Be upfront about ‘earnings tax’

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One of the most successful deceits practised by generations of British politicians is the tax which is euphemistically labelled national insurance [contributions].

Workers on PAYE become accustomed to “employee NIC” deductions from pay packets, while the self-employed grapple with payments episodically. Business groups, including the IoD, rightly criticise employer NICs as a “tax on jobs”.

So it was breathtaking to hear Gordon Brown warning Scots against independence because “the national insurance fund you’ve been paying into will be broken up”. There are many arguments against independence – but this is not one of them.

There should be a fund for national insurance contributions – and if there were, Britain, like Australia, might have a properly financed pensions system and a sizeable investment vehicle to maintain economic growth. There isn’t. NICs are simply grabbed by government and put into general tax revenues. Why not combine NICs with income tax, you may well ask. There’s an easy answer to that: because workers would then realise how much tax they were actually paying.

 

About author

Simon Walker

Simon Walker

Simon Walker served as director general of the IoD from September 2011 until January 2017, having enjoyed a career spanning business, politics and public service. From 2007 to 2011 he was chief executive of the BVCA, the organisation that represents British private equity and venture capital. Walker has previously held senior roles at 10 Downing Street, Buckingham Palace, British Airways and Reuters.

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