6 December 2010

The End of National Insurance?

The Centre for Policy Studies (CPS) has published a new report which proposes the abolition of National Insurance.

That sounds kind of drastic, but given that it has changed significantly since its introduction and that the Government are considering a flat rate, non-means-tested state pension, it becomes little more than some extra tax to pay.

Of course, that doesn't mean that we will end up paying less tax (you didn't really expect that did you?) but it could mean a significant saving in government costs - always worth aiming at.

The CPS describe National Insurance as "complex, cumbersome, misleading and ramshackle". There is no longer any real relationship between what you contribute and what you get, since most benefits paid for out of NI are now flat rate benefits, even though contributions are still related to earnings.

However, I can't see its abolition happening any time soon. It is useful to politicians who are still able to hide behind it as a way of raising taxes without calling it a tax. And with all the reform going on in the pensions world - mostly good stuff - tackling NI in the near future is probably a step too far.

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