Pensioners are to receive a flat-rate universal retirement payment of £140 a week that will end the injustice of working mothers being penalised for taking a break to raise children, under reforms to be signalled by Iain Duncan Smith today.
Forget the effect on women and look at what the really great prize is.
The abolition of national insurance.
Time was that you had to be paying your stamp to get a variety of benefits. Dole, pension etc. In theory, NI pays for the NHS etc as well.
There\’s still a certain complexity about whether you get dole or income support having paid NI or not. But really, the only major thing that NI (as opposed to a combined system of NI and income tax) does is you have to pay it for a certain number of years (used to be 40 I think, either just has been or just will be changed to 30) in order to get that pension.
If all citizens are to get a flat rate pension just by dint of being 67 (the new pension age coming) then we can abandon the whole NI system and simply roll it into one single income tax.
At which point people will see what the income tax we\’re charged really is. It starts at 45% ish (20% income tax, 13.8% employers\’ NI, 12% employees\’) on incomes as low as £7,000 a year. Yes, 45% on incomes half what the Joseph Rowntree Foundation tells us is the sensible (on Adam Smith\’s linen shirt principle) poverty level.
At the top end it\’s 50% income tax and 13.8% plus 1% NI.
As a political point having just the one tax will make \”let\’s raise income tax\” a very difficult sell. Because people will finally understand just how damn high it is already.
On the economic efficiency front it will also be beneficial: among other things, a combined system would remove an awful lot of tax dodging (despite my snarling at Murph, yes, simpler is better) as well as making saving pay for would be pensioners.
All in all it\’s a wonderful idea: as long as they go through with it. As long as they accept the logic of what they\’re doing and use the abolition of the last reason to actually have NI as a reason for abolishing it.
I know, I know, but we can hope, can\’t we?