Brown Denies National Insurance Is An Income Tax

by Jason Gorringe, Tax-News.com, London

12 April 2005

Gordon Brown, the UK’s Chancellor of the Exchequer, has denied that National Insurance, a levy traditionally ring-fenced to pay for the health service and other benefits, is effectively a form of income tax, despite its reclassification in new legislation.

The Daily Telegraph reports that the Commissioners for Revenue and Customs Bill, which was rushed through its parliamentary stages last week ahead of the dissolution of parliament prior to the general election, has redefined National Insurance as “revenue” to be paid directly to the Treasury, as evidenced by Clause Five (4), which states that: "In this Act 'revenue' includes taxes, duties and National Insurance contributions."

However, Brown has strenuously denied that NI is just an income tax by another name and rejected the argument that Labour has broken its pledge since being in government to freeze rates of income tax with a 1% NI hike on high-salaried workers in 2002.

"That's not true and I do not accept that, I will not accept that because I made my promises as the party did on income tax. National Insurance is paying for the National Health Service,” he told BBC Radio 4’s Today programme.

However, Brown‘s explanation has failed to convince members of the tax industry, such as Grant Thornton tax partner Mike Warburton.

"This confirms what we already know; there is no real difference to speak of between National Insurance and income tax,” he observed, according to the Telegraph.

The Tory spokesman for social security, David Willets, was equally unimpressed, noting that: "The Chancellor likes to claim that National Insurance pays for the health service. But this legislation shows it is really just the same as income tax."

Recommended