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National Insurance

Treasury written question – answered on 16th May 2002.

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Photo of Steve Webb Steve Webb Shadow Secretary of State for Work and Pensions

To ask the Chancellor of the Exchequer if he will set out the basis for the assessment made in para 2.28 of the Taylor report "The Modernisation of Britain's Tax and Benefit System: Number Two" regarding the under-contribution to the NI Fund by the self-employed; what his latest estimate is of that under-contribution; if he will undertake a similar comparison between the contributions paid by married woman at the reduced rate and the benefits to which such women are entitled; and if he will make a statement.

Photo of Ruth Kelly Ruth Kelly Economic Secretary, HM Treasury

The latest estimate of the value of the reduction in contributions by the self-employed which is not matched by reduced benefit entitlement is in Inland Revenue Statistics table 1.5, on the Inland Revenue website (www.inlandrevenue.gov.uk/stats/tax–expenditures_g_t05_1.htm).

The value is calculated by estimating the total employee and employer national insurance contributions which would be paid by the self-employed if they were to be subject to Class 1 contributions instead, and comparing this with the estimated total Class 2 and Class 4 contributions actually paid by the self-employed. An adjustment is made to allow for the fact that the self-employed are not eligible for certain contributory benefits, such as contribution-based jobseeker's allowance and the state second pension (or SERPS prior to April 2002).

If a similar calculation was performed for married women who have opted to pay national insurance contributions at the reduced rate it would not show any under-contribution.

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