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The Guardian - UK
The Guardian - UK
Politics
Andrew Sparrow

Budget 2017: IFS says Britain facing 'third parliament of austerity' after 2020 - Politics live

Philip Hammond, the chancellor, talking to staff and students at the Advanced Engineering Centre at Dudley College this morning.
Philip Hammond, the chancellor, talking to staff and students at the Advanced Engineering Centre at Dudley College this morning. Photograph: Christopher Furlong/Getty Images

Afternoon summary

  • The Institute for Fiscal Studies has published its analysis of the budget and warned that Britain faces “a third parliament of austerity” after 2020. (See 1.28pm.)
  • Downing Street has continued to defend the decision to introduce a national insurance contributions (NICs) tax rise in the budget, despite a growing revolt against the policy amongst Tory MPs. The former Conservative leader and former work and pensions Iain Duncan Smith is the most senior figure to demand a rethink (see 11.06am) and, according to one count, 14 Tories have now gone public to express reservations about the tax increase. Given that the government only has a working majority of 17, that suggests some form of compromise at least is very likely. The Labour party is opposed to the changes and the Lib Dems have said they should be delayed until the Taylor review into modern working practices is published. Speaking in the Commons, John McDonnell, the shadow chancellor, said:

I find what’s interesting is the response to yesterday’s statement has been one of anxiety right the way across the political spectrum. And I’m hoping the chancellor is listening.

I’m hoping that both the Labour party and other parties in this House will combine with some Conservatives, who are concerned in that way, and we can force the chancellor to think again.

Theresa May is due to hold a press conference in Brussels later this afternoon but she is expected to back her chancellor, Philip Hammond, who defended his plans in a series of interviews this morning. (See 10.19am.) On NICs, Hammond and May are not entirely isolated. The IFS supports the NICs tax increase (see 1.28am) and the Resolution Foundation, the living standards thinktank, is in favour. (See 9.14am.) Oh, and the Guardian in its leader has applauded the move too (although, sadly for the chancellor, as other politicians have discovered, having the backing of the Guardian is not always enough to guarantee the success of a political project.)

  • The Irish premier Enda Kenny has said he would back calls for Britain to have to pay a contribution to the EU when it leaves. Asked about this at the EU summit he told journalists:

When you sign on for a contract you commit yourself to participation. And obviously the extent of that level of money will be determined. Mr [Michel] Barnier is the lead negotiator for the European Union and obviously Britain will have a say. But that no more than any other problem will have to be faced, it will have to be dealt with and it will be dealt with.

That’s all from me for today.

Thanks for the comments.

Updated

Nick Clegg, the Lib Dem former deputy prime minister, was in Brussels today for a meeting of the ALDE group, the Alliance of Liberals and Democrats for Europe. He said there were seven EU prime ministers at the meeting and they all thought Brexit would be difficult. In a statement he said:

Brexit was the key preoccupation for the seven Liberal prime ministers around the table.

No-one thought that there would be an easy path to a post-Brexit nirvana of the kind that Theresa May has promised the British people.

The PM will rapidly discover that her hardline position has raised hackles across Europe and increased the chances of a bad deal.

The seven countries with Liberal prime ministers are Finland, the Netherlands, Estonia, Denmark, Belgium, Slovenia and Luxembourg.

My colleague Peter Walker was at the afternoon Number 10 lobby briefing. He is not sure he came out any the wiser.

There was also an odd moment when the spokesman was asked about the term Brexit.

The Lib Dems have said the government should delay the NICs tax rise until the Taylor review into modern employment practices has concluded. Susan Kramer, the party’s Treasury spokeswoman, said:

The budget was a car crash yesterday and the government is reeling. It should listen to calls on our benches and their own and pause this plan. With such a slim majority the government are playing with fire and are demonstrating yet again they are no longer the party of business.

I can only assume they just take for granted the millions of self-employed and think they will vote Tory come what may. I think this OmNICshambles budget will show them that is not the case. Pause this hypocritical tax rise and do it now.

Donald Tusk has been re-elected president of the European council at this afternoon’s summit. An attempt by the Polish government to block his re-election failed.

