The government should step up its fight against tax evasion to offset the NICs U-turn, says George Bull, a partner at audit firm RSM. 

"Tax evasion and the shadow economy cost the UK Exchequer £11.4bn a year, according to HM Treasury," he says.

"If the Chancellor is serious about tax fairness and maximising revenues, then he should resource HMRC to begin a new campaign against tax evasion, starting with an amnesty for tax evaders to encourage them to come forward and pay what’s due."

Image source, Getty Images

Tim Roach, the general secretary of the GMB union, said: "The Chancellor has made a complete dog's dinner of tax policy, and caused chaos for workers up and down the country.  

"Instead of tackling bogus self-employment, which exploits workers and allows companies to scam the taxman, the Chancellor has picked the wrong battle and lost humiliatingly, leaving a black hole in his Budget."

The World at One
BBC Radio 4

International Development Minister Rory Stewart has said the decision to drop plans to increase National Insurance levels for self-employed people was "the right thing to do". 

Mr Stewart told Martha Kearney it was important that MPs were "seen to listen" but that the Chancellor Philip Hammond should be given "credit" for trying to make the system fairer.   

More Business Live readers have been sharing their views on the chancellor's NICs U-turn.

Roger Shale says: "Great news about the NI U-turn, but the self-employed are still being hit with the lowering of the dividend threshold. We were hit very hard in April last year with the reduction to £5,000 and now find it being reduced again next April to £2,000."

James O'Neil says: "What's wrong with U-turns? It's better correct an error rather than see things go bad surely!?"

Another reader says: "Interesting to note great sympathy for the self-employed... [while] we continue with public sector pay restraints at 1% for foreseeable future."

In parliament, Mr Hammond is asked about the "scope" of the review of self employment he plans to undertake.

First, he says the government will respond to Matthew Taylor's report on the rights of the self employed in a changing economy. 

He also says it will "audit" the differences in benefits accruing to the employed and the self-employed, so MPs can see them "in the round".

He specifically mentions parental benefits, the "principal area" where there is still a discrepancy between the employed and self-employed. 

It undermines the credibility of the chancellor, an admission at the very least, that his political antennae have gone wonky.

Second, it questions the extent to which the prime minister is willing to back him.

Relations between the next door neighbours are businesslike and between their operations certainly frosty - and this will not have improved things at all.

It also tells us that although polling suggests the prime minister is strong in the country, she's simply not that strong in Parliament.

A firm nudge from backbenchers, and they shifted.

Read Laura's blog in full

Conservative MP Peter Bone poses an interesting question.

Couldn't the chancellor narrow the tax difference between the employed and self-employed by reducing the contributions that the employed make? 

He says this could be paid for through the "Brexit dividend".

But Mr Hammond says any reduction in tax from the employed would come at a "huge fiscal cost" for the government.

Hammond is being asked again and again about why he didn't realise he was breaking one of the Tories' manifesto in 2015 promises not to raise National Insurance contributions.

He sidesteps and says that "representations were not made before the Budget" about NI.

The Chancellor is also not being allowed to forget his earlier comment that it was the BBC political editor Laura Kuenssberg who first made him aware of the manifesto promise.  

Kevin Peachey
Personal finance reporter

Mr Emmerson of the IFS has also noted that 60% of all tax income comes from National Insurance (NI), income tax and VAT.

He argued that there should have been joined up policy-making – by increasing NI Class 4 contributions at the same time as improving access to the state pension and abolishing Class 2 NI for the self-employed.

There would be winners from the u-turn - the self-employed - but also losers, those employed people who continue to pay the higher rate, he said.

Kevin Peachey
Personal finance reporter

Carl Emmerson, deputy director of the Institute for Fiscal Studies (IFS) – which supported the chancellor’s plan – said it would now be harder to move towards a level playing field for the employed and the self-employed.

“Two people doing similar jobs for the same pay should face similar tax rules,” he said.

“The lesson is not to make promises like this in the manifesto – that is where the real mistake was made.”

Image source, Getty Images

Conservative MP Jacob Rees Mogg commends the Chancellor for having the "wisdom to change his mind".

He also cheekily congratulates him for "converting a number of desiccated socialists" to the merits of lower taxation. 

Mr Hammond thanks him and calls many on the Labour benches "opportunists" for attacking him.

House of Commons
Parliament

One of the Chancellor's critics from his own party, Anne-Marie Trevelyan, welcomes the reversal. 

She says it's time for a "holistic and simplified" reform of tax for the "genuinely self-employed", whom she describes as taking risks to create wealth.  

The chancellor answers that he "will always be on the side of those who strive to take risks and grow businesses" but "there is a problem of bogus self-employment". 

Philip Hammond credits BBC political editor Laura Kuenssberg for first raising the point that the Government had broken a promise it made in its 2015 manifesto that it would not raise National Insurance contributions.

House of Commons
Parliament

Image source, HoC

Treasury Committee chair Andrew Tyrie welcomes the decision, but asks whether differential in rates should remain in the long term to reflect the "additional risk" taken by the self-employed. 

The chancellor replies that the idea behind the rate increase was to "close the gap" and not to equal it. 

He says that they will be looking closely at the review into what needs to be done and come back to the issue with a fairer policy.