During a search on the web, a 2013 Parliamentary report on National Insurance was found, which gave the basis on which it was set up and the basic rules to be followed, which together with the latest DWP report on State pension expenditure made interesting reading.
In spite of the general understanding, NI contributions are required to be kept separate in a fund, whose use is strictly defined with any surplus protected. It would probably take an army of lawyers to find out whether this has been strictly adhered to.
It arises because of discussion and consideration being given to merge tax and NI to simplify administration, such a move could of course be political suicide, but the gnomes have not thought that far. Basic tax levels at 33%, with higher rate at 53% plus a 14% tax on Employers would not look very attractive.
These levels are only tolerated because National Insurance is linked to Pension provision and this is already being undermined by current proposals on a single tier pension, greater redistribution of NI wealth and delays in retirement age. The powers that be are already treading on tricky ground.
Rather than merge tax and NI, which makes NI firmly a tax and unpalatable, why not separate Ni completely from the present tax and welfare system to make it fully work related to the original intention. Set up as an independent body or Trust for the benefit of members.
Ni contributions are projected for 2013-14 at £107bn with £21bn to NHS and £86bn to pensions. There was no indication in the report of why NHS was involved or reference to work related benefits. Surplus has occurred since 1990, which amounted to £50.6 bn in 2009 but then dropped to £39bn because of the recession, due to investment in Gilts/ Bonds, that is borrowed by the Government and linked to market fluctuations.
The number receiving State pension, discussed in a previous blog, equal the total UK population, making it a universal welfare, in spite of the pretence of a Contributory system and the single tier pension makes even the final monetary return universal. The numbers do not make sense!
We have a modern day “Roin Hood” situation, except the rich are replaced by the working middle class, who themselves are now becoming the poor. Yet all agree that the only solution to present economic problems is to ensure work is available to all and restore the incentive to do so.
Welfare costs need to be reduced and universal work is one part, implementation of the failed European universal welfare system is another negative factor. Why should we make payments to anybody who has not contributed to the UK, we need to become more insular and look after ourselves, Europe can’t do it.
Social and citizen rights should prevail over human rights, all other major Countries do this, visas are short term unless residency can be proved or granted and this is strongly related to welfare, self sufficiency and being British.
The same attitude applies to National Insurance, it must be kept independent of the welfare system, some degree of wealth redistribution amongst members is needed as part of the Insurance aspect, but this is possible in a well run scheme.
Of course the existing mess has got to be sorted out first. The present system has led to a large pension liability, which overwhelms NI making it not viable. However the legislation apparently exists to run it as a separate entity, which needs to be done. The State has squandered the NI money and should help sort it out.
To be continued.
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