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Tory call to rebrand National Insurance is politically smart

23 February 2014

The government’s legislative programme is pretty light at present. But the Bill that is going to spark the most interest this week is destined to go nowhere at all. It’s a Ten Minute Rule Bill, introduced by Tory MP Ben Gummer this Tuesday, and calls for National Insurance to be renamed the ‘Earnings Tax’.

What’s in a name? Well, there are two good reasons why this Bill which won’t go anywhere (Ten Minute Rule motions are simply used as a way of making a point and drawing attention to an issue) has, as I understand it, already gained a great deal of attention and sympathy at the highest levels of government.

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The first is the reason that Gummer cites for introducing the motion in the first place: transparency. Few people understand what National Insurance really is – the TaxPayers’ Alliance demanded in 2012 that it be renamed so it was clearer that ‘its true function is overwhelmingly a tax, not an insurance scheme’. This mystery means that when politicians talk about lifting a number of low-income people out of tax, they can conveniently forget that those people continue to pay National Insurance. Gummer says:

‘Changing National Insurance to Earnings Tax is a very simple first step to doing what most people think is a good idea, which is merging it with Income Tax. I’ve thought for some time that one of the easiest ways of getting more simplicity in the tax system is just being more transparent about tax. Taxpayers are consumers – both parties have recognised that for some time, so if we give them a better handle on what they are paying and where is goes, you only enhance the conversation that you have with politicians.’

That’s all very noble in itself. But there’s another point, which Gummer isn’t focusing on, but which is politically handy to his party. Labour wants a greater emphasis on raising taxes after 2015 than the Conservatives do. But because tax rises aren’t very popular, the best way to do this beyond some symbolic taxes such as raising the top rate back to 50p (if that raises anything more at all) and introducing a mansion tax would be to focus on the mysterious National Insurance. But if National Insurance became an Earnings Tax and it was clearer to the electorate what it is, then the Tories wouldn’t need to work quite so hard on their ‘stealth tax’/’jobs tax’ campaigns as they have before.

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  • Maddie Miller

    all the government ever want from you is money and you will never be better of in this day and age! i am surprised we don’t need to start looking at getting health insurance as the nhs could start charging!

  • Chris Hobson

    Like climate change levy or national insurance but lefties call it “poll tax”. Convenient no.

  • Stephen

    The reason for this move seems to clear. If there is no “National Insurance” then there can be no State Pension, which will be replaced, no doubt, with a means tested pension available only to the most desperately poor. Whether the money from National Insurance pays for pensions or benefits (it doesn’t, of course), paying it earns entitlement to Basic State Pension and some other benefits. Without National Insurance the government will no doubt want to quickly shrug off its responsibilities to providing those other benefits. That means a much poor old age for everyone except the Westminster elite and the business elite, who ensure luxuriously funded pensions for themselves.

  • Tom Tom

    Makes it easier to extend it to savings interest and rental income

  • Smithersjones2013

    Hardman can be such a witless Tory doormat when she wants. Does she seriously think that calling it an earnings tax when there is already an income tax is going to sit well with the electorate?

    All it does, particularly as it comes from the ever witless Gummer, is demonstrate what lying filth exists within the Westminster Freakshow. Instead of providing a real solution to the pensions and welfare problems of this country, Osborne being incapable of offering anything more substantive resorts to the cheap PR stunts and tawdry political manipulation of his leader. It just further demonstrates the inadequacy of this Government, the Tory Party and Osborne and Cameron!

    • Alexsandr

      as opposed to Blair promising not to put up income tax then put a massive NI raise through. People need to know NI is just a tax. nothing more.

  • mightymark

    Doesn’t this idea further distance benefits from contributions (at least contributions so named) at just the time when the Government is trying to tie the two closer together?

  • english_pensioner

    It would never happen – what is the difference between earnings tax and income tax except for those with investment income or a pension. How long would it take before it is applied to “unearned” income?
    It would show that the real rate of income tax starts at 32% and that those who pay the higher rate of income tax are already paying well over 50%.

  • MrVeryAngry

    Huh. All taxes – except one – are taxes on ‘earnings’….

  • David Webb

    It’s politically smart – but what about ABOLISHING IT, and not just renaming it?

  • John_Page

    Good backbencher idea. I also like Halfon’s proposal to replace the tree with a ladder.

  • Peter L

    It’s only “politically smart” if that is a simile for “low

    All three main parties are obsessed with PR and brand/media
    management – talk instead of action. That’s why the “none of the above” party will win next year’s election hands down.

    Is it too much to ask that Mr Osborne (1) Sets out what he
    thinks is wrong with NI (2) Puts forward his ideas for change (3) Puts his
    proposal to the people next May ?

    • Alexsandr

      it should be merged into income tax, maybe in stages. It is the most avoidable tax by those not in simple employment. And why investment income is taxed at a lower rate than employment income is a mystery.

