Hammond says BBC's Laura Kuenssberg first warned of problem with broken manifesto promise - Politics live

• Philip Hammond has defended ditching the national insurance contributions (NICs) rise for the self-employed that was the centrepiece of his first budget, just a week after delivering it. In a statement to MPs, he also effectively confirmed that the Treasury did not think the NICs increase would be seen as a broken manifesto promise, telling the Commons that the BBC’s Laura Kuenssberg was the first person who flagged up that this would cause trouble. (See 4.18pm.)

• The government has not carried out a full assessment of the potential economic impact of Britain leaving the EU without a trade deal, the Brexit secretary has told a committee of MPs.

• The Crown Prosecution Service has received files from 11 police forces relating
  to general election expenses in 2015, a spokesman said. And a second Conservative MP, Will Quince, has revealed he was interviewed under caution over allegations about overspending in that election.

• MPs will be banned from hiring relatives using public money after the next general election, according to new rules issued by the expenses watchdog.

• Theresa May is expected to refuse a new Scottish independence referendum unless it is held after the UK has quit the EU.

• Liam Fox, the international trade secretary, has suggested he agrees with cabinet colleagues who want Theresa May to exclude foreign students from the government’s target to get net migration down to the tens of thousands. Giving evidence to a Lords committee, when asked about this point he said:
  

It’s an ongoing argument inside government and I’ve made my own views on that clear in private to the home secretary. I think there is a value for those who come and study in the United Kingdom. I 100% accept the point that they will be in many cases imbued by the values that they experience while they are here, many of them will go on to establish long-term relationships with the United Kingdom, understanding our institutions.

• Workers suffered a fall in real pay for the first time in more than two years in January as inflation outpaced wage growth, underlining the fresh squeeze in living standards facing UK households.

• Projects around the world to stop child slavery in factories making products being sold in Britain are to be funded by the first tranche of investments from the government’s new modern slavery innovation fund.

That’s all from me for today.

Thanks for the comments.

Philip Hammond may have received a sympathetic hearing from Conservative MPs this afternoon, but the pro-Conservative Spectator magazine is not so forgiving. In the leader in this week’s magazine, which is now online, it delivers an excoriating verdict on the U-turn. The government’s credibility “seems to be in tatters”, it says.

Here’s an excerpt.

To govern in such a haphazard way is nothing short of shocking. Mr Hammond has already raised doubts about whether the Conservatives can be trusted to keep firm promises. Now it is no means sure that he – or the Prime Minister – can be trusted to implement policies they lay out in the House of Commons. Mrs May may well be about to face a new Scottish referendum, fighting that campaign while carrying out most complex negotiations this country has faced in its postwar history.

This fiasco will be watched with amazement in European capitals. If Theresa May’s government caves under pressure, then her opponents in Brexit talks will apply pressure. If her red lines can be rubbed out after a few more days’ reflection, how seriously can anyone take anything that she says in such negotiations?

Mr Hammond has endangered wider credibility. What, now, are the financial markets to make of his Budgets or his promises? What more will he revoke after a few days, admitting that he had not given it enough thought? At a time when the UK government needs to borrow £140 million a day to meet its bills, credibility is a precious commodity. It now seems to be in tatters.

The Labour peer Stewart Wood thinks the NICs U-turn means an early election may be on the way.

15 Mar 201712.34 EDT

Severin Carrell

Two new opinion polls offer contradictory evidence about the support for Scottish independence, with a YouGov survey for the Times claiming the no vote is at its highest for two and a half years.

YouGov reports that 57% of Scottish voters wanted to stay in the UK against 43% who favoured independence, excluding don’t knows, while only 35% of voters supported a formal Scottish government independence campaign before Brexit.

A rival poll by Survation for the Daily Mail suggests that result is an outlier. It puts the yes vote at 47%, excluding don’t knows – a figure far more consistent with the latest polls from Ipsos Mori and BMG putting support for independence at 49% and 48% respectively.

The latest annual Scottish Social Attitudes Survey, seen as the most authoritative study of voter sentiment, found support for independence at 46% late last year – the highest level it had recorded since 1999.

However, the new Survation poll also confirms widespread voter scepticism about the case for staging a referendum before Brexit, with 18% of Scottish National party voters saying they would vote no to independence if the referendum were held tomorrow.

It said 31% of all voters agreed that Theresa May, the prime minister, should give Holyrood the power to stage it before Brexit, but 36% said that power should be refused and 18% said it should only be held after the UK leaves the EU.

Amongst yes voters, 22% opposed a referendum before Brexit and 25% said the power to hold the referendum should be granted only if it happened after Brexit.

It was not a particularly comfortable hour or so for Philip Hammond at the despatch box, but it could have been a lot worse. The chancellor was jeered at various points by opposition MPs, and many of them (like John Woodcock, Yvette Cooper, Mike Gapes, and Alex Salmond) asked questions that were funny and withering. Hammond did not seem to enjoy any of this, but he let it wash over him and for once dull unflappability was something of a bonus.

Crucially, though, his own MPs were on his side. Ministers are only really in trouble when their backbenchers will not support them at the despatch box. Hammond had Tory MPs lining up to welcome his move and it was telling that when Sir Desmond Swayne even complained about having to disown a newspaper article currently at the printer’s defending last week’s NICs increase, he did so light-heartedly, and not as a grievance. (See 3.23pm.)

Here are the main points.

• Hammond suggested it was the BBC’s Laura Kuenssberg who first warned the Treasury it was in trouble over breaking a manifesto promise. The issue was first raised by the SNP’s Alex Salmond who asked if it was Hammond or Theresa May who first spotted that raising NICs was breaking an election pledge. Hammond replied:

Since you asked me the question who first raised the issue of the manifesto, I think, credit where credit is due, I think it was actually Laura Kuenssberg on the BBC, shortly after I said it in the budget speech.

