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Ending the social contract

Among the various ineffectual measures announced by our epárkeiaphobic Chancellor yesterday, the showpiece was another cut in National Insurance.  This was – unconvincingly – the “give away” that would lure voters back to the Tories in the election later this year.  Although something much darker lurks behind the move.  To spell this out, Prime Minister Rishi Sunak told the BBC this morning that his “long-term aim” was to abolish National Insurance entirely.

Kier Starmer, channelling the putrifying corpse of Blair’s neoliberalism completely missed the point, focussing on the £46bn that abolishing National Insurance would cost the Treasury.  Which, coming after Shadow Chancellor Rachel Reeves’ imbecilic drivel about the economy (either she is an imbecile or she thinks you are) and Shadow Work and Pensions Secretary Liz Kendall’s attack on disabled people and the working poor, demonstrates that Labour are now a neoliberal extremist party which – assuming it is elected later this year – will merely continue the Tories’ economic and social disintegration of Britain.

Although a sizeable number of my readers will tell you that “all taxation is theft,” some theft is worse than others.  And while there is good reason for people to want to cut the amount the government takes out of their wage packet before they even see it, there are solid social reasons to oppose the cutting or removal of National Insurance… at least that part of it paid by individual citizens.

This is because National Insurance was a central element of the social contract established in the wake of the Second World War.  Its architect – William Beveridge – had rejected the system which – apparently – the Tory and Labour parties now endorse, of having the state simply make payments funded via general taxation to anyone deemed to need support.  The rejection was, in part, to do with the experience and consequences of “less eligibility” under the various iterations of the Poor Law prior to the war, since these left families destitute.  The main reason for rejecting it, however, was that it would become a political football, as recipients were singled out and vilified as “undeserving.”

Beveridge recommended an insurance-based system precisely because it would be more socially cohesive, since, just as with private insurance, we accept shared risk so that, in the event that disaster strikes, our losses are covered.  National Insurance had a progressive dimension in that it was paid as a percentage of earnings.  And it covered the entire of what became known as “the welfare state” – unemployment and sickness cover, old age pensions, and the National Health Service.  But the key point was that it made access to these the right which, in theory at least, it remains today.

In practice, of course, ever since Margaret Thatcher embarked on her mission to destroy the social contract – a process enthusiastically extended by the Blair governments – the social contract has been torn to shreds by governments of all colours determined to salami slice their way to abolishing it entirely.  As I fear millions of people are about to find out as the UK economy makes its way around the U-bend in 2024, it makes no difference if you have paid a lifetime of National Insurance, when you go to claim Universal Credit until you can get work again, you are going to be treated like a cheat and a scrounger… because that is what the government wants you to be…  Same if you fall sick or if you become disabled, thanks to the work capacity assessment system brought in by Blair.  And as is painfully obvious these days, any right you may have had to NHS treatment has been curtailed by decades of under-funding, leaving you facing long – and in the case of strokes, heart attacks and cancer, fatal – waiting times.  Nor – despite establishment media propaganda to the contrary – do your National Insurance contributions get you a generous pension.  While the two-thirds of baby-boomers who have private pensions – particularly the oldest boomers who enjoyed final salary pensions – enjoy a good standard of living in early retirement, around a third of pensioners must get by solely on the state pension.

Unfortunately, it is also true that Britain’s political class was never honest about the cost of the welfare state.  If they had been, our National Insurance contributions would have been much higher.  But against this, we might have taken more time to scrutinise the many non-essential things that those providing the services have been spending money on.  Instead, successive governments pretended that we could enjoy “European standards of welfare for American levels of tax” – all the while having to cut services and increase government debt to fill the growing gap.

After decades of unsustainable borrowing, cuts, neglect, and the reimposition and extension of Poor Law-style decreasing eligibility, it is all too easy to regard National Insurance as just another tax designed to bolster the wealth of the “haves” at the expense of the “have-nots.”  And there is one element of National Insurance which might reasonably be cut as the economy falls further into depression.  This is Employers’ National Insurance.

There is a good argument in principle that if employers want to have healthy and well-educated employees, they ought to make some contribution to the public services that – in theory at least – provide this.  But during recessions and depressions, Employers’ National Insurance acts like a tax on jobs – the contributions for roughly every four employees would be sufficient to employ another worker or to provide significant pay increases all round.  And since, during a recession, the aim should be to encourage both job creation and wage increases, cutting Employers’ National Insurance makes far more sense.

It is though, for this reason that we see the ideological nature of yesterday’s cut.  Employers’ National Insurance is not being cut, so it will continue to be a block on jobs and pay increases.  But the removal of workers’ National Insurance serves to further fray the final threads of the social contract, turning us from citizens served by a state system funded by our contributions, into some version of neo-feudal peasants who live or die at our overlords’ whim.

The fact that the Labour Party, which, in the distant past introduced this core pillar of the social contract, sees no reason beyond filthy lucre to maintain it, tells us that we urgently need a new party, a new social contract, and a new economic consensus.  Because none of the establishment parties of 2024 is leading us anywhere other than to collapse and chaos.

As you made it to the end…

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