NIC Increase Bill Passed This Week In Commons

by Jason Gorringe, Tax-News.com, London

14 June 2002

It emerged earlier this week that despite several attempts by Liberal Democrat and Conservative MPs to soften the blow of an increase in National Insurance Contributions (NICs) to fund the UK's ailing health service, the government's National Insurance Contributions Bill was passed on its third reading in the House of Commons.

According to parliamentary reports, Lib Dem MP, Dr Evan Harris was first off the mark during the five hour debate, tabling an amendment to the bill which would replace the 1% across-the-board increase with a 10% NIC hike for employees earning more than £100,000 per year. Explaining the logic behind the proposed change, Dr Evans told the House that:

'Under the Government's plans, those earning £600 a week will pay 9%, and those on £2,000 will pay around half that. That is no one's definition of progressive. People on around that earnings limit should make a significantly increased contribution to public services.'

However, the amendment was dismissed by both the Conservative opposition and the Government, with Paymaster General, Dawn Primarolo arguing that such a solution would mean that those earning the designated £100,000 would pay 11% up to the upper earnings limit, nothing on income between that limit and £100,000, and then 10% on income in excess of £100,000.

According to the Accounting Web news service, several other amendments, including exemptions from the increase for employers which subsidise private health insurance for their employees, and further exemptions for the self-employed, non-incorporated businesses, personal service companies, public sector employees, and employees over the age of 65 were also rejected.

Ms Primarolo was especially vehement in her assertion that the self-employed, and contractors operating personal service companies should not benefit from an exemption from the increase:

Observing that the self-employed are 'already getting an extremely good deal' with regard to the national insurance fund, the Paymaster General explained that: 'the amendments would give the self-employed further benefits in a system that would cost the taxpayer £450 million, and would give self-employed companies a greater benefit than they are already having.'

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