Irish PM says UK has to be 'realistic' about the need to pay something as it leaves EU

Enda Kenny, the Irish premier, has told reporters in Brussels that he thinks the UK should have to pay a “leaving bill” to withdraw from the EU. But he would not put a figure on how much it should be.

This is from the BBC’s Laura Kuenssberg.

And this is from Sky’s Faisal Islam.

The European commission wants Britain to pay a multi-billion bill when it leaves the EU as its share of the cost of projects to which the EU has already committed itself and the cost of EU liabilities (including staff pensions). There have been reports saying it will demand around €60bn.

The Daily Mail’s political editor Jason Groves thinks the government will have to abandon the NICs increase.

But the BBC’s political editor Laura Kuenssberg says she has been told that there will be no backing down (yet?).

Going back to the IFS, it said there were only two tax changes “of any substance” in the budget: the NICs increase, and the cut in the dividend tax allowance. As this chart shows, these two measures are progressive, in that they affect the rich the most.

Distributional impact of tax measures in yesterday’s budget.
Distributional impact of tax measures in yesterday’s budget. Photograph: IFS

But another chart in the same presentation (pdf) shows that, when you look at all tax and benefit changes coming into force this parliament, the impact is regressive. The poor lose most, proportionately and in cash terms. The people who do best are those in the ninth decile; ie, the richest 80 to 90%.

Distributional impact of tax and benefit changes since election.
Distributional impact of tax and benefit changes since election. Photograph: IFS

Theresa May has arrived in Brussels for the EU summit. Normally the prime minister, like other leaders, speaks to journalists on her way into the building. But today she dodged the reporters.

This from the BBC’s Laura Kuenssberg.

And this is from the Daily Mirror’s Jack Blanchard.

Still, she has been willing to face at least one crowd of unimpressed onlookers today.

Theresa May greeting children after the unveiling of the new memorial to members of the armed services who served and died in the wars in Iraq and Afghanistan at Victoria Embankment Gardens earlier today.
Theresa May greeting children after the unveiling of the new memorial to members of the armed services who served and died in the wars in Iraq and Afghanistan at Victoria Embankment Gardens earlier today. Photograph: WPA Pool/Getty Images

Updated

Minister says Tories should apologise for breaking manifesto commitment on NICs

A government minister has said his party should apologise for breaking its promise not to raise national insurance. According to PoliticsHome, Guto Bebb, a Wales Office minister, told the Welsh language station BBC Radio Cymru:

I believe we should apologise. I will apologise to every voter in Wales that read the Conservative manifesto in the 2015 election.

IFS says top 1% have lost more proportionally in earnings than average workers this decade

Contrary to expectations, the IFS is also saying that this decade has been particularly bad for the richest 1%. It says their earnings have fallen by more than the average.

This is what Paul Johnson, the IFS director, said on this subject in his opening remarks at the briefing.

Overall the highest earners, the top 1%, are having a particularly bad decade. Our calculations suggest that the top 1%, having pulled away from the rest over the 2000s are being reeled back in. The ratio between earnings at the 99th percentile and those at the median hit 5 to 1 in the late 2000s. It is back at 4.6 to 1 now, about where it was in 1999.

And that compression of the earnings distribution looks set to continue. Which will keep earnings inequality down. But it is bad news from the point of view of tax revenues. Such growth as we have had has not been tax rich. And going forward the OBR warns that: “The top end will be disproportionately hit by the UK exiting the EU (due to effects on higher paying sectors including financial services). Changes in the distribution are therefore expected to deliver a small drag on the effective tax rate over the next five years”.

And here is the chart with the evidence. It is from this presentation (pdf) given at the briefing.

Median real earnings and real earnings for the top 1% since 2007.
Median real earnings and real earnings for the top 1% since 2007. Photograph: IFS

Updated

Here is the IFS chart showing what has happened to median real earnings since 2007. This explains why the IFS is saying that by 2022 people will have gone 15 years without a pay rise. (See 1.28pm.) The chart comes from this IFS presentation (pdf).

Average real earnings since 2007.
Average real earnings since 2007. Photograph: IFS

And here is the IFS chart showing the distributional impact of the changes to NICs for the self-employed. Essentially, the people who gain are in the lowest three deciles (ie, the poorest 30%), but they don’t gain much. People in the top six deciles lose, often by a lot more in cash terms. Those in the fourth decile are unaffected, because what they gain from the abolition of class 2 NICs is matched by what they lose from the class 4 NICs increase. The chart comes from this presentation (pdf) given at the briefing.

