Chancellor George Osborne will unveil plans to merge National Insurance with Income Tax in the manifesto for the general election. He also came "within a whisker" of implementing the reform in Budget 2014, according to reports in the Times and the Independent. This is great news and comes not a moment too soon.
It's good news that the plans reportedly involve protection to stop pensioners from having their incomes drawn into the new merged tax, a feature that our campaigns have always recommended. Less encouragingly, employer's National Insurance does not appear to be included in the plans. This is a shame because so-called employer's contributions are the most pernicious, deceptive and dishonest section of National Insurance. They may be called "employer's" but economists are as good as united in believing that they fall on employees in just the same way as Income Tax and employee's National Insurance.
Nonetheless, we're delighted that one of our long-standing core campaigns is getting some political attention. The TaxPayers' Alliance has long campaigned for this reform:
- Abolish National Insurance was published in 2011, which set out the case for merging it into Income Tax and explained how it could be done.
- The Single Income Tax was published in May 2012, which set out a comprehensive reform of the UK tax system through a Single Income Tax and a key component of this was abolishing National Insurance.
- How to abolish National Insurance was published in November 2012, which mapped out in more detail how it could be abolished as part of a move towards a Single Income Tax. The paper set out the detail of how to bring in the reform which ensuring groups such as pensioners were protected from paying any more tax.
- The Giant Payslip was launched in March 2013, illustrating how the merging National Insurance could simplify people's payslips by making the deductions more transparent.
- What are you really paying? video was launched in May 2013, to illustrate the fact that National Insurance is really just another form of Income Tax.
Worries about the ease of merging the IT software for the two tax systems caused the Chancellor to hold off. Nobody wants another government IT catastrophe, but Mr Osborne should grab this bull by its horns and press ahead with the plan.