Pension tax raid being touted again

vulcanrtb

nigelbb said:

National Insurance isn’t just another income tax though as it is that very rare example of an hypothecated tax (the TV licence fee is the only other one I can think of). NI contributions are paid into the NI fund which is used for paying pensions & a few other work related benefits line JSA). 

And yet the average driver is convinced that VED is hypothecated and only they and other drivers pay for the roads 🤷‍♂️

vulcanrtb

jamjar92 said:

Not a surprise really the government robbing Peter to pay Paul, when did road tax just be used to maintain the roads?

1937

jimi_man

nigelbb said:

jimi_man said:

nigelbb said:

Mickey666 said:

zagfles said:

Mickey666 said:

How about removing the cap on NI contributions?  When most other taxes seem to be progressive,  I’ve never quite understood why the NIC rate REDUCES for higher earners?  

Because the annualised threshold co-incides with higher rate tax, so combined with income tax it is generally progressive, from 32% to 42%. But there are some anomilies to do with income tax being assessed over the year and NI over the pay period...

It’s really just paying politics isn’t it?  There’s no real justification for not combining income tax and NI into a single income tax, but governments like to have a complicated tax system because it gives them something to fiddle around with come budget time.

National Insurance isn’t just another income tax though as it is that very rare example of an hypothecated tax (the TV licence fee is the only other one I can think of). NI contributions are paid into the NI fund which is used for paying pensions & a few other work related benefits line JSA). 

And the NHS. 

Only a small proportion of NHS funding comes from NI contributions. In 2019 it was about £25 billion. After the NHS allocation was paid over by HMRC the receipts from NI contributions were almost £109 billion in 2019 with over £100 billion paid out in pensions & other benefits. Total NHS funding in 2019 was around £125 billion with the missing £100 billion funded out of general taxation. Fully funding the NHS from NI would require contributions to be more than doubled.

Here is the annual report of the National Insurance Fund https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/839411/Great_Britain_National_Insurance_Fund_Account_-_2018_to_2019.pdf

I should have been clearer, I didn't mean the whole of the NHS was funded by NI, just that some of NI goes to the NHS. 

The_Green_Hornet

bigadaj said:

The_Green_Hornet said:

bigadaj said:

The_Green_Hornet said:

The only reason money is taken from the NIF for the NHS is because New Labour wanted to keep a 2001 general election manifesto pledge not to raise income tax so they added 1% onto NI instead.

Don't think that's the only reason....

What other reason is there?

Several dozen. You are quoting a policy from twenty years ago since when there have been five elections and several different governments, we do currently have another party in power. As others have said the NIF being separate has been a fiction ever since it was set up decades ago, money flows in and out of it dependent on need and circumstance. Spending on many areas of welfare has increased rapidly, the NHS being one despite constant complaints of cuts, pension costs continue to rise etc etc

It isn't fiction though is it.

https://fullfact.org/economy/money-national-insurance-contributions/

short_bread

This whole debate can be settled by watching David Willetts speech at the Royal Institute, "have the boomers pinched their children's futures". There's going to be a lot more pensioners for the economy to support over the coming decades, roughly an extra third by 2050. Shifting the tax burden from income and spending (IT, NI, VAT, corp tax, duties), onto capital is a sound economic decision so that the working population aren't over taxed to support the growing number of pensioners.
And no, common counter arguments like "but I've worked hard to save all that money why should I have to pay tax on it again" "benefits and immigrants" "bankers" "tax dodgers" etc. aren't enough. If a family has 3 kids, 4 working and 3 grandparents and are getting by, then it would make a difference if one of the working age members retired. Broadly the same principles apply at population level.

bigadaj

The_Green_Hornet said:

bigadaj said:

The_Green_Hornet said:

bigadaj said:

The_Green_Hornet said:

The only reason money is taken from the NIF for the NHS is because New Labour wanted to keep a 2001 general election manifesto pledge not to raise income tax so they added 1% onto NI instead.

Don't think that's the only reason....

What other reason is there?

Several dozen. You are quoting a policy from twenty years ago since when there have been five elections and several different governments, we do currently have another party in power. As others have said the NIF being separate has been a fiction ever since it was set up decades ago, money flows in and out of it dependent on need and circumstance. Spending on many areas of welfare has increased rapidly, the NHS being one despite constant complaints of cuts, pension costs continue to rise etc etc

It isn't fiction though is it.

https://fullfact.org/economy/money-national-insurance-contributions/

Well how could anyone argue with a random internet site. 

Daniel54

 National Insurance contributions are legally hypothecated.
Depending on the class of contribution ,a fixed but different percentage is paid to the NHS.This is set out in law.For reference the 1992 Social Security Administration Act ( see Para 162 - destination of contributions)
https://www.legislation.gov.uk/ukpga/1992/5/section/162/enacted
These percentages were amended in 2002 as per the National Insurance Contributions Act 2002.This legislation remains in force unamended.
https://www.legislation.gov.uk/ukpga/1992/5/section/162/enacted
Contributions to the National Insurance Fund can only be paid out in relation to the contributory benefits ( primarily the state pension).This was set out in the National Insurance Act 1946 and continues in legal force in all subsequent iterations of that Act
Government can borrow any surplus in the NIF.Interest on these borrowings accrues to the NIF ( as shown in the accounts).All such loans are repayable to the fund on demand.
Conversely the fund is required to maintain a surplus of at least 2 months (1/6th) of expected annual payments.If the surplus falls below this, then the fund must be topped up from general taxation.as happened twice in the last decade

For those who don't trust Full Fact UK,here is an excellent resource from the House of Commons Library  ( read the full linked report rather than relying on the executive summary)
/..................................................................................................................................................................................................

zagfles

Daniel54 said:

 National Insurance contributions are legally hypothecated.
Depending on the class of contribution ,a fixed but different percentage is paid to the NHS.This is set out in law.For reference the 1992 Social Security Administration Act ( see Para 162 - destination of contributions)
https://www.legislation.gov.uk/ukpga/1992/5/section/162/enacted

Note clause 7 which says:

"The Secretary of State may, with the consent of the Treasury, by order amend any of paragraphs (a) to (f) of subsection (5) above in relation to any tax year, by substituting for the percentage for the time being specified in that paragraph a different percentage." [subsection 5 being the defined percentages which go to the NHS]

Daniel54

Which in turn is circumscribed by by clause 8

"No order under subsection (7) above shall substitute a figure which represents an increase or decrease in the appropriate national health service allocation of more than—

(a)0.1 per cent. of the relevant earnings, in the case of paragraph (a) or (b);

(b)0.1 per cent. of the relevant aggregate, in the case of paragraph (c);

(c)4 per cent. of the relevant contributions, in the case of paragraph (d) or (e); or

(d)0.2 per cent. of the relevant earnings, in the case of paragraph (f)."

Daniel54

It seems sensible to me that legislation should consider "wriggle room" should the NIF be in substantial surplus  as per the GAD and  funds might be better directed to the NHS.