Distribution impact of NICs changes.
Distribution impact of NICs changes. Photograph: IFS

Updated

Here is the IFS chart showing how self-employed people will be affected by the NICs increase depending on their earnings. It is from this presentation (pdf) given at the briefing.

Impact of NICs tax rise by earnings
Impact of NICs tax rise by earnings Photograph: IFS

The IFS says anyone earning less than £15,570 a year will be better off. The Treasury is saying anyone earning £16,250 will be better off.

(I will try to get an explanation for this discrepancy.)

UPDATE: The IFS say the Treasury figures refer to a different year. The IFS figures apply to 2017-18, while the Treasury figures apply to 2019-20.

Updated

IFS says Britain facing 'third parliament of austerity' after 2020

Here are the key points from Paul Johnson’s opening statement at the IFS post-budget briefing (pdf).

  • Johnson said that Britain faces “a third parliament of austerity”.

We remain on course to be borrowing about £20bn in 2020 – that’s £30bn more than intended a year ago. That leaves a lot of work to do in the next parliament to get to the planned budget balance. It looks like being, I’m afraid, a third parliament of austerity.

  • He said current forecasts suggest that by 2022 people will have gone 15 years without an effective pay rise.

Income and earnings growth over the next few years still look like being weak. On current forecasts average earnings will be no higher in 2022 than they were in 2007. Fifteen years without a pay rise. I’m rather lost for superlatives. This is completely unprecedented.

  • He said Britain has effectively had “a decade without growth”. Pointing out that GDP per capita is barely 2% above its 2008 level, he said:

That’s nine years to grow as much as it would normally grow in one. What the OBR is saying is that despite that truly dismal record all of the productivity – and with it earnings growth – we would normally expect has been lost forever. This remains the big story of the last decade – a decade without growth, a decade without precedent in the UK in modern times.

  • He defended the decision to increase NICS, saying this was “a modest but welcome change designed to shore up the tax base and create a slightly less unequal playing field between the self employed and employees”.
  • He said benefit cuts coming into force in April would have a far bigger impact than any changes announced in the budget.

However brief yesterday’s budget may have been there are plenty of big changes coming in this April. The biggest of them are cuts to benefits – to ESA and to tax credits. These will have much bigger effects on people’s incomes than anything announced yesterday.

Tax credit changes in April will not affect current claimants immediately but will mean big losses in the longer term. The removal of benefit from third and subsequent children will mean that in the long run 600,000 three child families will be an average of £2,500 a year worse off than they would have been, while 300,000 families with four or more children will be £7,000 a year worse off on average. This and the reduction in the “family element” of tax credits will save around £5bn a year in the long run, dwarfing all of yesterday’s announcements combined.

  • He suggested politicians and voters were to blame with Britain having an unfair and inefficient tax system.

Clearly the most controversial announcement yesterday was the increase in self-employed NI rates. This appears to break a foolish manifesto commitment not to raise any of the major taxes. On the other hand it is a small change taking a small step to correcting a big problem with the current tax system. That problem needs a much more thorough review and strategy to deal with it, as do many other problems in the tax system. If politicians continue to make silly manifesto pledges about not changing taxes and the rest of us resist sensible changes such as this we will end up with the tax system we deserve – inefficient, inequitable, complex and increasingly unable to raise revenue in the face of a changing economy.

Updated

The Institute for Fiscal Studies is starting its post-budget briefing.

Here is the text of the opening remarks (pdf) from Paul Johnson, the IFS director.

I will post a summary soon.

During Brexit questions in the Commons earlier David Davis, the Brexit secretary, hinted that the government may adopt some form of regional immigration policy after Brexit.

He was responding to Stephen Gethins, the SNP’s Europe spokesman, who asked if the government could give Scotland control over immigration policy. David Davis replied:

The simple truth is that the Scottish government has raised a very important issue on the joint ministerial committee about the question of the immigration needs of Scotland.

And I have reflected those questions to the home secretary, and I would expect that when we come to a UK immigration policy, we will reflect the needs of every part of the United Kingdom.