  • Mynydd

    It is reported that Mr Cameron/Osborne have an open cheque book (money is no object, spend, spend, spend, borrow, borrow, borrow) to pay off Ukraine’s national debt. Therefore it is only fitting that the knew name for NIC should be the Cam Ukraine Tax. (CUT)

    • John McEvoy

      Or perhaps more appropriately the Cameron Ukraine National Tax?

      • Mynydd

        I more than agree

  • Lady Magdalene

    “Changing National Insurance to Earnings Tax is a very simple first step to doing what most people think is a good idea, which is merging it with Income Tax”
    Which is UKIP policy. Once again the “loonies” are ahead of the game.

    • Makroon

      The “most people think is a good idea” is just an heroic and untested assumption by a lobbyist.
      As a “UKIP policy” (2010 version or just current/on the hoof ?) it is the usual disconnected and random stuff that some UKIPper thought would sound “efficient” and “modern”. Wait till the hard-pressed pensioners, who comprise a large part of the UKIP electoral target, find that they will be hit with another hefty tax !

  • swatnan

    Its Insurance; you contribute and get some benefit out of it, like all insurance schemes, when adversity strikes; its not a tax. So keep it as it is because its not a tax. Those people who haven’t contributed, or not contributed enough, will have to get relief from some other charitable source. The Cons have come up with some stupid ideas in the past, but this suggestion to abolish it is the stupidest. The Cons are paranoid about ‘tax’ and not paying their fair share tax.

    • Dougie

      I’m afraid that great Socialist Nye Bevan disagreed with you: “There ain’t no fund” as he famously said at the 1955 Labour Party conference in Margate.
      To quote from Michael Foot’s biography of Bevan: “The use of the term insurance, he believed, was a misnomer; when everybody was in, when insurance was universal and compulsory, the system was no longer based on the insurance principal; it involved a poll tax.”
      As Bevan also pointed out, people can draw benefits whatever contributions have (or haven’t) been paid. “People say ‘We have to defend the fund. We must keep the fund on an actuarial basis.’ Comrades, that is a lot of nonsense. There ain’t no fund. It is absolute nonsense.”
      So there you have it: Bevan thought your view was absolute nonsense – and he ought to know.

      • swatnan

        But I’ve just said that NI shouild be contributaory to a large extent; so people who haven’t contributed a penny should fall on the mercy of State or Charity. But insurance is insurance. An 18 yr old could start work and a week later say be involved in an accident at work which might put him on DLA for life (god forbid).

    • John McEvoy

      It’s not Insurance by any stretch of the imagination. The ‘premium’ is directly linked to income, not risk. So it’s income tax pure and simple, and is swallowed up in the general tax fund, out of which the Ponzi scheme is operated. Any liability shortfall is simply borrowed against the collateral of the members, which is future taxation. You couldn’t get the scheme any further from the proper meaning of ‘insurance’ if you tried.

      • swatnan

        Ok, but its more egalitarian anin the sense that you contribute as much as you can afford; the govt encourages you to contribute by making it mandatory, in the same way that you need that pension plan imposed, not voluntary. But risk is risk, some drivers for example have a life time of driving but never have claimed; the only benefit is a no claims premium. Maybe we need a lump sum dividend on ALL benefits for people who have no reason to claim or have no children or never fall ill, or who die before pension age.

  • Tony_E

    Changing the name doesn’t get us closer to what we really need – a truly contributory system. The problem with this is that there isn’t a majority in the country who are willing to take a long view and implement such a change through the ballot box.

    While welfare has no links to National ‘savings’ in the public’s mind, then any move to make the system less open to being gamed is impossible, because it’s always someone else’s money for the majority. Once you are drawing on your own contribution, your attitude must surely change.

    • Donafugata

      Agree about a need for a proper contributory scheme but that is unlikely as more than 40% of today’s claimants have never contributed anything.

  • Portendorfer

    Tax tax tax!
    Why rebrand it?
    Why not abolish it?

  • BarkingAtTreehuggers

    Just look at that child in the picture – he doubled the debt since, and his weight.

    • Daniel Maris

      More debt! You can say that again.

  • JohnInFife

    It’s called National Insurance because it’s supposed to be that: insurance against bad times, irrespective of how badly it has been handled over the years. For the Tories to try to rename it means they are trying to abdicate social responsibility. That’s all.

    In the future they – let’s be honest here Labour and Tories are no different now – can turn round and say, No, you’ve just been paying a tax, there was no responsibility or implied contract within that payment for you to get anything back, especially on retirement or unemployment. More inhumane heartlessness by the Coalition, seemingly being backed up here by Isabel.

    They might have just stopped the welfare state, or signaled its end, with this announcement but a so called journalist just lauds them for a ‘smart’ political move.

