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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Is defeat in Stoke the beginning of the end for Paul Nuttall?

The Ukip leader was his party's unity candidate. But after his defeat in Stoke, the old divisions are beginning to show again

In a speech to Ukip’s spring conference in Bolton on February 17, the party’s once and probably future leader Nigel Farage laid down the gauntlet for his successor, Paul Nuttall. Stoke’s by-election was “fundamental” to the future of the party – and Nuttall had to win.
 
One week on, Nuttall has failed that test miserably and thrown the fundamental questions hanging over Ukip’s future into harsh relief. 

For all his bullish talk of supplanting Labour in its industrial heartlands, the Ukip leader only managed to increase the party’s vote share by 2.2 percentage points on 2015. This paltry increase came despite Stoke’s 70 per cent Brexit majority, and a media narrative that was, until the revelations around Nuttall and Hillsborough, talking the party’s chances up.
 
So what now for Nuttall? There is, for the time being, little chance of him resigning – and, in truth, few inside Ukip expected him to win. Nuttall was relying on two well-rehearsed lines as get-out-of-jail free cards very early on in the campaign. 

The first was that the seat was a lowly 72 on Ukip’s target list. The second was that he had been leader of party whose image had been tarnished by infighting both figurative and literal for all of 12 weeks – the real work of his project had yet to begin. 

The chances of that project ever succeeding were modest at the very best. After yesterday’s defeat, it looks even more unlikely. Nuttall had originally stated his intention to run in the likely by-election in Leigh, Greater Manchester, when Andy Burnham wins the Greater Manchester metro mayoralty as is expected in May (Wigan, the borough of which Leigh is part, voted 64 per cent for Brexit).

If he goes ahead and stands – which he may well do – he will have to overturn a Labour majority of over 14,000. That, even before the unedifying row over the veracity of his Hillsborough recollections, was always going to be a big challenge. If he goes for it and loses, his leadership – predicated as it is on his supposed ability to win votes in the north - will be dead in the water. 

Nuttall is not entirely to blame, but he is a big part of Ukip’s problem. I visited Stoke the day before The Guardian published its initial report on Nuttall’s Hillsborough claims, and even then Nuttall’s campaign manager admitted that he was unlikely to convince the “hard core” of Conservative voters to back him. 

There are manifold reasons for this, but chief among them is that Nuttall, despite his newfound love of tweed, is no Nigel Farage. Not only does he lack his name recognition and box office appeal, but the sad truth is that the Tory voters Ukip need to attract are much less likely to vote for a party led by a Scouser whose platform consists of reassuring working-class voters their NHS and benefits are safe.
 
It is Farage and his allies – most notably the party’s main donor Arron Banks – who hold the most power over Nuttall’s future. Banks, who Nuttall publicly disowned as a non-member after he said he was “sick to death” of people “milking” the Hillsborough disaster, said on the eve of the Stoke poll that Ukip had to “remain radical” if it wanted to keep receiving his money. Farage himself has said the party’s campaign ought to have been “clearer” on immigration. 

Senior party figures are already briefing against Nuttall and his team in the Telegraph, whose proprietors are chummy with the beer-swilling Farage-Banks axis. They deride him for his efforts to turn Ukip into “NiceKip” or “Nukip” in order to appeal to more women voters, and for the heavy-handedness of his pitch to Labour voters (“There were times when I wondered whether I’ve got a purple rosette or a red one on”, one told the paper). 

It is Nuttall’s policy advisers - the anti-Farage awkward squad of Suzanne Evans, MEP Patrick O’Flynn (who famously branded Farage "snarling, thin-skinned and aggressive") and former leadership candidate Lisa Duffy – come in for the harshest criticism. Herein lies the leader's almost impossible task. Despite having pitched to members as a unity candidate, the two sides’ visions for Ukip are irreconcilable – one urges him to emulate Trump (who Nuttall says he would not have voted for), and the other urges a more moderate tack. 

Endorsing his leader on Question Time last night, Ukip’s sole MP Douglas Carswell blamed the legacy of the party’s Tea Party-inspired 2015 general election campaign, which saw Farage complain about foreigners with HIV using the NHS in ITV’s leaders debate, for the party’s poor performance in Stoke. Others, such as MEP Bill Etheridge, say precisely the opposite – that Nuttall must be more like Farage. 

Neither side has yet called for Nuttall’s head. He insists he is “not going anywhere”. With his febrile party no stranger to abortive coup and counter-coup, he is unlikely to be the one who has the final say.