§ Lord Aveburyasked Her Majesty's Government:
What would be the saving if the national insurance contribution system were abolished, and the same amounts raised by means of increases in the rates of corporation tax and income tax respectively, benefits being paid on criteria of residence alone.
The Chancellor of the Duchy of Lancaster and Minister for the Arts (The Earl of Gowrie)An estimated £10.7 billion is expected to be raised from employers' contributions in 1984–85, including the sums allocated to the Redundancy and Maternity Fund and to the National Health Service, and an estimated £10.1 billion from contributions paid by the employees and the self-employed. Raising the same amounts from corporation tax and income tax respectively it would have no significant effect on Inland Revenue's administrative costs. The administrative cost of collecting contributions in 1984–85 is estimated to be about £160 million. If the contributory system was abandoned, and the state retirement pension and other national insurance benefit were paid on the basis of residence alone, the administrative costs of collecting contributions would be saved; but far more people would qualify for benefits, and the resulting increase in benefit expenditure and the administrative cost of paying out to more people would easily offset that saving. The net cost cannot be quantified easily, but it is likely to be substantial.