Is it time to scrap National Insurance?

JezR

This House of Commons briefing note has a lot of historical detail about the constitution of NI and the NIF, and various attempts to harmonise or merge with income tax. Up to date (to last week).

This one considers the accounts of the NIF since 1975.

Paul_Herring

https://en.wikipedia.org/wiki/National_Insurance_Fund:

The surplus is loaned to the government through the Debt Management Office which is part of the Commissioners for the Reduction of the National Debt in Call Notice Deposits (previously invested in gilt-edged securities) and interest on these invested monies is paid to the NIF - £1.3 billion in the 2007/08 year.

One arm of the government "lending money" to other arms of the government is an accounting fiction.

Insofar it's no longer the taxpayers from whom it was forcibly acquired, it's all the government's money.

To reiterate the analogy from earlier:

kidmugsy wrote: »

JezR wrote: »

It is still acountred for separately from the consolidated fund and reported on each year.

The same is true of my Range Rover fund.

JezR

Have you looked at the document I suggested rather than Wikipedia (which does I suppose at least confirm that there is an NIF)? It shows how the funds are legally separate and that for example legislation relating to NI has to be enacted separately from the general budget or finance acts, as those relates to tax gathering that can be used for any purpose.

The money within the NIF is effectively loaned to the Government which pays interest on it - it isn't free. At one time this was more obvious as the NIF held gilts itself.

Maybe the name is the problem - in effect the NIF is the current account of the NI system.

Now like anything else in this country this legal framework can be swept away by further legislation, but it is the current position and one of the things that would need to be addressed in any NI/Income Tax consolidation. It so happens that the balance of the NIF is at its lowest point for many years which might ease things.

There is a separate NIF for Northern Ireland.

zygurat789

Clifford_Pope wrote: »

Just increase the personal tax allowance for people over state pension age to compensate.

That's very cynical.
The Labour government did this to benefit the aged for the loss of the 10% tax rate only for Gideon to steal it back.

noh

Mr_Prudent wrote: »

..........
What the article doesn’t answer is what this would mean for pension payments which do not attract NI , only income tax. Any thoughts?

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/447209/ToR_closer_alignment_of_IT_-_NICs_review.pdf

"The review will consider the base of the systems but will not consider the extension of NICs to nonemployment
income (such as property, dividends and pensions)."

BobQ

Paul_Herring wrote: »

My thought is that the reporter doesn't know much about what they're writing. Presuming your quotes are accurate:



Nope. Not for basic rate - not even close...

IT: 20%
Employee's NI: 12%
Employer's NI: 13.8%

I think 30% is being highly overoptimistic on the part of the reporter.

IT+NI is already (an effective) 45.8% of gross pay for a basic rate employee, split between employer and employee.

Scrapping it would result in basic rate rising to (at least) 46%, and higher (40%ers) rate to (at least) 55% (employee's NI is 2% after ~£42K)

And that is why NI won't be rolled into IT any time soon - the numbers are too high.

Well it might be possible if you then transferred some of the things taxation pays for back to the private citizen . So no healthcare without personal medical insurance and parents required to fund education at state schools. Then we could ask people to pay individually for refuse collection, street lighting, street cleaning,etc. That way taxation could be much less.

zygurat789

BobQ wrote: »

Well it might be possible if you then transferred some of the things taxation pays for back to the private citizen . So no healthcare without personal medical insurance and parents required to fund education at state schools. Then we could ask people to pay individually for refuse collection, street lighting, street cleaning,etc. That way taxation could be much less.

A true Victorian.
What needs to be scrapped are those payments started in the last 10 - 15 years, tax credits and housing benefits that are intended to buck the wages market. The problem in the UK is that our housing costs are much greater than in Europe so our wages are higher and hence our productivity is lower.
Sort out the hose price problem and there will be no need for all these benefits which account for the largest slice of government expenditure.

kidmugsy

zygurat789 wrote: »

That's very cynical.
The Labour government did this to benefit the aged for the loss of the 10% tax rate only for Gideon to steal it back.

He didn't steal it back, he extended the advantage of it to everyone.

BobQ

zygurat789 wrote: »

A true Victorian.
What needs to be scrapped are those payments started in the last 10 - 15 years, tax credits and housing benefits that are intended to buck the wages market. The problem in the UK is that our housing costs are much greater than in Europe so our wages are higher and hence our productivity is lower.
Sort out the hose price problem and there will be no need for all these benefits which account for the largest slice of government expenditure.

Maybe my post was too subtle. I am not in favour of a return to the Victorian era, even if the present Government is doing its best to do this.

I do agree that tax credits and housing benefit subsidise employers and landlords and probably the self employed. But if prices reflected the true costs of employing labour, would people be able to afford to live?

zygurat789

BobQ wrote: »

Maybe my post was too subtle. I am not in favour of a return to the Victorian era, even if the present Government is doing its best to do this.

I do agree that tax credits and housing benefit subsidise employers and landlords and probably the self employed. But if prices reflected the true costs of employing labour, would people be able to afford to live?

That would depend upon the true cost of labour and the true cost of labour being paid for that labour. If accommodation costs could be reduced to the European level then wages might not even need to increase, in short reducing house prices could substantially reduce the governments benefits bill.