Cut, simplify and then abolish National Insurance

January 16, 2014 2:38 PM

Cut National Insurance, raise and align its thresholds and prepare for it to be fully merged into Income Tax, says a new report from the CentreForum think tank:


National Insurance cuts (including employer side) should be prioritised over income tax cuts.

Tax simplification should also be considered when increasing allowances.
The number of separate tax thresholds should be reduced, with the National Insurance allowances in particular aligned with each other and with the Personal Allowance. They should also be annual rather than weekly, and per individual rather than per job.

It's great to see a consensus building about the problem of National Insurance, following our 2020 Tax Commission's Single Income Tax and our more recent report How to abolish National Insurance.

The CentreForum report isn't perfect. It says that cutting employers National Insurance "can sometimes increase the demand for labour" and seems to suggest raising the minimum wage to combat that, as if creating jobs for unemployed people jobs is bad thing.

It also recommends hiking National Insurance rates to "fund" the more generous allowances. This isn't a good idea. With the Government wasting well over £100 billion a year and extending itself further than necessary anyway, its books should be balanced by cutting spending, not raising taxes in other ways.

But overall, the key message from the report of simplifying and cutting National Insurance should be welcomed.

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