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We’re caught in a trap

March 10th 2017

There is a paradox at the heart of this week's budget, and in the popular reaction to it. On the one hand, the landmark changes to National Insurance for self-employed people signal the level of confidence within the Government that an early election is off the table. On the other, it demonstrates why going to the polls may prove necessary.

Millions of people in self-employment will be affected by the harmonisation of NI - so that they pay the same proportion of their income as employees do. This will hit builders, plumbers, one-man-bands and white van men, hairdressers and child minders in their back-pockets - the very constituency that Theresa May describes as 'Just About Managing' and has promised to help. The rationale for the change is pretty straightforward in terms of principle - these people use the NHS, education, police and fire services just like everyone else, so why shouldn't they pay the same? What's more, our labour market is undergoing a long-term structural change - away from one-man-one-job as the norm and towards much higher levels of self-employment and participation in the 'gig economy'.


Across the developed world, collapsing tax bases are adding to the pain caused by the 2008 crash and subsequent recession. Broadening that tax base, making it simpler and more universal, is a reasonable ambition. And so, this measure can be understood as ripping off a plaster - a short, sharp shock that the Chancellor hopes will pay long-term dividends and which will be forgotten at the ballot box in 2020. The fact that he has done this now is an indicator of his certainty that the Prime Minister intends to keep her word and serve out the rest of this fixed term Parliament. And yet...

There is very little ambiguity in the Conservative Party's 2015 manifesto when it comes to National Insurance. Keen to exploit Balls' and Miliband's strategic vagueness about their tax plans, Cameron and his team pledged loudly and repeatedly not to increase NI. Hammond can try to retrofit nuance into that position (indeed, that is what he has been seeking to do over the last few days) but it is not a good look for a Government prone to lecturing journalists and opponents that 'politics is not a game'. The truth is that not only does the Government not have a mandate for this measure, it has an active counter-mandate. Like it or not, and given her radical departure from her predecessor's approach across multiple policy areas it is safe to say that Theresa May does not particularly like it, this Government is still bound by the contract Cameron made with the public in 2015. If Theresa May wishes to do things that David Cameron explicitly promised not to do, it is not unreasonable to expect her to ask the electorate first.

The rebellion by Tory MPs was swift and vicious. A Government whip - tasked, usually, with imposing discipline - has even called on the Chancellor to apologise to voters.

Because George Osborne - in a piece of politics that really was mere game-playing - introduced legislation barring NI rises, if the Government is to get its way in this it will need to pass a separate and standalone bill. There is no obvious route through the commons for such a measure, given the scale of public dissent and Labour's refusal to co-operate. It is likely, then, that May will use the need for legislation to park the issue, for now - in a retreat that can be called a regroup, saving her and her Chancellor face. But this debacle teaches us something about the Parliamentary Conservative Party that should worry the Prime Minister. Tory MPs have proven remarkably supine and biddable over the last few months. In part, this is because of the genuine shell shock that set in for many in the hectic, confusing weeks after the referendum. For a while it looked like everything was falling apart. MPs are grateful to Theresa May for her grip and for her sense of direction. She has given them purpose and clarity on Brexit and has soothed their understandable panic. What's more, she is popular. And she gives many members, particularly those in marginal constituencies, the sense that she understands how to capitalise on Labour's woes. Never underestimate the power of prospective job security over a politician's principles. But on this question there has been immediate, public uproar. One has rather got the sense that many of the ring-leaders are enjoying themselves immensely. Why? Well, partly it is a dangerous mix of principle and pragmatism. The self-employed occupy a special place in the Tory imagination - they are the doers, the creators, the 'hard working families' who have got on their bikes. Conservatives see themselves as on these people's side; it's a much more attractive group to champion than oligarchs, plutocrats and be-tweeded aristocrats. But this is also the very demographic on whom Tory MPs in non-oligarchic/plutocratic/aristocratic constituencies depend in order to defeat Labour's still strong public sector and low-wage vote. 'This hurts OUR people' as Thatcher might have said.

But this uprising is also a product of being kept in a Brexit-branded pressure cooker for six long months. MPs who have not dared to speak their minds about Europe - fearful of their electorates, terrified of Number 10 - have found in National Insurance a safe space for an anguished howl of impotence and rage. This is as much a psychological moment as it is a political one. It is a warning to May that MPs loyalty is contingent and a reminder of the tiny room for manoeuvre that is available to her.

All of which leads us to a moral and political conundrum; with which May and her advisers are wrestling earnestly. It is not fair to tie Theresa May to David Cameron's manifesto and his mandate - everything has changed, why should this stay the same? But it is also not fair to spend five years pushing (sometimes successfully, sometimes less so) policies that the British people have never had their say on. May's Government is caught in a trap. The only way out is an election, but May does not wish to fight one and feels obligated by her own promises on the matter. On National Insurance, a fudge has been found that will help the Government to avoid confronting their difficult position for a while. But in politics, as in life, too much confectionary leads to rot. They cannot outrun political gravity forever.