Chancellor Philip Hammond has performed a U-turn and abandoned proposals to raise National Insurance Contributions (NICs) paid by self-employed people.

The controversial plans were set out in his Budget last week but the Chancellor has now said there will be no NICs increases during this parliament.

He had announced class two NI, the lowest self-employed band, will be abolished while the higher rate, class four, will rise from 9% to 11%.

Opposition parties claimed the changes amounted to a tax hike for low-earning workers.

There was further criticism the changes breached a pledge in the Conservatives' manifesto not to increase National Insurance.

In a letter sent to Conservative MPs on Wednesday, the Chancellor conceded a "significant section" of the public opposed the changes.

He said: "In light of what has emerged as a clear view among colleagues and a significant section of the public, I have decided not to proceed with the Class 4 NIC measures set out in the Budget.

"There will be no increases in NIC rates in this Parliament. We will continue with the abolition of Class 2 NICs from April 2018.

"The cost cost of the changes I am announcing today will be funded by measures to be announced in the 2018 budget."

At Prime Minister's Questions on Wednesday, Labour leader Jeremy Corbyn said the decision would leave a "black hole" in the budget.

He told the House of Commons: "It seems to me like a Government in a bit of chaos."

The Prime Minister responded: "As a number of my parliamentary colleagues have been pointing out in recent days, the trend towards greater self-employment does create a structural issue in the tax base on which we will have to act. We want to ensure we maintain fairness in the tax system."

She continued: "We will bring forward further proposals but we will not bring forward increases in NICs later in this Parliament."

The Federation of Small Businesses said the Chancellor had "come to his senses" over NICs.

Andy Willox, the organisation's Scottish policy convenor, said: "He's made the right choice - obviously realising that it doesn't make sense to squeeze the nation's strivers while trying to deliver a business boom.

"We agree with him that politicians need to better support people who work for themselves. But the way to do that isn't by hiking their tax bills."