Andrew Young
I am glad I started a blog as a conversation between Prem and Dan about the state of the national insurance fund. I would not let two accountants have the last word.
Here are two comments from venerable actuaries.
I got a comment from my friend Andy Young who was the Government Actuary for the DWP (DHS, DSS or whatever). He had this to say after reading my blog
I certainly will not read anything from these people on the NI Fund.
I asked him not to spoil our fun
The NI is my idea of professional fun.
For me anyway.
I reckon GAD will have some interesting results. I am not sure the latest numbers published are up to date with all the recent shenanigans of reductions and then increases in NI.
Not that it matters. It is just an accounting device. To the extent it has a “balance” it is all in gilts and so if it is needed other taxes have to make the payments.
What matters is the trend in expenditure.
I thought that that would be the extent of mental exertion but I was wrong. Here is Bryn Davies who sits with Prem Sikka in the House of Lords and is also an actuary.
I won’t side with Andy Young or Bryn Davies but I will repeat that my heart is with Prem and so with Bryn.
Bryn Davies
I’m a friend and colleague of Prof. Prem Sikka, who is valuable member of the House of Lords for a range of reasons, not least as a leading academic in the field of accountancy. It is Dan Neidle’s intemperate comments that are the embarrassment, as he is clearly wrong in what he says about the NI Fund.
First, he states the Fund is “a buffer to cover pensions/social security for an aging population”. This is simply untrue. The NI system is funded on a pay-as-you-go or unfunded basis and there is no provision for balances to be built up to pay future benefits. Some may regard such reserves as desirable and the existence of the accounting reserves might lead them to some post-hoc rationalisation. But this is just wishful thinking.
Second, I have no doubt that the increase in reserves is not in any way driven by a wish to fund future benefits. It is simply the outcome of the intention to avoid increasing income tax. Prem is clear in his view that such an increase should fall on richer people, for example, taxing investment income like earned income.
In summary, it is entirely coherent to argue that NI contributions have been set higher than necessary, not because it builds up the NI Fund, but in order to avoid increasing tax on rich people. It is worth noting that recent changes in NI contributions, under both governments, have been made without any proper assessment of their impact on the Fund. We have to await the forthcoming quinquennial review from the Government Actuary to get any real idea of where the Fund is going.
