Changes to NI system will need UK consent

Tynwald buildings, Douglas

Tynwald buildings, Douglas

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An extra £2.25 million would be raised each year if workers who are over pension age were to continue to pay National Insurance contributions.

Further questions were raised in the House of Keys over the state of the National Insurance Fund which Treasury Minister Eddie Teare has warned will collapse by 2050 if no action is taken.

Mr Teare and Minister for Policy and Reform Chris Robertshaw were due to give evidence to a Public Accounts Committee yesterday afternoon about the decision to spent £775,000 on consultants to review the NI Fund and the wider benefits system.

In the Keys this week, Peter Karran MHK (LibVan, Onchan) asked how much would be added to the fund if workers who are over pension age were to continue to pay NI contributions.

Mr Teare said removing the exemption to pay the contributions after an individual reaches state pension age would raise an additional £2.25m a year.

But he reminded members that the island has a reciprocal agreement with the UK on social security matters and any major changes to the NI scheme would therefore need the agreement of Westminster before they could be introduced here.

And he added: ‘It’s not as simple as the member seeks to make out.’

Mr Teare pointed out that employers continue to pay NI contributions up to the age of 70 and the reduction to 30 in the number of contributing years needed to get a full state pension had been a major issue with the current imbalance in the fund.

‘This just goes to show this isn’t a simple exercise – we need to look at how it works in the round,’ he said.

Mr Karran suggested he was trying to ‘help executive government’ with his proposal and Mr Teare was just making excuses. ‘We need to take action sooner rather than later,’ he said.

Figures released in a written reply by Mr Teare to a question from Kate Beecroft MHK (LibVan, Douglas South) show that the NI Fund was in deficit for the first time in 2012-13, to the tune of £14,006,486.

The deficit estimated for the 2013-14 is £10,433,761.

In the Keys, Kate Beecroft (Lib Van, Douglas South) asked Mr Teare whether he supported taking £44m out of the NI Fund to pay for the ‘new’ Noble’s hospital.

He replied that we now have a modern hospital built to the highest standards and Jersey was now talking about spending £300m on their new hospital. The island had got value for money, he suggested.

In answer to a separate question from Mr Karran, the Treasury Minister said he had taken steps to tackle the use of personal service companies for tax avoidance purposes.

He said payment of dividends does not attract an NI charge and company owners can arrange their financial affairs in perfectly legal ways which may affect the timing and amount of income tax and NI paid.

Mr Teare said the NI scheme will be in his mind as a review continues into the island’s benefits system.

Mr Karran suggested: ‘The only people who pay tax are the working people.’

Alfred Cannan MHK (Michael) pointed out there were many companies whose owners who had spent large amount of money investing in their firms and were working as hard as they can to keep their businesses going and were far from what you would regard as wealthy.

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