Gordon Brown is publishing his memoirs this autumn, my colleague Jonathan Freedland reports.

The former Lib Dem pensions minister Steve Webb has an idea as to how Philip Hammond could defuse the NICs tax increase row.

At the Number 10 lobby briefing a spokesman for the prime minister reiterated the chancellor’s argument that the NICs increase was aimed at equalising the tax liability between employees and the self-employed; and pointed to legislation introduced after the general election, in 2015 that implemented its manifesto tax pledges — but didn’t mention class 4 NICs. He said:

There’s been a lot written about this this morning. The chancellor’s addressed this widely this morning. The government was clear in the legislation that was brought in that it covered class 1 national insurance, which covers 85% of workers. There were no amendments as that bill was passed; no concerns were raised at the time.

On the issue of whether the government had broken a manifesto promise, he again referred to the bill, saying: “There were no concerns raised at the time; it was recognised broadly that it met the commitments that were set out.”

Asked whether the government could review the policy, amid growing disquiet on the Conservative backbenches about the policy, the spokesman simply reiterated that the NICs rise was about “restoring a sense of fairness” in the tax system. He said:

Self-employed workers now have access to the full state pension; that makes them £1,800 a year better off; so having equalised the state pension, it was right that the contributions that go towards that are equalised as well.

Pressed on whether the change was central to Wednesday’s budget, the spokesman replied: “It’s a part of the budget; it’s a part of the budget that addresses an issue of fairness.”

According to Paul Goodman, the ConservativeHome editor and a former Conservative MP, the Treasury did not properly check what the 2015 manifesto said about national insurance before announcing its NICs increase.

The Conservative MP Stephen McPartland was also on the Daily Politics. He was much more blunt than Raab about wanting a U-turn over NICs. He told the programme:

I was very surprised [when the NICs cut was announced]. I think the whole party was very surprise, the parliamentary party. We sat there in complete and utter silence listening to that part of the announcement. I personally think Philip [Hammond] is a very good chancellor, he’s a very grown-up chancellor, but I think on this issue we need to get a U-turn and we need one quickly.

The Conservative MP Dominic Raab told the Daily Politics a few minutes ago that he did not like the NICs increase much. He suggested it should be reviewed. He said, because there would have to be a separate bill implementing this (see 10.43am), the government should use that as an opportunity to “look at this in the round”.

An Ipsos MORI poll for STV suggests that support for Scottish independence has risen to 50%. Welcoming the figures, Derek Mackay, the SNP’s business convenor in the Scottish parliament, said:

It is no surprise that more and more people in Scotland are supporting independence – we are being driven ever closer towards an economically catastrophic hard Brexit by a right-wing Tory government who think they can do what they want to Scotland and get away with it.

But the commentator David Torrance points out that firm support for the union is higher than firm support for independence.

Sion Simon, the Labour candidate for mayor of the West Midlands, is hoping that the NICs increase will help him defeat the Conservative candidate, Andy Street, in this year’s election. He has just released an open letter to Street challenging him to state his opposition to the increase.

Here is the Evening Standard’s Joe Murphy making an important point about Number 10’s refusal to rule out a review of the NICs increase.

Tory MPs will remember how some of their colleagues went out of their way to defend the disability benefit cuts proposed last year before they left out on a limb when Downing Street abandoned them in a U-turn.

There are a now a majority of Northern Ireland Assembly members who are in favour of legalising gay marriage in the region, an alliance in favour of marital equality claimed today.

“A decisive majority of new MLAs (Members of the Legislative Assembly) to support marriage equality”, said Clare Moore from the Irish Congress of Trade Unions at a press conference in Belfast today organised by the Love Equality coalition.

Northern Ireland is the only part of these islands where gay couples cannot get married. This is due in the main to the opposition of the largest party at Stormont, the Democratic Unionists which has a powerful Evangelical Christian wing.

In the last parliament the DUP again blocked the introduction of legislation that would make gay marriage legal in the province.

The DUP used the ‘petition of concern’, a mechanism built into the Northern Ireland power sharing system that was designed to protect minorities. The ‘petition of concern’ is triggered when one party claims that there is no cross-community support for any law because one of the two main communities’ representatives doesn’t back that legislation.