    • Alexsandr

      but its the truth. They have already stolen my SERPS and graduated pension, I am not even sure they will pay the pension I have paid for. There is no contract to pay stuff when you start work and start paying NI, so its not insurance. Its been a con since 1945.

    • John McEvoy

      It’s not insurance and never has been. The premium is directly linked to income, not risk, and it’s compulsory – so it’s Income Tax. There is no fund, and the money is in no way hypothecated. It is simply swallowed up in the running costs of the Great Socialist Welfare State that has destroyed millions of jobs and bankrupted the country.

  • southerner

    Nothing better to do these un-conservatives. A complete and utter barking waste of time. Did his Dad force feed him a beef burger at the height of the BSE crisis as well as his sister?

  • Makroon

    Cunning. Earnings tax eh? Does that mean that pensioners will remain exempt, or that those with a part-time job will be liable, or that pension payments will be redefined as “earnings” ?
    I am sure the latter would please “two brains (but both duff)” Willetts.

    • Daniel Maris

      So we’ll have an income tax and an earnings tax…hmmm…

      • Alexsandr

        Hmm. Why does a pensioner need a lower rate of tax then someone earning?

    • DRXL44

      Pensions are already taxed as earnings, Makroon … your time will come!

      • Makroon

        No, my friend, they are taxed as “income” and do not attract “national insurance”. Earnings and income are two different things, which is the point really.

  • D Whiggery

    The best thing about NI is that it’s a regressive tax and yet progressives defend it as if their very belief system depended on it.

  • kyalami

    Use the time rather to introduce a Recall Bill.

  • David Webb

    Isabel, well done for highlighting the fact that people on the minimum wage have certainly not been taken out of tax! People on £12K a year pay £512 in income tax and £510.24 in Class 1 national insurance – so the NI doubles the tax take from them.

    • Alan Douglas

      Have you not ignored the Employer’s NI here ? Which far more than dooubles tax taken ?

      Alan Douglas

      • David Webb

        No, I haven’t ignored it, and Employers’ NI ultimately reduces wages, as the money has to come from somewhere. We need a major reduction in the state. Getting rid of both employers’ and employees’ NI would be a good start.

  • B0YC0TT

    It would also be helpful if employers ensured that pay slips showed the employer’s contribution, as well as employee NI and income tax. That would give voters a better idea of the extent to which government is purloining what should be the voters’ earnings.

    • Cooper cap

      Although not a requirement, very few businesses do not show employers’ contributions on payslips – and how exactly is an employer contribution a purloining of your earnings?

      • DRXL44

        If the employer paid none, or less, there might just be scope for pay increases … but I’m sure you’ll know all about low-flying pigs!

        • MrVeryAngry

          Erm, I am an employer and I would be entirely happy to share the savings of scrapping NI with my employees. And if I didn’t, my competitors would, so scrapping it would result in higher pay.

      • ajwillshire

        If an employer wants to hire you then they will look at the total amount of money that they can afford to pay for your skills. From that number, subtract NI, pension contributions, etc and then you are left with a number which is the maximum salary that is payable to you as an individual. Therefore it is obvious that the maximum salary that you can get is a bit lower because the government have staked a claim to some of that.

        Similarly, if an individual works out how much they need to earn after tax in order to live then they need to add on their NI and income tax to calculate the minimum salary that they would need to accept a job offer.

  • gerontius

    “Tory call to rebrand National Insurance is politically smart”

    The nation can barely contain its excitement.

    • southerner

      Indeed. The liblabcon have nothing at all to say on the issues that really matter.

    • Hexhamgeezer

      Tory call to rebrand National Insurance is politically feeble

      Tory call to rebrand National Insurance is political window dressing

      Tory call to rebrand National Insurance is politically irrelevant

    • The Red Bladder

      The talk in my local pub has been of nothing else recently.

      • gerontius

        What pub do you drink at?

        • The Red Bladder

          The Gullible Mugs Arms

  • alabenn

    Any money the government takes from you is a tax, you can call it anything you like, but you still end up lighter in the wallet.

    • 2trueblue

      And the government that think this is going to go down well are not going to get reelected. Watch the grey vote disappear from any party who tinkers with it.

  • Andy

    It’s a Jobs Tax. That is all it ever has been or ever will be. It ought to be abolished.

  • saffrin

    Orders from Brussels in an attempt to stop the little people thinking they’re paying for their health and pensions through the tax system is what this is.

  • HD2

    It’s an employment tax – and I’m old enough to remember Selective Employment Tax.

    That was not selective
    Destroyed employment
    Was hardly a useful tax

    And was scrapped by Heath in 1970.

    Only to be replaced by NI.

    Same concept, same faults.

    • Cooper cap

      Only to be replaced by NI ?
      NI actually started before WW1 although rates have changed at various times since.

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