Tory Supremacy Confirmed. Now They Eat Their Own
Under any normal Conservative government, the Budget would be a high profile opportunity to reward their core vote, whether it is big business leaders, pensioners, white van men or women, or the ubiquitous hard working families.
If tough measures need to be taken then it will be against soft targets such as work dodgers, benefits scroungers, lie-in-bed-till-noon layabouts or public sector workers.
But despite having a working majority of just 17 MPs, Chancellor Philip Hammond decided to use a third of his March 2017 Budget speech attacking the growing number of self-employed people and landing them with a hefty tax bill.
They now face a rise in the National Insurance contributions they pay from 9% to 11% by 2019. Hammond justified this by saying that the new state pension had reduced the gap between the entitlements of the employed, who pay up to 14% NICs, and the self-employed.
There are two practical objections to this. The first is that pension entitlement is the last thing on most freelancers’ minds. The true gap between their working conditions and those of office workers is that they get no holiday pay, no sick pay, and no maternity or paternity pay.
Secondly, this move was specifically ruled out by the Conservative party in its 2015 general election manifesto: “We will not raise VAT, National Insurance contributions or Income Tax.”
But the more interesting aspect is the political ramification. The self-employed are the part of the labour market that has seen the most pronounced growth since the financial crash, growing by 45%. The level of self-employment in the UK increased from 3.8 million in 2008 to 4.6 million in 2015.
That has helped the Conservatives hail their job creation miracle as Hammond did on Wednesday. Without any irony Hammond noted employment was at a record high with “over 2.7 million more people enjoying the security and dignity of work than in 2010” before hiking their tax rate.
As the Association of Independent Professionals and the Self-Employed pointed out, he was targeting the very group of people that “made it possible for him to claim that”.
“If you are one of the hardworking self-employed people who face a significant increase on your tax bill, you might feel that the Chancellor has it in for you,” said Chris Bryce, its chief executive.
Bryce also makes the point that it appears that the Chancellor has used the self-employed to help pay for business rate relief for small firms angry at being hit by the controversial revaluation
This where is gets interesting. A poll of self-employed contractors - admittedly a small subset over the overall pool - ahead of the 2015 election found that almost half (46%) would vote Conservative ahead of 20% for Labour.
Think of the last time you took a taxi or called in a plumber, electrician or decorator - often collectively called the “white van men” - who was up for talking about politics and that conclusion should ring true.
the only effective opposition comes from the media
It is also true that there is precious little fat to carve off the “just about managing” families who are facing a freeze in universal credit rates and in unemployment benefit, and a cap on child benefit to two offspring for new families. On top of that comes the decision to save £3.7bn by overturning a court decision allowing 160,000 people to claim personal independence payment.
And, of course, he could have reversed the £8bn tax cut from freezing fuel duty, the £9bn handing to big business by cutting corporation tax and the £18bn from increasing personal tax allowances that only reaches the top half of earners. But he chose not to.
Of course, it is not a surprise that Disclaimer, which is a stable of the self-employed, should complain, and we have done before. But this change potentially affects some 5 million people and not all of them are part of the much-derided gig economy or trying to avoid paying employee taxes.
The fact the government feels able to raid one category of potential Conservative voters (the self-employed) to help alleviate another set (small businesses) is indicative that it is aware that it faces little practical opposition from the Labour party.
Corbyn may not have noticed the NIC hike in his response, but the move could turn out to Hammond's own self-inflicted wound similar to his predecessor's embarrassing 2012 pasty tax.
It seems that, as in Trump’s America, the only effective opposition comes from the media in the form of Nick Robinson’s combative interview on the Today programme accusing the Tories of not telling the truth in their manifesto.
All together now: “First they came for the disabled, but I did nothing because I was not disabled…”
About the author
Phil has run Clarity Economics, a London-based consultancy, since 2007 and, before that, was Economics Correspondent at The Independent.
Phil won feature writer of the year Work Foundation Work World media awards in 2009, and was commended by the Royal Statistical Society in 2007.
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