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By Mark Wadsworth blog
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It's always "National Insurance", isn't it?

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From the BBC:

Social care must be adequately funded, Justice Secretary Robert Buckland has said, amid reports ministers plan to raise national insurance. Downing Street did not deny reports of an increase of at least 1% to improve social care and tackle the NHS backlog.

The justice secretary said he would not “speculate” but said there should be a “grown-up conversation” about how to pay for rising social care costs. “The British public are sensible enough to know that when it comes to the issue of social care we have to find some way in which it will be adequately funded,” Mr Buckland told BBC Breakfast.

The move would break a Tory manifesto commitment at the last election. He said that the Conservative Party had also promised at the 2019 election that it would bring forward sustainable proposals to fund social care.

The Daily Telegraph reports that Downing Street favours a 1% rise in the national insurance rate, affecting about 25 million workers and self-employed people, as well as employers. But it says the Treasury is pushing for a 1.25% increase. And the Times adds that Health and Social Care Secretary Sajid Javid wants a bigger rise of 2%.

For the sake of this post, I will assume that the rumours are correct.

“National Insurance” is one of the biggest con-tricks ever. It’s just tax, it’s a super-tax of over 20% on employment income and a lower super-tax of 9% for people with moderate self-employment income (it’s only 1% on high self-employment income).

Social care is the government’s responsibility for the simple reason that people seem to assume it is, it is self-fulfilling, so fair enough, and thus it has to be paid for out of taxes (short of the obvious alternative, stop wasting so much money on crap and dishing out billions to ministers’ friends and families).

Somehow, National Insurance isn’t really seen as a tax (a bit like VAT). In popular myth it only goes towards wholesome stuff like old age pensions, the NHS, unemployment benefit and now social care. On top of that, pensioners genuinely appear to believe that they paid for their own pensions, even though it’s actually today’s taxpayers who are funding them. If you add up all the things on which people believe National Insurance is spent, it is about double the amount it actually raises.

And people don’t seem to mind or even remember. Gordon Brown hiked it by 2% back in 2003/04 and planned to hike it again by 2% in 2010, but he lost he election. The incoming Tories did it anyway. Was there a big outcry? Not that I remember. And they stuck 2.5% on VAT, nobody cared. So the Tories’ are likely to pull the same sneaky trick again.

What’s even more insane is that when Philip Hammond wanted to up self-employed National Insurance from 9% to 10% (still less than half of what employees bear), there was a huge outcry and he backed down.

Final thought – the additional tax they hope to raise from this appears to be about £3 billion, so why not put a ten percent surcharge on Council Tax and just call it ‘National Insurance’ and see if people mind?


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