Future generations of pensioners would be hung out to dry if the Government’s proposal to scrap National Insurance becomes a reality.
Prime Minister Rishi Sunak flirted with the idea of axing the levy in his interview with The Sunday Times over the weekend.
He claimed that “significant progress” would be made in ending National Insurance if the Tories win the next General Election.
This is part of the Government’s wider desire to end the “double taxation” on work which is imposed on hard-working Britons via both income tax and National Insurance.
As appealing as this sounds on paper, the Conservatives would be jeopardising the future of the state pension and the retirement of millions on a cheap electoral ploy.
Someone’s National Insurance record is vital to them in accessing the benefits system and their full state pension entitlement.
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Future pensioners will be hurt if National Insurance is scrapped, writes Patrick O’Donnell
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Workers need to have at least 10 years of contributions under their belt to access any of the new state pension, while the full amount is awarded to those who have paid the levy for 35 years.
Money made from contributions are placed into a National Insurance fund which is used to pay for benefit payments and the NHS.
In the tax year ending March 2023, National Insurance contributions from workers and companies generated £178billion, according to the House of Commons Library.
As such, this makes the levy the second-biggest tax in the country in terms of total revenue raised after income tax.
For that year, £117billion of National Insurance contributions made was spent on benefits and associated costs.
Notably, the largest proportion of money was reserved towards paying for the state pension with £110billion being spent.
According to the Labour Party, if employee National Insurance contributions are axed, this would cost £46billion.
With this being a portion of the levy that the Prime Minister reportedly wants to scrap, this means a sizable portion of state pension funding will no longer be available.
This comes amid calls to review the triple lock on payments and concerns over how the state pension will be paid for going forward.
While the Government is able to top up the National Insurance fund, this will result in more public borrowing at a time when the books desperately need to be balanced.
If the Tories were to scrap this particular tax, the entire benefits system status quo would need to overhauled.
Axing employee and self-employed contributions would mean there would need to be another method of recording how much someone has contributed in tax during their career.
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Rishi Sunak has suggest the tax could be scrapped by the Tories if they remain in power
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Even if National Insurance was successfully abolished, the rate workers pay in income tax will likely be raised to cover the cost.
A hike in income tax would also mean pensioners will end up paying more to pay for a lacklustre retirement for their children and grandchildren.
The UK’s tax burden is at its highest since the Second World War at a time amid an ongoing cost of living crisis.
The public are desperate for a grown-up tax policy which will address this reality and not sweep our country’s problems under the rug.