David Martin

Abolish National Insurance Contributions

Government plans for a universal state pension of £140 per week were reported in the media in late October. We should be getting more information in a Green Paper soon. While this announcement was most welcome, it raises two important questions which go to the heart of our tax and benefit system: what should happen to National Insurance Contributions (NICs)? And should we now recognise that the contributory principle behind benefit payments is effectively redundant?

NICs are an important source of government revenue. The total paid in 2009/10 was £97bn, significantly more than VAT (£84bn), and over 20 percent of government receipts for that year. Yet how the NIC system works, who pays, and where the money goes, is not well understood.

In fact, as my report published today by the Centre for Policy Studies shows, someone paying NICs gets very little back in contributory benefits.

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