The tax issue that the Tories have got right

Have the Tories gone mad? To judge from the brickbats levelled at Jeremy Hunt for asserting that his party’s long-term ambition is to scrap national insurance contributions (NICs), you’d certainly think so. “A £46bn threat to the funding of state pensions and the NHS,” is how Labour branded it. But though scrapping the UK’s second-biggest tax might sound foolhardy, it’s actually a very sensible ambition, says Will Dunn: one that would deliver “a simpler, more honest, less easily manipulated tax system”. If we replaced the current 8% NIC deduction on most people’s payslips with a 5% increase in income tax, every worker would enjoy a tax cut and the Treasury would end up with the same amount of money. The only people who’d lose out would be landlords, pensioners and those who get their income from dividends. None of these pay NICs, a fact that exposes the fallacy, much exploited by politicians, that NICs constitute a special, separate levy, paid by every adult, that underwrites our social contract. In reality, they’re just another revenue stream for the Treasury. The only national principle they represent “is this country’s generational tilt towards the wealth of the old over the earned income of the young”.