When Labour’s Yvette Cooper asked Hammond if he was saying that no one in Number 10 or 11 was aware that the NICs rise broke a manifesto promise, Hammond said he was not saying that. He said that Kuenssberg was the first person to raise this as an issue in public after the budget.

But, in answer to a later question from John Woodcock, he effectively confirmed that the Treasury did not think the manifesto pledge was any longer an issue, because the “tax lock” legislation it mentioned had already been put into law. He said:

We [in the Treasury] understand the commitment that we made to have been discharged by the passage through this House of the National Insurance (Rate Ceilings) Act 2015 and that set out very clearly the scope that the then chancellor decided to apply to the national insurance contributions lock. That is how the Treasury has worked since 2015 around the locks and ringfences that were put in place. They are part of the everyday workings of the Treasury and that is what we worked to in this case.

But I have accepted today that there is a broader interpretation, not the legislation that implemented it. That is why I have come to the House and made the statement that I have.

The tax lock act only covered class 1 NICs. Hammond’s problems arose because the manifesto ruled out all NICs increases.

• Hammond said that the decision to abandon the NICs increase was taken by Theresa May and him at about 8am this morning.

• John McDonnnell, the shadow chancellor, said the government was in “chaos”. He said:

This is chaos. It’s shocking and humiliating that the chancellor has been forced to come here to reverse a key Budget decision announced less than a week ago.

If the chancellor had spent less time writing stale jokes for his speech and the prime minister less time guffawing like a feeding seal on those benches, we would not have been landed with this mess.

• Hammond suggested he did not want the employed and the self-employed to pay the same rate of national insurance. Although his NICs rise would have closed the gap between the two rates, it would not have equalised them, he said.

We were not seeking to equalise the contributions treatment of employed and self-employed. There are actually very good reasons why there may well need to be a gap.

The statement is over.

Alex Salmond, the SNP former Scottish first minister, uses a point of order to call for an emergency cabinet meeting and for Laura Kuenssberg to be given a cabinet post so she can warn them of any future mistakes.

And the Tory MP Sir Desmond Swayne also raises a point of order. He says his article defending the chancellor’s NICs increase for the New Forest Journal (his local paper) is currently at the printer’s. Can he retract.

John Bercow, the speaker, says he has made his point.

I will post a summary shortly.

Tracy Brabin, the Labour MP, says the cut in the dividend tax allowance from £5,000 to £2,000 will affect people more. Will Hammond reverse that tax increase?

Hammond says this will only affect a relatively small number of people, typically with share portfolios worth more than £50,000. He says the Treasury has to raise money somewhere to fund services.

This is from the BBC’s Laura Kuenssberg (who has emerged as the surprise star of this statement.)

Labour’s Geraint Davies says the government has become a consultation exercise. Can Hammond confirm that, when the Tories made their “tax lock” promise, the government did not carry out an assessment of the impact of Brexit. Brexit means that the cost of Brexit will have to be paid for from public service cuts.

Hammond says he has discussed the thinking behind the manifesto.

Andrew Murrison, the Conservative, asks Hammond to consider hypothecating NICs.

Hammond says there is already “soft hypothecation” around NICs. He says 20% goes to the NHS. And it funds the state pension. He says giving the self-employed access to a state pension will give them an extra £1,800 a year on retirement. He says that extra cover is worth £50,000, because that is what it would cost to buy.

The Labour MP Mike Gapes says Hammond made what was at the time a funny joke about a chancellor (Norman Lamont) being sacked 10 weeks after the budget. Does Hammond agree that his NICs increase was a rookie mistake?

Hammond says he was trying to make the system fairer. But he has listened to MPs and cancelled his plan. He says there will be a review.

The SNP’s Roger Mullin says the last chancellor who had to make a U-turn like this only lasted a few weeks. So, before Hammond leaves office, can he confirm that cabinet has not agree his U-turn.

May says this decision was taken by him and the prime minister this morning.

Labour’s Andrew Slaughter says he can understand why Hammond did not want to read the Tory manifesto. But is his position now, he was right to raise NICs, and so he is not doing it?

Hammond says there are two issues: the policy was right in principle, but breaking a manifesto promise was not acceptable.

Owen Smith, the Labour MP, asks Hammond to pass on MPs thanks to Laura Kuenssberg, for pointing out that this was a duff decision, and to Theresa May, for forcing him to do a U-turn before breakfast.

Hammond says Smith is entitled to his opinion.

This is from the Evening Standard’s Joe Murphy.

Peter Bone, the Conservative, says Hammond could reduce the gap between NICs for the employed and the self-employed but cutting NICs for the employed.

Hammond says 85% of workers are employed. Cutting NICs for the employed would involve a “huge cost”, he says.

Labour’s John Woodcock asks Hammond if he is saying that he was not aware that he was breaking the Tory manifesto commitment, or that he was aware, and was just hoping on on would notice.

Neither, says Hammond. He says the Treasury worked on the basis that the tax lock legislation implemented the manifesto commitment.

Hammond says extra measures in the autumn budget will raise money to fill the gap created by the cancellation of the NICs increase.

Labour’s Yvette Cooper asks Hammond to confirm that the first person to raise with him whether the budget met the manifesto was the BBC’s Laura Kuenssberg. (See 2.34pm.) Did no one in Number 10 check?

Hammond says he was talking about the first person to raise this after the statement.

He says he took the view that he was bound by the tax lock.

But now he accepts that he should be bound by the “more expansive” interpretation in the manifesto should apply.