§ Dr. McDonaldasked the Secretary of State for Social Services what would be the revenue effect (a) of abolishing the upper ceiling on payments to the national insurance fund broken down into employee and employer contributions and (b) of converting the present lower earnings exemption limit into an allowance on the same rules as used for income tax broken down between employee and employer contributions.
§ Mr. WhitneyUsing the assumptions set out in his report on the draft of the Social Security (Contributions, Re-rating) (No. 2) Order 1984 Cmnd. 9386, the Government Actuary calculates that were the upper earnings limit for contributions to be abolished, but the ceiling for the contracted-out rebate retained, the additional contributions revenue in a full year at 1985–86 rates accruing to the national insurance fund would be:
- (a) £625 million from employees.
- (b) £720 million from employers.
There would also be a proportional increase in Treasury supplement and interest on investments accruing to the fund.
Because the rules for the assessment of liability for national insurance contributions are substantially different from those for income tax, it is not practicable to estimate the financial implications of converting the Lower Earnings Limit for contributions into an allowance as used for tax purposes. However, were all weekly earnings below the lower earnings limit exempt from contributions liability as earnings up to the amount of the annual allowance are exempt from tax, the loss to the national insurance fund on the same basis as above would be:
- (a) £2.6 billion in respect of employees.
- (b) £3.4 billion in respect of employers.