It was already known that chancellor George Osborne was minded to merge national insurance and income tax. Yesterday we found out that he meant it as he announced a consultation on the issue during his Budget statement.
On the surface, a merger would sound common sense, if only for the sakes of simplicity and modernity. National insurance contributions were introduced in 1911, initially to provide pensions, but were the platform for the post-second world war welfare state.
Guaranteeing an income for people who became unemployed, the contributions also funded a universal health service free at the point of delivery. NI was even administered by its own body.
The Inland Revenue has since taken over collection and the contributions have become an extension of the tax-raising mechanism for governments that kid themselves they are freezing personal taxation.
So, a good idea from a chancellor intent on transparency?
Perhaps. It would be speculation to pre-judge the consultation but it is possible that older people's watchdogs may need to turn guard dogs.
Why? From 6 April pensioners will pay tax on income above £9,940. What they will not be paying - and never have - is national insurance. Merging income tax and national insurance would increase the tax take from older people, whose income in any case is stagnating or even falling.
It follows that those on incomes just above the threshold would be hit hardest from a merged tax system.
Unless, that is, the government introduces a pensioners' threshold, in itself a complication to what is intended to be a simplified system administered by an organisation renowned for its IT glitches.
We also need to be told what will happen to employers' national insurance contributions. Will these be rolled into corporation tax? Unlikely, but, if they are, tax take will be dependent on the economy's performance as companies' profits wax and wane. On the other hand, employers' contributions may be abolished, handing the private sector another tax cut.
But someone will have to pay. You and me?
