Philip Hammond has axed his Budget plan to hike National Insurance contributions

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Exactly a week after it was first announced, chancellor Philip Hammond has said he will scrap a Budget plan to increase National Insurance contributions for the self-employed.

Hammond only announced the plan last Wednesday, but has been forced into a U-turn by widespread criticism of the decision. Tory MPs have complained of the added burden on small businesses, while others have pointed to a 2015 manifesto promise not to increase taxes.

When the chancellor's NIC plans were first announced, Treasury officials claimed the "tax lock" applied only to employed workers, rather than the Class 4 payments made by the self-employed. 

However, the chancellor has today admitted that while that may be technically true, he would still scrap the plan.

Read More: Hammond's U-turn on national insurance hike plans – read his letter in full

In a letter to Tory MPs issued today, Hammond said: "It is very important both to me and to the Prime Minister that we are compliant not just with the letter, but also the spirit, of the commitments that were made.

"In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measures set out in the Budget. There will be no increases in NICs rates in this parliament."

Treasury officials had estimated that the increase in NICs would bring in just over £2bn by the end of 2021-22. Hammond told MPs today the cost of axing the plan would be funded by measures in the Autumn Budget.

The chancellor is due to make a statement in the House of Commons at 14.30.

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