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"The Battle Of Waterloo", 1815, by William Sadler

Two hundred years ago the House of Commons voted to abolish income tax. After Waterloo, this wartime expedient was no longer justified or needed. Even the records should be destroyed — and so they were, but the wily taxmen had kept copies. Back came a “temporary” tax which is still with us. Indeed, by now we have two income taxes and a third is on the way, labelled “automatic enrolment”. Look out.

The second is, of course, national insurance, the tax that dare not speak its name. The standard rate is 12 per cent (and employers may pay more) bur no one now pretends that these payments are premiums or represent a claim on a fund. There is no fund. Chancellors every so often admit this and look for ways of merging the two taxes. Today’s Chancellor is only the latest. Until now the complications have been too much for them.

Now comes a new complication. Devised in Tony Blair’s time by a commission under the omnipresent Adair Turner (since ennobled), it is a scheme for forcing people and employers to make pension contributions. National insurance, Mark II? Not exactly. The money will be looked after by pension providers, including some familiar names and also a state-owned owned entity, at first called Natspis but quickly renamed Nest.

This has all the marks of a consultant’s dream, so we are being allowed to wake up to it slowly. Auto-enrolment began three years ago, but only at minimal rates, and only with the biggest employers, whose back offices could cope with it. By this time next year it will extend to employers of fewer than 30 people. One will be enough. Everyone will be caught, the office work will be a dead weight on the smallest business, and the rates will be on their way up.

In less than three years’ time, these “contributions” will be levied on people in employment at a rate of 5 per cent but will qualify for relief against income tax — the original  version, that is. Their employers will chip in another 3 per cent. This will apply to everyone over 21 who is not adequately covered by a pension scheme. There will be a right to opt out, but woe betide any employer who makes opting out attractive. If (for instance) he offers a pay rise — cash now, rather than the hope of cash many years later — that would break the law and he could go to jail.

You might well suspect an insurance promoter who has to rely on such threats to sell his policies. If his scheme represents such good value, why can’t it stand on its merits? By the time we find out it will be too late to ask, but we know that the providers will charge for their services, and that the modest individual contributions will be costly to handle. As always, we shall have to hope that the funds will keep pace with the fees.

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