Moore said the “litmus test” for the next assembly following last Thursday’s elections would be if members of the regional parliament vote to legalise gay marriage.

Declan Meehan, of Cara Friend, which alongside Amnesty International is one of seven groups calling for reform, said:

All of the people of Northern Ireland must be served by the incoming government – that includes the LGBT community.

Before any new executive is formed, there must be a firm commitment to deliver equal marriage legislation. Without that, we know it will be another five years of LGBT people being treated as second-class citizens of Northern Ireland.

Clearly, we think any new executive should legislate for equal marriage. At a minimum, there must be a public commitment by any parties forming a new executive that their members will not deploy a petition of concern to prevent a private members’ bill on equal marriage similar to laws which already exist in England, Wales, Scotland and the Republic of Ireland.

Updated

No 10 refuses to rule out review of the NICs tax rise

At the lobby briefing Number 10 also refused to rule out a review of the NICs increase.

My colleague Heather Stewart has been at the Number 10 lobby briefing. Downing Street is defending Philip Hammond over the NICs increase.

Duncan Smith joins Tory revolt over NICs increase and demands rethink

Iain Duncan Smith, the former Conservative party leader and the former work and pensions secretary, has become the most senior Tory to call for a rethink on the National Insurance Contributions (NICs) increase.

Speaking on Sky’s All Out Politics just now, he said that while he welcomed many aspects of the budget, he was concerned about the NICs increase and the cut in the dividend tax allowance, which will lead to people who set up their own companies paying more tax. Both measures hit “people who choose an enterprise process”, he said. He said he would like them to be reviewed at the next budget, in the autumn.

I would like for this period to have a chance to reflect on that, with this report coming in [the Taylor report on employment practices], to think about how this lands and whether or not you want to look at adjustments, at whether £16,000 is the right level to be at - that’s below average earnings - and whether there should be adjustments.

I would like to see that kept, the ball in play, because it doesn’t land until next year, so there is plenty of scope to look how this actually affects them and to listen to business representatives etc.

Duncan Smith also said that it has been a mistake to offer a categoric promise at the general election not to raise national insurance.

I think there is always a problem if you make an absolute pledge at the time of an election and then you subsequently you don’t [keep it]. We all saw what happened to President Bush senior, “read my lips”, so some of us were slightly concerned at the time about making pledges that lock you in.

He also said he thought the Treasury was being too pessimistic about Brexit.

My sense of the problem here is that the Treasury is still way too pessimistic about the future and isn’t looking at the opportunities.

Iain Duncan Smith on Sky.
Iain Duncan Smith on Sky. Photograph: Sky News

The Labour MP Chris Leslie, a former shadow chancellor, says the government will need a separate bill to introduce the NICs increase.

As the BBC’s Laura Kuenssberg says, this could make it easier for rebel Tories and the opposition to vote against it.

Philip Hammond, the chancellor, was giving his morning interviews this morning from Dudley, where he is launching the “Midlands Engine” strategy. He has tweeted about his visit.

John McDonnell's morning interviews - Summary

And here are the main lines from John McDonnell’s morning interviews.

  • McDonnell, the shadow chancellor, said Labour would oppose the increase in national insurance contributions. He said they were unfair because they would hit middle and low earners. And he said he hoped Tory MPs would join with Labour to oppose them. He said:

I’m hoping that we will be able to persuade the chancellor to back off from this. Certainly the Labour party will oppose this. I think other parties will as well. We may be able to persuade enough Conservative MPs to ask the chancellor now to think again.

This is just going to hit people - middle and low earners in particular - at a time when consumer spending is dipping. These small traders, sole traders, the self-employed, are usually at the front line when consumer spending dips and they are the ones who suffer the most. It’s the wrong policy and it’s certainly the wrong timing.

He said it was unfair to increase taxes on workers when the rich and corporations were getting tax cuts.

There’s got to be an element of fairness about our taxation system. [Hammond] cannot cut the taxes to the rich and the corporations and increase the taxes on the lower-paid.

  • He said the extra money Hammond announced for social care was not enough.

[Hammond] trailed £2bn and then when he announced it’s over three years, well it isn’t a sticking plaster even. It means we are still in crisis.

