If you have a job in Britain, you pay National Insurance. You may not realise this, because it is taken out of your wages, like taxes. But politicians are keen to tell you that it isn't tax...it's insurance. Baloney.

The scheme was introduced in 1911 by Lloyd George, and the idea was to provide a safety net for workers who hit difficulties. The idea was to build up a fund, from which things like medical care could be paid for. Today it's supposed to pay for the NHS, unemployment benefit, sickness and disability benefits, and the state pension. But in reality, there is no fund, and these things are paid for out of taxation – even pensions, which make it Britain's biggest Ponzi scheme If you or I tried to run anything like it, we would be in the slammer alongside Bernie Madoff.

The other reason you might not notice National Insurance is because the 'employer' pays more than the 'employee'. It's a lot more for employers, 12.8% of salary, so it's a major cost. But of course, it is really the employees who pay the whole cost...wages would simply be higher if it didn't exist.

National Insurance doesn't really pay for the NHS, pensions, and the rest. It's collected alongside other taxes and tipped into the general Treasury pot. And these things are paid for out of the general Treasury pot, alongside much else. If it did provide what it said it was for, it would be a pretty good deal for older workers, but a disastrous one for younger workers. After all, older people use more NHS services by far, and older people are more interested in pensions.

It also helps rich people more than poor people. Rich people are more likely to stay on at school and do degrees at university before they start working and paying in. They can also afford to retire earlier, and take their state pension at 65. People from poorer families are more likely to go to work straight from school, so are paying in for longer. They may not be able to retire at 65; if they put off collecting the state pension, they do get a higher rate, but it is unlikely to be enough to compensate. Richer people live longer so get more pension (and healthcare) benefits than poorer people. You can be stinking rich and still get your state pension and your free NHS benefits. Scam, or what?

National Insurance is a tax. We should bite the bullet and call it a tax, even though this would put the headline rate of tax up to about 35% and the top rate up to about 65%. But at least then we would see the size of the burden that exists on Britain's workers. Then give people a tax rebate if they insure their own health and provide their own pension. Job done. And done a lot more fairly than the state system.