Theresa May has backed Philip Hammond’s controversial National Insurance changes, but bowed to rebel Tory MPs by retreating on when they will be introduced.
Instead of being included in the Finance Bill, which implements the Budget, they will be brought in as part of separate legislation in the autumn, the Prime Minister announced.
And in a concession to her backbenchers, she pledged that her embattled Chancellor would speak to them about their concerns and publish a paper explaining the proposals before they are introduced.
Labour claimed the PM’s move – which effectively puts the brakes on the Chancellor’s Budget proposals – was a “partial U-turn” and said she was rowing back on Philip Hammond’s plans.
But speaking in Brussels as a Tory mutiny over the plans appeared to be growing almost by the hour, she said the proposals would make National Insurance “simpler, fairer and more progressive”.
The PM said the Chancellor’s paper would contain details about reforms “along with some changes we plan to make on rights and protections for self-employed workers, including on issues like pension rights and parental rights and maternity pay”.
She added: “The decision on National Insurance was taken in the context of a rapidly changing labour market in which the number of people in self-employment – often doing the same work as people employed more traditionally – is rising rapidly.”
The Prime Minister also said the shift towards self-employment was “eroding the tax base” and making it harder to pay for public services “on which ordinary working families depend”. And she said: “This goes some way towards fixing that.”
Responding to the PM’s move to leave the door open to more concessions to her rebel MPs, shadow chancellor John McDonnell called on her to show leadership and scrap the proposals.
“The fact the Prime Minister won’t fully support her own Chancellor’s Budget measure, and has been forced by Labour to row back on it just 24 hours after he delivered his speech in Parliament, shows the level of disarray that exists at the top of government,” he said.
“What is even more alarming is that the Government didn’t stop and think before announcing such a tax hike.”
The PM’s comments came as a rebellion by Tory backbenchers over the changes grew to about 20 MPs, including one junior minister who called on the Chancellor to apologise for the increase.
Dissent is not just confined to backbenchers. Welsh Office junior minister Guto Bebb could be facing the sack for declaring in a radio interview: “I think we should apologise.”
And he added: “I will apologise to every voter in Wales that read the Conservative manifesto in the 2015 election.”
But so far, despite the Prime Minister sacking Michael Heseltine for rebelling on the Article 50 Bill earlier this week, her spokesman has insisted she still has confidence in Mr Bebb.
In a blistering attack in an article for The Daily Telegraph website, Tory MP Anne Marie Morris wrote: “The changes to National Insurance defy belief! What did the Chancellor think he was doing?”
And comparing Mr Hammond’s move to George Osborne’s so-called “omnishambles” Budget of 2012, she added: “It has all the hallmarks of the ‘pasty tax’ own goal.”
Ominously for the Prime Minister and Chancellor, at about 20 the scale of the backbench revolt is now higher than the Government’s majority of 17 in the Commons, meaning they could face defeat in a showdown with the rebels.
One of the latest to join the revolt, Craig Mackinlay, told Sky News: “This is a move which has understandably generated negative headlines and I do have concerns about breaking manifesto commitments and the fairly small amount of revenue this is likely to generate.”
But there was good news for Mr Hammond when his controversial National Insurance changes won the backing of the Institute of Fiscal Studies in its analysis of his Budget measures.
Earlier, visiting a factory in the West Midlands where he had hoped to be talking about his Budget boost for training, the Chancellor was forced to defend his controversial National Insurance proposal.
Speaking to Sky News, Mr Hammond said the move would make the system fairer considering that employees and self-employed workers have access to similar benefits from the state.
“It’s only right and fair we should take a small step to closing the gap between the treatment of employed and self-employed people,” he said.
Mr Hammond insisted that with Brexit the circumstances had changed since the 2015 manifesto.
“No Conservative likes to increase taxes, National Insurance or anything else,” he said. “But our job is to do what needs to be done to get Britain match-fit for its future.”
But Conservative MPs and the Government’s opponents angrily pointed to a manifesto pledge on tax and National Insurance given by David Cameron during the 2015 general election campaign.
As MPs continued debating the Budget in the Commons, shadow chancellor John McDonnell accused the Chancellor of a “manifesto betrayal” and accused him of hiking taxes on minicab drivers, low-paid drivers, self-employed cleaners and plumbers.
And the former shadow cabinet member Angela Eagle told MPs: “No-one will ever believe a Tory election promise ever again.”