How a salary insurance scheme would work

The unemployed would receive a higher level of support and pay back when they return to work.

On yesterday's Newsnight, James Purnell made two big argument about how we could make people trust and respect the welfare state again. First, that it should provide fewer, bigger things that would really make a difference to people's lives, rather than many smaller ones that are marginal in the good times and insufficient in the bad. And second, that the principle of contribution should be revived, so that people get something out in return for what they put in.

This would reverse the approach of successive government over recent decades, which has been to maintain a permanent rear-guard action against the threat of a taxpayer rebellion by making the welfare state tougher for those on benefits. Conditionality has an important role to play, but this is an essentially defensive tactic, rather than a positive strategy. For those of us who see a strong welfare state as essential to advancing social justice and full employment, this won't do. The solution is to not only make welfare more demanding, but also more protective too.

This insight opens up the potential to develop a popular, majoritarian agenda for welfare. As a first step along that road, IPPR is today publishing a report proposing National Salary Insurance (NSI). This would offer anyone who had made enough national insurance contributions but became unemployed up to 70 per cent of their previous earnings in non-means tested support for up to six months, capped at a maximum of £200 a week.

NSI would incorporate the existing £67.50 a week of contributory JSA, trebling the amount of support available to working people when they lose their job - while not affecting their entitlement to other benefits or tax credits. This would help protect people from the dramatic drop in income they face on losing their job, which can often trigger a spiral of further (costly) problems, like losing their home, relationship breakdown or racking up unaffordable debt. Based on recent JSA flows, we estimate that between 700,000 and one million people each year could be entitled to NSI.

To make the scheme affordable, the extra amount in NSI - up to £132.50 a week - would be repaid once people were back in work and could afford to do so, charged at a zero real rate of interest. There would be a cap on the amount that people could borrow at any one time, equivalent to the maximum support for the full six months (£3,445). Eighty per cent of people claiming JSA get back to work inside six months and as people paid back, they would become entitled to the help again.

In short, NSI would offer much greater security to people when it is really needed, without imposing significant new net costs on the state. Based on the design of the student loans system, the net liability to the state of NSI would be between £180m and £520m a year - though because people would be able to borrow less and have to pay back sooner, there are good reasons for thinking it would be even cheaper.

For much of the 20th century unemployment benefit was paid at reasonable levels of generosity to people who had lost their job after having paid into the system. Over the last three decades, however, the contributory principle has been eroded (with means testing becomingly increasingly dominant), while the real value of the jobseeker's allowance (JSA) has declined significantly relative to average earnings. Today, the average 'replacement rate' for British workers - the proportion of previous earnings they can get if they lose their job - is 54 per cent, compared to 70 per cent or more for many of our European neighbours, including some with higher employment rates than ours (like Denmark and the Netherlands).

So people not only worry to others are taking advantage of the system unfairly, they also feel - often rightly - that the system won't really be there for them if they need it. In response to this problem, NSI would significantly provide real income security in a more risky world, while reinforcing the principle that people are rewarded for contributing to the system.

NSI contributes to the big task of rethinking the centre-left's approach to welfare in a post-crash era. Alongside ensuring that people on benefits fulfil their obligations to look for work in return for the support they receive, this reform can help to make the welfare state popular again - by showing that it demands more and protects better.

Graeme Cooke is Visiting Fellow at IPPR

Graeme Cooke is Associate Director at IPPR

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Donald Tusk is merely calling out Tory hypocrisy on Brexit

And the President of the European Council has the upper hand. 

The pair of numbers that have driven the discussion about our future relationship with the EU since the referendum have been 48 to 52. 

"The majority have spoken", cry the Leavers. "It’s time to tell the EU what we want and get out." However, even as they push for triggering the process early next year, the President of the European Council Donald Tusk’s reply to a letter from Tory MPs, where he blamed British voters for the uncertain futures of expats, is a long overdue reminder that another pair of numbers will, from now on, dominate proceedings.

27 to 1.

For all the media speculation around Brexit in the past few months, over what kind of deal the government will decide to be seek from any future relationship, it is incredible just how little time and thought has been given to the fact that once Article 50 is triggered, we will effectively be negotiating with 27 other partners, not just one.

Of course some countries hold more sway than others, due to their relative economic strength and population, but one of the great equalising achievements of the EU is that all of its member states have a voice. We need look no further than the last minute objections from just one federal entity within Belgium last month over CETA, the huge EU-Canada trade deal, to be reminded how difficult and important it is to build consensus.

Yet the Tories are failing spectacularly to understand this.

During his short trip to Strasbourg last week, David Davis at best ignored, and at worse angered, many of the people he will have to get on-side to secure a deal. Although he did meet Michel Barnier, the senior negotiator for the European Commission, and Guy Verhofstadt, the European Parliament’s representative at the future talks, he did not meet any representatives from the key Socialist Group in the European Parliament, nor the Parliament’s President, nor the Chair of its Constitutional Committee which will advise the Parliament on whether to ratify any future Brexit deal.

In parallel, Boris Johnson, to nobody’s surprise any more, continues to blunder from one debacle to the next, the most recent of which was to insult the Italians with glib remarks about prosecco sales.

On his side, Liam Fox caused astonishment by claiming that the EU would have to pay compensation to third countries across the world with which it has trade deals, to compensate them for Britain no longer being part of the EU with which they had signed their agreements!

And now, Theresa May has been embarrassingly rebuffed in her clumsy attempt to strike an early deal directly with Angela Merkel over the future residential status of EU citizens living and working in Britain and UK citizens in Europe. 

When May was campaigning to be Conservative party leader and thus PM, to appeal to the anti-european Tories, she argued that the future status of EU citizens would have to be part of the ongoing negotiations with the EU. Why then, four months later, are Tory MPs so quick to complain and call foul when Merkel and Tusk take the same position as May held in July? 

Because Theresa May has reversed her position. Our EU partners’ position remains the same - no negotiations before Article 50 is triggered and Britain sets out its stall. Merkel has said she can’t and won’t strike a pre-emptive deal.  In any case, she cannot make agreements on behalf of France,Netherlands and Austria, all of who have their own imminent elections to consider, let alone any other EU member. 

The hypocrisy of Tory MPs calling on the European Commission and national governments to end "the anxiety and uncertainty for UK and EU citizens living in one another's territories", while at the same time having caused and fuelled that same anxiety and uncertainty, has been called out by Tusk. 

With such an astounding level of Tory hypocrisy, incompetence and inconsistency, is it any wonder that our future negotiating partners are rapidly losing any residual goodwill towards the UK?

It is beholden on Theresa May’s government to start showing some awareness of the scale of the enormous task ahead, if the UK is to have any hope of striking a Brexit deal that is anything less than disastrous for Britain. The way they are handling this relatively simple issue does not augur well for the far more complex issues, involving difficult choices for Britain, that are looming on the horizon.

Richard Corbett is the Labour MEP for Yorkshire & Humber.