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Sunday, 4 September 2011

Bring Back National Insurance!

Here in the UK we get bank statements and mortgage statements but we never get a National Insurance statement. We should.

I just finished reading Tony Judt's Ill Fares the Land an elegant essay but really too bland to review in its own right. Like many well-meaning critics vaguely to the Left he would like us to be equal enough to feel that we are all in it together. Right now, in the UK and USA, we live in a very unequal world dominated by zero-sum gaming and free riding.

My own modest proposal to reverse the trend is to relaunch the idea of universal and compulsory National Insurance.

You would get a National Insurance number at birth and your parents would start paying in for you; when you take over responsibility you would continue to pay for the rest of your life. After all, private firms don't start giving you free Travel Insurance when you hit 60. Instead, they increase the premiums.

What you are paying Insurance for would be set out in your National Insurance contract. An annual National Insurance statement would show you what you had paid in - and what you had taken out.

Insurance is basically a way of dealing with risk and hazard. National Insurance should primarily protect against the risks of ill-health and unemployment - one hundred years ago, that was the main intention.

I am not sure it should be a pension scheme since pension schemes ought to involve investment and, ill-luck aside, everyone will end up wanting a pension. But National Insurance could be combined administratively with a contributory state pension scheme.

So once a year you would get a National Insurance statement:

Paid In £abc

Received Back:

3 visits to GP @ £x per visit
1 visit to Accident and Emergency @ £y
1 month's unemployment benefit @ £z

Administrative charges should be shown in some kind of globalised way, reckoned at a percentage of the insurance premiums. That would be an index and test of government efficiency.

People would get into the habit of carrying their National Insurance card and even remember their NI number.

The alternative to such a scheme is to abolish the idea of National Insurance altogether and pay for everything out of general taxation.

The problem is that general taxation is resented precisely because there is no transparency and accountability. It all goes into a big pot which is then fought over by government departments. Some people have privileged access to the pot - for example, Prime Ministers when they decide they need a war to boost their standing or when they want to roll out the red carpet for the Pope.

My suggestion only makes sense in a more equal society otherwise it turns into a form of regressive taxation. It requires that there be a high minimum wage and high income tax threshold combined with a cap on salaries and other earnings.

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