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Coffee House

Tory call to rebrand National Insurance is politically smart

23 February 2014

8:39 PM

23 February 2014

8:39 PM

The government’s legislative programme is pretty light at present. But the Bill that is going to spark the most interest this week is destined to go nowhere at all. It’s a Ten Minute Rule Bill, introduced by Tory MP Ben Gummer this Tuesday, and calls for National Insurance to be renamed the ‘Earnings Tax’.

What’s in a name? Well, there are two good reasons why this Bill which won’t go anywhere (Ten Minute Rule motions are simply used as a way of making a point and drawing attention to an issue) has, as I understand it, already gained a great deal of attention and sympathy at the highest levels of government.

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The first is the reason that Gummer cites for introducing the motion in the first place: transparency. Few people understand what National Insurance really is – the TaxPayers’ Alliance demanded in 2012 that it be renamed so it was clearer that ‘its true function is overwhelmingly a tax, not an insurance scheme’. This mystery means that when politicians talk about lifting a number of low-income people out of tax, they can conveniently forget that those people continue to pay National Insurance. Gummer says:

‘Changing National Insurance to Earnings Tax is a very simple first step to doing what most people think is a good idea, which is merging it with Income Tax. I’ve thought for some time that one of the easiest ways of getting more simplicity in the tax system is just being more transparent about tax. Taxpayers are consumers – both parties have recognised that for some time, so if we give them a better handle on what they are paying and where is goes, you only enhance the conversation that you have with politicians.’

That’s all very noble in itself. But there’s another point, which Gummer isn’t focusing on, but which is politically handy to his party. Labour wants a greater emphasis on raising taxes after 2015 than the Conservatives do. But because tax rises aren’t very popular, the best way to do this beyond some symbolic taxes such as raising the top rate back to 50p (if that raises anything more at all) and introducing a mansion tax would be to focus on the mysterious National Insurance. But if National Insurance became an Earnings Tax and it was clearer to the electorate what it is, then the Tories wouldn’t need to work quite so hard on their ‘stealth tax’/’jobs tax’ campaigns as they have before.

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