Secret Thatcher-era memo undermines Sunak’s plan to scrap national insurance

A secret, unpublished memo from Margaret Thatcher’s tax-cutting chancellor Nigel Lawson warned against merging national insurance and income tax because it would “create many losers” including pensioners.

The type-written memo, marked secret, was sent to Thatcher two months before Lawson’s third budget and was enclosed alongside a green paper set to be published that day.

In the brief, Lawson says he has considered “the scope for integrating income tax and national insurance contributions”, but concludes: “I see little practical merit in moving in this direction; it would destroy the contributory principle and create many losers, especially among the elderly.”

In the March budget, Jeremy Hunt announced his “long-term ambition” to abolish NICs, saying he was looking at the option to “merge income tax and national insurance”.

Jonathan Ashworth, the shadow paymaster general, called the Lawson memo “the unexploded bomb which blows apart Rishi Sunak’s case for the merger of income tax and national insurance, and if he wants to persist with that plan now, he will need to explain why he is ignoring the advice of his own hero and instead asking pensioners to pay the price”.

Labour insiders have said the final week of the local election campaign will be focused on older voters and rising concerns about the repercussions of abolishing national insurance.