Yesterday, Philip Hammond gave a number of different reasons for his proposals to raise National Insurance Contributions for some self-employed people. The Government has honoured a “broad commitment” not to increase NICs. The rise itself will raise an average of around 60p a week for each self-employed person in this country – a manageable sum, he suggested. Brexit, he said, raises “new challenges”. The Chancellor clearly believes that the present balance of taxation between the employed and the self-employed is unfair to the former – and that a tax increase for some of the latter is the right way of redressing the balance.
But near the heart of his case was a phrase that has the capacity to dynamite the Conservative election campaign of 2020: “no Chancellor can ever rule out future tax changes”. One of the usual norms of fighting elections is one side ruling out a tax change and challenging another to do so too. George Osborne pushed the principle further with his benefit cap and debt trap. Both of them came back to bite him. Hammond’s categorical rejection of the tactic that his predecessor was prone to deploy showed what he thinks of it. The Chancellor is a grown-up politician with a distaste for schoolboy games (as he sees them).
An Opposition worthy of the name will seek to hang Hammond’s words round his neck when the 2020 campaign comes, claiming that they leave him unable definitively to rule out any tax rise it claims he will make. But his decision also has a short-term impact. When the Chancellor brooded over his NIC proposals, he evidently discounted the possibility that they would open him to the charge of being just one more weaselly, out of touch, lying politician. After all, had he not already honoured the manifesto commitment not to raise NICS? Didn’t Parliament accept last year that this applied only to only referred to those paid directly by employers and their employees?
To say so is to count each tree, but get lost in the wood. Only a man as intelligent as Hammond could miss a point obvious to many less clever than he: that when the Conservative election manifesto said that “we will not raise VAT, National Insurance contributions or income tax”, voters read those words as meaning, well, that a Tory Government would not raise VAT, National Insurance contributions or income tax – regardless of the class of NICs under discussion. Emotional literacy is a buzzword of our times. The Chancellor is a spreadsheet wizard, but the question is now being asked: does he have emotional numeracy? Is he on the same wavelength as those fabled JAMS?
Sources that ConservativeHome have spoken point the finger of blame at Hammond’s team. They claim that alarm bells that should have rung in the Treasury did not do so. Ministers and SpAds should have clocked that claiming the manifesto pledge on NICS has been honoured would be met by an explosive raspberry from the media – and, more importantly, from many striving voters on JAM-type incomes of £18,000. But blame should not simply be dunped at the Chancellor’s door. Theresa May’s government is old-fashioned in many ways, but it is very modern in at least one. There is no such animal as a major financial statement that Downing Street does not see in advance.
Number Ten does not dispute this: it confirms that the Prime Minister “agreed the budget” with Hammond and “discussed it at length”. So why did May’s own team not spot the problem? For an explanation, it appears that we must return to the Chancellor’s distaste for his predecessor’s politicking. It is one shared by the Prime Minister herself – the woman who sacked that predecessor, George Osborne, and sternly warned her first Cabinet that “politics is not a game”. Packed into that phrase was at least five year’s worth of frustration at a style of politics that she believes came in with Tony Blair, and which should have gone out with him too.
At the level of feeling, what drives the NIC proposals is the Government’s desire for more revenue. But at the level of emotion, one can glimpse, behind May and Hammond’s agreement to settle on the policy, an ambiguity about the manifesto on which they fought the last election. They are already in the business of seeking to junk parts of it. There have been hints that a number of staple Cameron/Osborne gizmos will be cast away for 2020: winter fuel payments, the triple lock on the state pension, ring-fenced budgets. In this case, it seems that the Prime Minister and Chancellor both believed that protests against the NICs plan would be containable – so they could move early.
They may be right. Hammond argues that his proposals are progressive, and that there will be more winners than losers. He is supported by the high priests of rationality, such as the IFS and the Resolution Foundation. But, unfortunately for him, he is opposed by iconoclasts on the Conservative backbenchers, outraged that a Tory Chancellor is socking it to “our people”. Many Conservative MPs who feel less strongly will none the less be quietly seething. They detest being made fools of by their own front bench. In 2015, they were marched up the top of the hill, where they swore not to raise NICs. They will not want to be marched down it less than two years later.
They have now been joined by a Minister, Guto Bebb, who says that he “will apologise to every voter in Wales that read the Conservative manifesto in the 2015 election”. This is a gesture of defiance far nearer the heart of the Government than that for which Michael Heseltine was fired this week, since the latter was an adviser, not a Minister. This outbreak of indiscipline confirms our point from yesterday evening: Hammond is hemmed in. He is also, for perhaps the first time in his career as a senior Minister, in the eye of the right-wing media tiger – panned by the Daily Telegraph; mauled by the Daily Mail.
The Chancellor is wriggling on a hook, and he will have to get off it – fast. His standing is integral to the Government’s. A climbdown is necessary, but one that spares his blushes. As this site predicted yesterday, one is already under way. It is reported this morning that the Government will seek to trade off Hammond’s NIC rise against greater access to social benefits. May will be tempted to put distance between herself and her Chancellor – to go to ground, as is sometimes her way when the temperature rises. She must tell that Satan to get behind her. She and Hammond must stand together. The alternative is perilous not only for him, but for her.