  • McDonnell criticised Hammond for his anti-Corbyn jokes, saying there were “nasty” and inappropriate. He said:

Yesterday was not the day - when you are inflicting suffering on people by raising National Insurance, you are not addressing the NHS crisis, you are not tackling the problems we have in social care. It was not a day for jokes like that.

It was more stand-up than it was serious economics.

John McDonnell.
John McDonnell. Photograph: REX/Shutterstock

Hammond's morning interviews - Summary

Here are the main points from Philip Hammond’s morning interviews.

  • Hammond refused to apologise for breaking the Conservative manifesto promise not to increase national insurance contributions. (See 8.15am.) In a series of interviews, he also refused to acknowledge directly that he had broken the manifesto promise. He argued that the manifesto had been clarified in the “tax lock” legislation that specifically excluded class 4 NICs from the ‘no tax increase’ promise.

We said something during the course of the election. When we legislated for those measures we explained very clearly in parliament what we were doing. There was a broad commitment to lock taxes so there would be no tax increases and that is what we have done.

But he also argued that circumstances had changed since the general election. He told ITV’s Good Morning Britain.

Britain’s circumstances have moved on. We are now facing the challenge of leaving the European Union, of building a global Britain to exploit the opportunities in the future that this country can enjoy, and we need to invest to do that. I’ve had to ask the self-employed to pay a little bit more National Insurance in order to make a fair contribution for the services that they receive from government.

  • He said that when the government passed its “tax lock” law, no one complained about the class 4 NICs exemption being a breach of the Conservative manifesto promise. He quoted Rebecca Long-Bailey, then shadow chief secretary to the Treasury, as saying that the bill delivered the Tory manifesto.
  • He rejected claims that the NICs increase was equivalent to George Osborne’s pasty tax, a measure Osborne had to abandon. When asked on LBC if he was confident that this was not another pasty tax, he replied:

Yes. This is a fair measure, it is a modest measure. Half of the money raised will come from people in the top 20% of income earners. Nobody earning less than £16,250 will pay any more national insurance contributions. Sixty per cent of self-employed people will see a reduction in their national insurance contributions. This is a fair and appropriate measure.

  • He played down the prospect of abandoning the NICs increase - without categorically ruling out a U-turn. Speaking on the Today programme, he said he was “prepared to listen” to what backbenchers have to say about this. (And they are not happy - see 8.56am.) He also said that the tax increase was required to fund an increase on spending for social care - implying that it was something of a one-off. He told the programme:

We’ve introduced this measure because we need to raise revenue in this Budget in order to fund social care. We have to pay for these things somehow. This is the difficult challenge.

No Conservative likes to raise taxes and, of course, I’m always prepared to listen to backbenchers, to talk to our backbenchers, but we have made a decision to make the national insurance system a little bit fairer.

But during his morning interviews Hammond also repeatedly argued that there was a principled reason for the increase. He said:

What we are dealing with here is a perverse incentive in our tax and National Insurance system which is driving people who are essentially employees to turn themselves into self-employed workers instead.

That’s not good for them and it’s not a healthy thing for the structure of the economy to be driven by tax advantages and tax differences. People should have choices about the way they work and the form they use to set up a business, but those choices should be driven by the needs of their business and the needs of the economy, not by artificial tax incentives.

  • He said that Britain could not remain in the customs union. He told the Today programme.

It’s clear that we can’t stay in the customs union and wasting a lot of political capital arguing about that will not be fruitful.

In her Lancaster House speech Theresa May said the UK would not remain a full member of the customs union, although she also floated the possibility of some sort of associate membership.

  • He rejected the claim that self-employed workers were being made to pay the price for voting for Brexit. When this was put to him, he replied:

Not at all. The key circumstance that has changed in respect of the self-employed is that they now have access to the full state pension on the same basis as employees.

  • He said his staff helped him out with his budget speech jokes. Asked who came up with them, he told LBC:

My team. We sat round the table, some civil servants, some special advisers, myself, on Tuesday evening. We said let’s try and liven it up a bit, let’s see if there are any little bits of humour we can inject into it.

Philip Hammond being interviewed this morning.
Philip Hammond being interviewed this morning. Photograph: BBC

Updated

Towards the end of the Today programme Nick Robinson mispronounced the chancellor’s nickname and called him “spreadshit Phil”. It now has its own hashtag.

