Government has missed the opportunity to ensure tax system keeps pace with a changing world of work

Published on Tax and Welfare

Commenting on the news that the Chancellor has dropped plans to increase Class 4 National Insurance contributions for the self-employed in this parliament, Torsten Bell, Director of the Resolution Foundation, 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.

“This matters both for fairness and for the public finances. The U-turn means the cost of lower national insurance for the self-employed will now grow from £5.1bn this year to an estimated £6.2bn in 2019-20.

“It is welcome that the government clearly intends to revisit this issue, albeit not this side of a general election. But it is deeply regrettable that a U-turn on a small and sensible piece of tax reform that affects higher income households coincides with the decision to press ahead with benefit cuts that leave low and middle income households facing a far greater hit in the coming weeks.

“Addressing these policies should be the real issue for those concerned about the living standards of ordinary working families.”