Today Parliament will vote on plans to rename National Insurance “Earnings Tax” to show it’s not really an insurance scheme in any meaningful sense, but is instead a tax. The motion is being put forward by Conservative backbencher Ben Gummer MP.
National Insurance was established in 1911 with the intention of employers and employees paying in, then using the pot to pay out for things like pensions. However, very quickly after its introduction, the scheme began paying out more than was ever paid in. This means they people paying NI today have very little prospect of receiving much benefit from it.
Mr Gummer’s eventual plan is to merge NI and income tax, and so today’s vote is an interim measure towards that objective. Gummer said: “If it’s a tax we should call it a tax… I want to see National Insurance and Income Tax merged as they are essentially the same thing.”
Stephen Herring from the Institute of Directors said: “National Insurance is not, as many people think, set aside for their pensions. We thoroughly support the proposal to rename the tax, to present a clearer picture to workers of the tax they pay out of their salary.”
The vote today is being introduced as a private members bill through a 10 minute rule motion. This means that Mr Gummer will have 10 minutes to advocate the plan but, if passed, it is unlikely to become law due to shortage of parliamentary time.
The system is often used a highlight an idea in the hope the government will eventually adopt it. In this case, the Treasury has already hinted that the Chancellor may introduce the change himself as part of the budget.