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Gov't faces £2bn gap in budget after scrapping NICs rise

Gov't faces £2bn gap in budget after scrapping NICs rise

The government faces a £2 billion hole in its budget after scrapping a planned rise to National Insurance contributions (NICs) for the self-employed.

Chancellor Philip Hammond (pictured) yesterday scrapped plans announced in his Budget which would have seen NICs for the self-employed rise to 11% by 2019.

He dropped the proposals after coming under pressure from members of his party and the press, who viewed it as a betrayal of the 2015 Conservative manifesto promise to not raise income tax or national insurance levels. 

The measure was due to raise £2 billion over the next five years, providing the government with much needed money to fund social care iniatives and other public projects.

Now he has scrapped the rise Hammond must find another way of finding this money, the Telegraph reports. 

It is not clear yet where this money will come from, and the chancellor will wait until his Autumn Budget to announce any measures. The Telegraph suggests increasing corporation tax, or halting plans to cut it to 17%, could be an option. This would break a promise made by the government, but would not contradict a manifesto pledge. 

An increase in inheritance tax could also be used since this would also not break any promises made in the manifesto, although it did promise to raise the threshold. 

Inevitably pension tax relief has also come under scrutiny. Royal London director of policy Steve Webb asked on Twitter where else the chancellor could find £600 million from in the Autumn. 

However, this caused problems for former chancellor George Osborne when he planned to make changes to pension tax relief last year.

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