That Budget – and the proposed NI increase for the self-employed . . .

Will it happen?  Or not?  There’s been an immediate – and growing – backlash over Chancellor Philip Hammond’s plan to raise Class Four National Insurance Contributions by two per cent in the next two years.

The proposal, headlined by a hostile media as ‘a tax on the self-employed’, needs Parliamentary approval, and if the initial dissent from all quarters continues to gain momentum, it might never happen. 

But as things stand at present, the Chancellor’s decision to hit construction workers in the pocket could in turn accelerate inflation in labour rates, and put vital national infrastructure projects at risk.

Freelancers in the construction sector will contribute approximately £7 billion in tax and National insurance this year, rising to £8.2 billion in 2018/2109 if the increases go ahead.  Ultimately, this extra money will come from those looking to commission building and infrastructure works – and some projects will be abandoned as a result.

Construction Policy Advisory Committee

That’s the verdict from the Association of Independent Professionals and the Self-Employed (IPSE).  The Association’s Construction Policy Advisory Committee, which consists of a group of leading figures from the industry – and which I chair – highlights that official figures show over a third of the 2.3 million people that work in the construction industry are self-employed and will all be hit by the change.

The IPSE response:

Over 900,000 self-employed construction workers who are critical to the industry and the British economy face are now facing an NI hike.  Those in demand will compensate by increasing their charge out rates, while others will simply be worse off.

Mr Hammond says he wants infrastructure to be the ‘backbone’ of industrial strategy, and the government wants to build an economy that ‘works for everyone’.  But now they are putting this at risk, while simultaneously breaking their manifesto promise not to raise tax.

If the government is really serious about building more houses and encouraging investment in infrastructure it will need the help of self-employed contractors to get the work done.  It must also understand that one of the most common reasons why schemes are shelved is cost. Whilst freelance construction workers deserve to earn more, inflation in labour rates due to increased taxes will not help get schemes off the ground.

Fortunately, there is still time for the government to reconsider the damaging impact this measure would have.