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NICs: lessons from a UK political u-turn

17 Mar 2017
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UK

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One of the big political stories in the UK this week was the ‘u-turn’ by Chancellor Philip Hammond on his budget proposal to raise National Insurance Contributions (NICs) for the self-employed. These are the basic levies on all UK taxpayers to fund social welfare provision. Despite being praised by some as a progressive tax reform, Hammond reversed the policy just one week after announcing it after coming under pressure for breaking a 2015 manifesto commitment to not raise personal taxes. The NICs u-turn demonstrated a couple of important things about politics and policymaking at Westminster as the UK prepares for the most complex bout of parliamentary activity in its modern history, namely legislating its way out of the EU.

The most important is that with the Labour opposition both exceptionally weak and internally divided, party discipline on both sides of the aisle was notably absent. Despite having made its way through a Conservative cabinet, a sizeable group of more than 20 Tory backbenchers showed little reservation in opposition, including a very active campaign of media criticism that ultimately forced Hammond’s hand. The u-turn itself has divided Tories again – such as former Culture Secretary Ed Vaizey, continue to maintain their support for the tax rise even as the Chancellor gives it up. The Labour opposition grappled with the natural instinct to oppose government policy, but quickly blurred opposition into a lukewarm and ambiguous response as left-leaning think tanks like the Resolution Foundation pointed out the policy was rather progressive.

This is a reminder that UK politics is entering a phase in which voting on individual issues can, and will, routinely strain or even trump party discipline and the historic predictability this has brought. This has been exemplified by the EU issue, and is playing out in Scotland on devolution issues too. While a majority in both main English parties (and all but one of the Tory commons party) have fallen in line behind the government on triggering the EU exit process, division on issues such as EU citizens’ rights hints at unity stopping there. Once Article 50 is triggered, the government will turn to the detail of transposing EU law and legislating for life after Brexit with as many as nine bills to pass through Parliament. As party lines begin to look less important than issue by issue majority building, the government’s chief opposition may routinely be inside its own ranks.   

The second reminder from this week was that the Prime Minister Theresa May is determined to remain firmly in the driving seat. Hammond himself was prepared for an element of backlash, equipped with a well-thought out case for the tax rise and ready to ride it out. It was May who decided to abandon her Chancellor and take control in an attempt to quickly shut the debate down. The UK Prime Minister is known to be an independent decision maker. But, over the next couple of years, much will depend on her ability to garner support in parliament, she may need to work on her inner coalition builder.   

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Authors

Jade
Rickman

Senior Associate
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[email protected]

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