This looks good:
The changes, which are due to be detailed in a green paper by the end of the year, mean a single person could receive £7,280 a year and a couple £14,560.
Ministers believe that removing means testing and the resulting reduction in bureaucracy will save around £6bn a year. They believe a single-tier system would also reduce reliance on benefits.
The changes are likely to benefit married couples and stay-at-home mothers the most, as the latter often fail to qualify for the full basic pension because they have taken time out from work and have not built up enough national insurance contributions.
Having a (lowish) State pension topped up by means tested benefits means deterring people from saving for their own pension. If what you manage to save is simply going to be knocked off your extra means tested payment, why save?
But much more importantly for the long term, by decoupling the pension eligibility from national insurance contributions over the years they remove the last major barrier to abolishing national insurance.
No, of course this won\’t mean that what is snaffled from paycheques in NI payments (two of them remember, amounting to some 25% in total of wages between, what is it, £70 off a week and £600 odd a week? 13% on more than that?) but it will allow the whole system to be folded into the income tax system.
Desirable for two reasons. Firstly reducing complexity, thus costs of administration, is a good idea. Secondly, as a political aim.
It\’s generally accepted by economists that some or all of \”employers\’\” national insurance is in fact paid by the worker in the form of lower wages (quite how much is a matter of heated empirical argument but the arguments run from much to most to all, no one who can count even trying to argue for none). Making this clear, as NI is folded into income tax, helps to place an upper bound on how much can actually be raised in income tax.
When people realise that the upper rate is now not the headline 50%, but more like 64%, the basic rate not 20% but more like 45%, there will be a certain political pressure….well, maybe to reduce these rates, maybe just to insist that they don\’t rise any further.
For for some decades NI has really operated as a parallel and near hidden income tax. Making it clear and open makes the price of what is supplied in return clear.
Me, I think that\’s a good thing.