Hammond said while people should be free to choose how they work, their choices “should not be driven primarily by differences in tax treatment”.
Hammond said: “An employee earning £32,000 will incur between him and his employer £6,170 of NICs.
“A self-employed person earning the equivalent amount will pay just £2,300 – significantly less than half as much.”
Britain open for business
With corporation tax set to reduce from 20% to 17% by 2020, as planned, Hammond said: “Britain is open for business” and that he was building the foundations for a “stronger, fairer, more global Britain”.
He pointed to employment at a record high and unemployment at an 11-year low, yet said in spite of the UK growing faster last year than the US, Japan and France – second only to Germany – productivity remained “stubbornly low”.
Citing Office for Budget Responsibility growth forecasts, Hammond described an immediate upward uptick from 1.4% to 2%, set to dip to 1.6% next year before gradually returning to 2% in 2021.
Ian Kernohan, economist at Royal London Asset Management, said the UK was looking more “resilient” than was expected following the Brexit referendum and noted the “punchy” 2% forecast for this year to then dip back down to softer levels.
“There is little sense here that the OBR believes that Brexit will be a significant headwind to growth, despite the Prime Minister’s stated aim of leaving both the Single Market and Customs Union, however its GDP forecasts over the next five years look modest enough to offer some room for upside surprise.”
Further short-term public sector net borrowing was expected to fall gradually from its current estimate of £58.3bn to £16.8bn in 2021/22.
Hammond said the UK was currently paying £50bn a year on debt interest payments – more than defence and policing combined.