Robinson seems to be laughing off his error.

Here is my colleague Peter Walker’s story about Philip Hammond’s morning interviews.

The Resolution Foundation, a thinktank focusing on living standards, has published its 40-page analysis of the budget (pdf) this morning.

Here’s an extract.

While the chancellor inherited most of these benefit changes from his predecessor, he did announce a 2 percentage point increase in the Class 4 national insurance paid by the self-employed to coincide with the abolition of flat rate class 2 national insurance. This is a welcome and progressive change that will mean the bottom 54 per cent of self-employed earners pay less national insurance, or none at all. Those earning over £16,250 will pay more, with anyone earning over £50,000 paying a little over £600 more tax each year. At a household level these national insurance changes are highly progressive, with the majority of revenue raised coming from the top ten per cent of households.

These changes should however be part of a wider reform of self-employed taxation and an increase in the support the self-employed receive, including with the likes of maternity pay and pension saving.

Despite the focus received by this national insurance change, it stands in stark contrast to benefit cuts planned for the coming years by virtue of being both modest and progressive. The real inequity lies with the fact that the combination of low pay growth and regressive benefit cuts means, all told, the next four years (2016-17 to 2020-21) are on course to be even worse for the poorest third of households than the four years following the financial crisis (2007-08 to 2011-12).

Tackling rising inflation or stubbornly low productivity growth is not straightforward but, in the face of a severe living standards squeeze, the chancellor should recognise that now is not the time to be adding to the pressure on low and middle income working families with substantial benefit cuts. Luckily for him and them, the chancellor has two budgets this year and will have the chance to think again.

What the national newspaper front pages are saying about the budget

This is what the papers are saying about the budget on their front pages.

The only one splash headline that is actually positive about the budget is in the Daily Express.

Updated

Tory MPs call for Hammond to change his mind over NICs

On the Today programme the Conservative MP Anne-Marie Trevelyan said that she would try to reverse Philip Hammond’s decision to increase NICs. She floated the idea of tabling an amendment to the finance bill that would overturn it and she told the programme:

We need to halt this particular decision now. I think we need to put this on hold so we can have a proper review and think in a holistic way.

Another nine Tory MPs, at least, have spoken out against the policy. The Guido Fawkes blog has a useful round-up of their quotes.

Updated

Hammond's Today interview - Reaction from the Twitter commentariat

This is what political journalists and commentators are saying about Philip Hammond’s Today programme interview.

I can’t remember a chancellor’s main post-budged interview getting panned so comprehensively. By comparison, the pasty tax row was relatively trivial. The only comparison that does come to mind is Gordon Brown trying to argue that people would not lose out from the abolition of the 10p rate of tax, which wasn’t true, but that row did not erupt until about a year after the budget in which it was announced.

Here are some of the best tweets.

From the Spectator’s Isabel Hardman

From Bloomberg’s Robert Hutton

From the Financial Times’ Jim Pickard

From the Guardian’s Jessica Elgot

From the BBC’s Ross Hawkins

From the Sunday Times’ Tim Shipman

From the Telegraph’s Asa Bennett

From the Times’ Michael Savage

From the Mail on Sunday’s Dan Hodges

From the Sun’s Tom Newton Dunn

From the BBC’s Kamal Ahmed

Q: It sounds like you have given up fighting for the best outcome for business.

Not at all, says Hammond.

He says it is clear we cannot stay in the customs union. Wasting a lot of political capital arguing for that would not be fruitful.

Instead the UK wants to negotiate the best possible customs deal.

On immigration, he says there will be no overnight closure of the UK labour market.

EU workers will come here for many years to come. But they will come on a different basis, with the UK deciding the rules.

Q: You sound like a pilot asking passengers if they want ice with their drinks when the plane is heading towards a mountain.

Hammond says there is less uncertainty about Brexit now.

Q: Do you accept that people will not be able to trust you now to keep your promises?

Hammond says 85% of people are not self-employed. And 60% of the self-employed will benefit. But some well-paid self-employed people will pay more.

And that’s it. Hammond’s Today interview is over.

Q: Why did you barely mention Brexit in your budget speech?

