National Insurance U-turn: North West business leaders have their say

So the Government has decided to scrap its plans for an increase in National Insurance rates for the self-employed, a controversial measure announced in last week’s Spring Budget.

The move, criticised for breaking a pledge the Conservatives made in their 2015 election manifesto, is set to blow a £2bn fiscal hole in Chancellor Philip Hammond’s Budget.

At Bdaily, we reached out to the North West’s businesses for their take on the U-turn decision.

Emma Hamnett, employment partner at Clarke Willmott (Manchester)

“I have no doubt the growing number of self-employed people in this country will breathe a sigh of relief, as for many the change would have meant increased NI contributions of hundreds of pounds.

“This coupled with the fact that self-employed workers do not receive the same level of benefits as employees, it always appeared to be a difficult political argument for Mr Hammond to defend.

“We now await the independent review on employment practices that the Government has commissioned from Matthew Taylor – of the Royal Society of Arts – no doubt the question of self-employment, tax and NI will be picked up in this review.”

Karen Campbell-Williams, partner at Grant Thornton

“Given the staunch defence of the NIC increase by senior ministers after the Budget announcement last week today’s news is a surprise.

“From a fiscal perspective Mr Hammond now has a £2bn hole to fill, and it’s going to be very interesting to see how he rises to this challenge, so early on in his career as Chancellor.

“I think the Government will revisit the question of the ‘gig economy’ in the Autumn Statement. There is a lot of work to do in this area. For instance it’s clearly not fair to bring the self employed in line with the employed in terms of tax and NIC, but not look at benefits such as sick pay and holiday pay, which the self-employed don’t receive.

“The Chancellor refers to “bogus self-employed” which I hope is not a precursor to further complex tax law to determine who falls on which side of the line.”

Peter Taaffe, managing partner at BWMacfarlane

“Well, they say a week in politics is a long time and it certainly has been for Philip Hammond.

“The Chancellor’s jovial parliamentary performance last Wednesday and a decidedly boring budget on the whole, has succeeded mainly in reddening the faces of the Conservative party this week.

“Both Philip Hammond and Theresa May have come under pressure to justify some of the decisions taken, which stirred a shocked reaction amongst political peers and the public alike - both as to the impact on the millions of self-employed, and the breaking of their manifesto promises.

“Certainly it gave concern to a number of our clients and people we work with and I certainly can’t remember the last time a budget stirred quite so much emotion. Just this week, I met with a number of self-employed business people voicing their frustrations on what had become, frankly, a matter of principal.

“The Tory’s argument that the decision was taken to ‘maintain fairness’ in the taxation system was weak, at best. Self-employed people don’t have the same benefits, the same protections as employed people so how can it be fair to close the gap in contributions?

“The Government now propose a consultation over the summer on the differences between employed and self-employed. So now it’s a matter of watching this space.

“So what does this tell us from the immediate aftermath – Philip Hammond has been forced into a humiliating U-turn and has no doubt been put on the naughty step by Theresa May.”

Kelly Gilmour-Grassam, owner of Making You Content

“Manchester is a real hotbed for entrepreneurs, so the proposed increase in NICs would have had a worrying effect on self-employment in the region.

“As a small business owner myself, it’s reassuring to see that the government has reconsidered the Budget announcements, and it will certainly help to send the right message to business owners in the region.”

Richard Thomas, partner at DTM Legal

“The step taken to scrap the proposed increase in NICs for self-employed people is a sensible and obvious one. It was a breach of a manifesto pledge and would have come back to haunt the Chancellor and the Prime Minister many times in the future if left in place. Whether it is genuinely a Government holding its hand up or pure political expediency doesn’t really matter.

“Looking forward, the Government needs to consider all the factors in this area when saying the tax imbalance needs to be redressed. The whole point about why NI rates for the self-employed are lower is because they are not as much of a burden on the State, no State funded sick pay for example.

“I would therefore want to see the comparative savings made by the Government if people are self-employed compared to the lower tax revenue before any further changes were introduced, whether a breach of a manifesto pledge or not! The Chancellor will also need to demonstrate some pretty nifty footwork to evidence how he will now plug the gap that this will cause in his intended spending on schools etc. in order to prevent further controversy.”

Phil Bates, principal of Phillip Bates & Co

“Although this U-turn is the right decision for Britain’s army of self-employed, it is hugely damaging to the reputation of the Government.

“Britain’s business community needs to be able to trust the Prime Minister and her Chancellor at a time when we are just days away from Brexit being triggered and with continuing uncertainty over the future direction of the UK economy.”

Colin Tice, tax partner at Cassons

“As soon as it was suggested that the proposed self-employed NIC increase was potentially in breach of the Conservative Party manifesto, politics took over from tax policy and the proposal was under threat. The proposal was never really about fairness but about increasing the tax take.

“In itself, it further encouraged the self-employed to consider forming limited companies because of the reduction in corporation tax. The reduction in the dividend allowance claws some tax back.

“Going forward we should expect further measures to increase taxes, but perhaps not as blatant as the NIC increase and probably more convoluted.”

Murray Patt, founder of Alexander Knight & Co

“It’s a situation that should never have been allowed to occur in the first place. It is pleasing to see that the Chancellor has finally found his sense and reversed one of the most anti-entrepreneurial measures we’ve seen for at least half a decade.

“Many of our self-employed clients are breathing a sigh of relief at the fact they are able to get on with the job of growing their businesses without a national insurance hike.

“I’m proud that our voice has been heard and that the Government recognises that small and medium sized businesses - and specifically entrepreneurs are the lifeblood of the economy.”

Paul Jorgensen, founder of Strategic Analytics Team

“We welcome any initiative that supports the entrepreneurial spirit and allows business to grow. Last year saw a huge growth in Start Up businesses across the Greater Manchester area and it is these people who provide employment opportunities for tens of thousands of people.

“Whether someone is running a business like ours, or a self-employed driver, plumber or other tradesperson – they drive the economy forwards and, in particular, the Northern Power House concept which I am a huge supporter of.

“We should be encouraging greater levels of engagement, in particular with younger people who have so many bright ideas and the talent to get new businesses going.

“To take on the initial challenge of being self-employed and creating opportunities for others, it is vital that this spirit is not hindered in any way and changes to like this to National Insurance would be seen by many in a negative light. We welcome the move by the Prime Minister and the Chancellor to change their position and not push forward with this measure.”

Martin Hall, head of compliance and risk at ICS

“The Chancellor confirmed yesterday that the increase in NICs for the self-employed which was announced at last week’s Spring Budget are not to go ahead after all. This is great news for all of those North West businesses who would have been affected.

“This is also a positive indication that the power of industry bodies are getting the points across of the relevant members of the public and it is having an effect.

“The Budget, and the direction of travel for self-employed individuals and temporary workers has not been favourable of late, but this is potentially a step in the right direction.”

What did you think of the decision? Let us know in the comments.