tax on the eve of Brexit seemed a very strangely timed measure.

Politicians always claim to value entrepreneurs and 'strivers' but then they keep cranking up their tax rates.

The self-employed take big risks and miss out on holiday pay, sick pay and many other benefits. It is time the Treasury stopped picking on them.

- Roy Maugham, UHY Hacker Young

8. Time to end roller-coaster policy making

It is time for an end to the roller-coaster of policy making from the Treasury. First we had a dividend tax break introduced and slashed a year later. Then we had a National Insurance rise for the self-employed reversed within days of being announced. What is needed is a long-term strategy for tax, not a serious of short-term announcements.

Now that the Chancellor has committed to leave NICs for the self-employed alone, we also need a long-term commitment to stop meddling with pension tax relief. That would provide savers with the certainty that they urgently need. We also need a strategy to tackle the pensions saving crisis amongst the self-employed which remains unaddressed

- Steve Webb, Royal London

9. The government is out of touch

This is a stunning u-turn by the Chancellor, just a week since his Budget. Whilst we welcome this climbdown, it does show just how out of touch this government is with Britain’s hardworking, already-squeezed and over-taxed entrepreneurs – the lifeblood of the UK economy.

- Nigel Green, deVere Group

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