Hammond says in the autumn statement he set out his approach to preparing the UK for Brexit. He did not feel the need to set that all out again.

Q: Are you as worried as you were then? Then you talked of uncertainty, and a rollercoaster.

Hammond says there is less uncertainty now after Theresa May’s Lancaster House speech. That has been “a huge step forward”.

Q: In 2015 you said you would run a surplus. Your figures show that you will not be able to do that in this parliament.

Hammond says circumstances have changed. You have to deal with the world as it is.

He could have kept to the deficit reduction pledge, but that would have squeezed the economy in a harmful way.

Q; You also broke your promise to keep the UK in the single market.

Hammond says the decision to leave the EU has changed the game.

Q: Only because of a referendum your party chose to hold. It could have foreseen a vote to leave.

Hammond says the government kept its promise to hold a referendum.

We now have to negotiate the best possible deal.

Q: Would you put NICs up again for the self-employed?

Hammond says he has got the system into a better place.

No chancellor can ever rule out future tax changes.

Q: Your backbenchers says you need to think again. Will you listen?

Hammond says he has introduced this measure because he needed to raise revenue in this budget.

He had to put money into social care.

No Conservative likes to raise taxes, he says.

He has decided to make the national insurance system “a little bit fairer”. But the self-employed still pay less.

Hammond says he faces extremely challenging circumstances.

Q: You could use that as a reason for admitting you have not kept your promise?

Hammond ignores the point, and goes on to say he is making the UK match-fit for Brexit.

He put £2.5bn into health and social care, he says.

And he committed to a radical change in the way technical education is delivered.

Q: You have said circumstances have changed, even if you do not admit breaking a promise. Has white van man paid the price for voting for Brexit?

No, says Hammond.

Q: What other circumstance has changed then, if not Brexit?

Hammond says the way the state pension is being paid has changed, helping the self-employed.

Q: You knew that before the election.

Hammond ignores the point, and goes on to say he wanted to close the gap between the way the employed and the self-employed are taxed.

Philip Hammond's Today interview

Philip Hammond is being interviewed by Nick Robinson on the Today programme now.

Hammond says the government legislated to implement their “tax lock” manifesto commitment. The legislation made it clear that the promise covered class 1 NICs.

Q: But the manifesto says repeatedly that national insurance contributions would not rise. Was there small print saying you only meant some NICs?

Hammond says Labour was putting forward a plan for wide-ranging tax increases.

He says 60% of self-employed people will see a reduction in NICs. Anyone earning less than £16,250 will pay less.

Q: Will you apologise for saying something during the election and then unsaying?

Hammond said the Tories then passed legislation.

Q: But do you accept what the party said was untrue?

Hammond says the party explained when it legislated for the tax lock what it meant. At that point people could have queried what the party meant. But Labour did not. Rebecca Long-Bailey, then the shadow chief secretary to the Treasury, said the bill delivered the Tory manifesto.

'Circumstances have moved on' - Hammond defends breaking Tory manifesto promise on NICs

It is the day after the budget and, as is usual, the chancellor is out giving interviews. With Conservative MPs, and, perhaps just as importantly, the Tory press, furious about the increase in national insurance contributions (NICs), Philip Hammond has a tough job.

On ITV earlier this is how he defended his decision to break a Conservative manifesto promise.

Britain’s circumstances have moved on.

We are now facing the challenge of leaving the European Union, of building a global Britain to exploit the opportunities in the future that this country can enjoy, and we need to invest to do that.

I’ve had to ask the self-employed to pay a little bit more National Insurance in order to make a fair contribution for the services that they receive from government.

He is about to be interviewed on the Today programme. I will be covering that in full, as well as summarising everything he and John McDonnell, the shadow chancellor, have said in their morning interviews.

Then, at 1pm, the Institute for Fiscal Studies will give its verdict on the budget.

Here is the Guardian’s main overnight budget story.

You can read all today’s Guardian politics stories here.

If you want to follow me or contact me on Twitter, I’m on@AndrewSparrow.

I try to monitor the comments BTL but normally I find it impossible to read them all. If you have a direct question, do include “Andrew” in it somewhere and I’m more likely to find it. I do try to answer direct questions, although sometimes I miss them or don’t have time. Alternatively you could post a question to me on Twitter.

Updated

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