Ship Money and National Insurance

Much ink has been spilled over the long term causes of the English Civil War (starting 1642). The Whig school of history has for a long time cited the constitutional infringements conducted by Charles I in his “eleven years tyranny” when he ruled with no parliaments, the most discussed one being ship money. 

Ship money was a prerogative tax/rate (so not approved by parliament) which was levied on coastal counties and towns in order to help fund the Navy in times of war. However, not only was Charles collecting this in peace time but he also extended it to all English counties, in 1635. While Charles claimed that it was being used to pay for measures to protect southern England from Barbary Corsairs, much of it was not and was siphoned off into the treasury. 

What is surprising, however, is how most opposition to the tax arose after it had been phased out in 1640. The future parliamentarian leadership, in the Grand Remonstrance passed in November 1641, complained about how, despite paying large sums, the piracy problem had not gone away. Despite much drama arising from the issues of ship money during Long Parliament and after, it had not remained a prominent issue at the time and encountered very little opposition. In 1635 only 2.5 per cent of the sum requested failed to come in. Even Oliver Cromwell paid his Ship Money on time. The one notable opposition was the prosecution of John Hampden in 1637, a man who would go on to propose the Grand Remonstrance, who was taken to court and in a moral if not legal victory only lost by seven judges to five. But even then, over 90% of the money was still collected. Collection only ran into problems when Charles decided to wage war on his Scottish subjects in 1639-40 when the amount paid fell quickly to 20%. 

So what has this got to do with National Insurance (NI)?

Firstly, they are both claimed to be collected for something they are not. Ship Money was supposed to fund the Navy and national defences against Barbary pirates who were enslaving Englishmen and Women along the coast of southern England. But instead it was mostly used to fund the normal functioning of the government. 

Likewise, NI is supposed to be funding primarily our pensions as well as healthcare services through the National Insurance Funds. However, these have been in surplus for over 20 years and their surpluses are growing. As a result, the money is loaned back to the central government meaning that National Insurance is really nothing more than direct revenue to the treasury. National Insurance is not specifically going into your pension pot but is just an income tax under another name, except it is also an exceptionally badly designed one. 

Secondly, it is likely to enjoy the same popularity fall when it is eventually removed (please let it be this year). While it would be a stretch to describe ship money as popular, it was nowhere near as unpopular as Long Parliament MPs or Whig historians would have you believe. As they analysed it in retrospect surely it must have been widely unpopular. 

I can imagine that we will have a similar situation in the future with national insurance. Currently 53 per cent of people support raising the basic rate of NI to 13% (from current 12%) if it went towards the NHS. Not only would this harm those on the lowest incomes much more than if it was a 1 percentage point rise in income tax (which only gets 43% approval) but again this would still essentially go into the central treasury pot. 

NI currently enjoys the relative obscurity and good branding that ship money did before the Long Parliament in 1640 and the Civil War starting in 1642. It has only survived because of its current lack of unpopularity . It either needs to be scrapped or seriously reformed to address the current failures of the system.