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In his first budget as Chancellor yesterday, Phillip Hammond announced changes to National Insurance for the self-employed while scrapping their Class 2 National Insurance contributions completely.
The focus on this budget was one of building growth and economic confidence in a time of uncertainty for business, while education sector was also made a priority. However, the move to increase National Insurance for the self-employed has been a controversial one.
The main rate of Class 4 National Insurance contributions for the self-employed will increase from 9% to 10% in April 2018 and to 11% from April 2019. The new rate, applying to earnings below £43,000, will raise £145m a year by 2021–22 at an average cost of 60p a week to those affected. However, Class 2 National Insurance contributions will be scrapped for those working for themselves.
Meanwhile, all earnings above £43,000 will be taxed at 2%.
There were no changes to National Insurance paid by either employees or employers, or to income tax or VAT.
The personal tax-free allowance will rise as planned to £11,500 this year and to £12,500 by 2020, while the National Living Wage will rise from £7.20 to £7.50 in April for those aged 25 and over. Public sector pay has already been set at a 1% annual rise each year until 2019–20.
Commenting on today’s Budget, Julia Kermode, CEO of FCSA said: “The Chancellor wants to grow a fairer economy but there is nothing fair about today’s announcements. Once again, microbusinesses and the self-employed are coming under attack for not paying enough tax with Mr Hammond believing that employees are being penalised by an unfair system.
“This is wholly unjustifiable and today’s measures are targeting the wrong people. We have seen a raft of tax policy changes penalising self-employed professionals over the last few years leaving them financially worse off and under-valued by a Government that purports to recognise the important role they have played in the country’s economic recovery to date. It would have been sensible for the Chancellor to await the full outcome of Matthew Taylor’s review that is due out in the summer before he announced today’s kneejerk moves that will see policy changes that will have serious negative implications.”
The Chancellor also pledged to help fund up to 110 new free schools and grammar schools at a time when teacher shortages are already affecting the sector. In addition, an upgrade fund of £216m for existing schools has been announced, along with a 50% increase in training hours for technical students aged 16–19.
Education recruitment expert Baljinder Kuller, Managing Director of online supply teacher portal, The Supply Register, commented: “While it’s fantastic that the education sector has not been overlooked in what has been hailed by many as a ‘no-frills’ Budget, Hammond’s plans seem to outright ignore the existing issues that school leaders are currently facing.
“At a time when headteachers are protesting about a funding crisis in existing schools, directing funds into new schools seems bizarre – particularly when the National Audit Office is questioning if free schools offer value for money, with half of the 113,500 new places being opened in free schools by 2021 creating spare capacity in nearby schools.
“Aside from this, we need to take into account existing skills shortages in the education sector. Recent news that the number of graduates training to be teachers has fallen for the fourth year running, with a 2000 shortfall in the number of people starting initial teacher training courses in 2016, is the latest in a long line of indicators that the current teacher recruitment crisis only looks set to worsen. Consequently, this money would be better invested in training and developing teachers to help mend damaged talent pipelines and fill existing vacancies. What’s the point of building new schools if there are not the teachers to fill them?”
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