The Tory Chancellor told MPs he will no longer proceed with a £2bn, 2% hike to Class 4 National Insurance for the self-employed
Threatened with a rebellion from his own MPs, the Chancellor will no longer hike National Insurance for the self-employed.
His chaotic move leaves a £2billion hole over four years in his Budget.
Astonishingly Mr Hammond appeared to admit people only realised the hike broke a key Tory manifesto pledge when it was mentioned on TV - before quickly backpedalling.
A Downing Street spokesman was forced to insist Theresa May had "full confidence" in her Chancellor.
Labour MP Yvette Cooper said the move came just a year after a £4bn Budget U-turn on benefit cuts, adding: "Is that why they want to abolish spring Budgets? Because they just keep ripping them up?”
Labour tried to take credit for the climbdown as Jeremy Corbyn said: "Seems to me like a government in a bit of chaos here."
Theresa May snapped back: "“When it comes to lectures on chaos, he’d be the first person I’d turn to.”
The National Insurance hike was announced last week as the centrepiece of Chancellor Philip Hammond’s Budget and is designed to raise £2billion for the Treasury after it comes into force next year.
But it breached his own party's 2015 manifesto pledge not to hike so-called NICs.
After fury from her own MPs, Theresa May was forced to announce there would be no Parliamentary vote on the measure until the autumn.
Mr Hammond's letter to Tory MPs today was released to journalists just 23 minutes before Theresa May was due to be grilled over the row at Prime Minister's Questions.
He wrote: "The measures I announced in the Budget sought to reflect more fairly the differences in entitlement in the contributions made by the self-employed.
"The government continues to believe that this is the right approach.
"Since the Budget, however, there has been much comment on the question of commitments made in our 2015 manifesto."
But today he wrote: "In light of the debate over the last few days it is clear that compliance with the 'legislative' test of the manifesto commitment is not adequate.
"It is very important to both me and the Prime Minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made.
"There will be no increases in NICs rates in this Parliament".
The Chancellor said the abolition of Class 2 NICs, which costs the taxpayer money, will continue as planned from April 2018.
Reforms will only be announced in future after a review of inequality for self-employed people compared to those in secure work, including their parental benefits.
Support for National Insurance hikes themselves - which Labour proposed when it was in government and which the Budget watchdog said would mainly hit higher earners - was mixed.
GMB General Secretary Tim Roache said: "The Chancellor has made a complete dog's dinner of tax policy - and caused chaos for workers up and down the country.
Public and Commercial Services union chief Mark Serwotka said: “While the U-turn is humiliating for the chancellor and the Tory MPs who defended the rise, the money it would have raised was tiny compared to the billions being cut from our public services and social security.
“It is an indictment of our political system that the anger and energy directed at this one budget measure is not also trained on the fact money is being taken from the poorest in society while big businesses get tax cuts.”
Torsten Bell, Director of the Resolution Foundation think tank, said: "Whatever the rights and wrongs of Conservative Manifesto commitments, today’s U-turn on National Insurance means the government has missed an opportunity to correct a big structural flaw in our tax system which allows better-off self-employed workers to pay far less tax than employees."
Mirror
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