Why Labour is right to consider a salary insurance scheme

A welfare system that provides greater support to people when they need it most offers an alternative to the divisive pose bring struck by the coalition.

On Sunday, the Observer reported that Labour are considering an IPPR proposal to establish a system of National Salary Insurance (NSI). This would offer working people who have contributed into the benefits system, but have lost their job, much greater income protection at the point they need it most. The twist on the proposal – which has provoked most reaction – is that to control the costs of the system, the extra money provided would be recouped once people are back in employment.

To clear up one thing straight away: this proposal is in addition to existing entitlements to Jobseeker's Allowance (we do not want to turn JSA into a loan). This means that, contrary to one claim, it wouldn’t mean people who hadn’t worked get more than those who had.

In our original proposal, we suggested that the additional amount available might be £132.50 a week for six months, providing people with £200 a week in total, including their £67.50 in JSA (which has actually now risen to £71.70 a week). These numbers could be altered, but the core rationale is three threefold.

First, for anyone earning much above minimum wage, the benefits system offers very weak protection of their income for short-term, temporary periods of unemployment. For instance, social security provides just 38 per cent of the previous average wage for a single person who also qualifies for help with rent. This compares to an EU average of 58 per cent. For those not eligible for housing support, such as the two-thirds of homeowners, the replacement rate for average earners is just 13 per cent. And it’s not that the private insurance market is filling the gap: a survey published last week by Scottish Widows found that only 5 per cent of people own an income protection policy, which would pay out if they lose their job.

The second rationale for NSI directly flows from the first: the popular legitimacy crisis facing the welfare system is not only about the sense that it pays out too much to people who have not worked, but also that it offers so little protection to those who have. A decade and a half of welfare reform has focused on increasing the conditions attached to the receipt of benefits, but has neglected the erosion of any meaningful reward for the contributions of those who have worked (outside of the state pension). Labour is right to alight on this issue as part of developing a strategic alternative to the populist and divisive pose bring struck by the current government on welfare.

However, the challenge in seeking to improve income protection and rebuild the contributory principle is that it costs money. This is where the third rationale comes in. Deploying the income-contingent loan principle in NSI means that greater security at the point of crisis can be improved without imposing considerable extra net costs. In other words, the social security system would add a new function: smoothing household income to help people to cope with the loss of a wage, keeping them out of the hands of payday lenders and loan sharks, while reclaiming the money once they are back on their feet.

Some have argued that repayment will create a disincentive for people to return to work. Clearly this risk should be monitored on implementation, and the point at which repayments began and the repayment rate could be amended to reduce this concern. But over half of people who claim JSA leave the benefit within three months; 80 per cent after a further three months. Conditionality would continue to apply, so people would be required to take up job offers (or lose access to NSI) and if they hadn’t found employment in six months they would revert to the much lower level of JSA (a strong incentive to find work within that period). Fundamentally, this policy is explicitly aimed at people who have a good work record and so are motivated and job ready.

Critics of this idea have questioned why the extra income protection provided by NSI cannot be attained simply by increasing the level of contributory JSA. The problem of course is where the money would come from (we estimated the upfront cost at somewhere between £1.8bn and £2.6bn, though it is hard to be precise). One option is redistributing money from within the existing social security budget, perhaps by lower disregards or sharper tapers on Universal Credit (or, of course, ending the protection of pensioner benefits). Alternatively, the costs could be met by extra departmental cuts, more borrowing or higher taxes. But it is highly unlikely that any party will cut public services or raise taxes to pay for a higher rate of JSA (especially with £21bn of welfare cuts that some want to see reversed potentially ahead of this in the queue).

Given all this, those of us interested in building up economic protection for working people should probably bank on having to be creative.

A National Salary Insurance system would provide people with £200 a week for six months after they become unemployed. Photograph: Getty Images.

Graeme Cooke is Associate Director at IPPR

John Moore
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The man who created the fake Tube sign explains why he did it

"We need to consider the fact that fake news isn't always fake news at the source," says John Moore.

"I wrote that at 8 o'clock on the evening and before midday the next day it had been read out in the Houses of Parliament."

John Moore, a 44-year-old doctor from Windsor, is describing the whirlwind process by which his social media response to Wednesday's Westminster attack became national news.

Moore used a Tube-sign generator on the evening after the attack to create a sign on a TfL Service Announcement board that read: "All terrorists are politely reminded that THIS IS LONDON and whatever you do to us we will drink tea and jolly well carry on thank you." Within three hours, it had just fifty shares. By the morning, it had accumulated 200. Yet by the afternoon, over 30,000 people had shared Moore's post, which was then read aloud on BBC Radio 4 and called a "wonderful tribute" by prime minister Theresa May, who at the time believed it was a genuine Underground sign. 

"I think you have to be very mindful of how powerful the internet is," says Moore, whose viral post was quickly debunked by social media users and then national newspapers such as the Guardian and the Sun. On Thursday, the online world split into two camps: those spreading the word that the sign was "fake news" and urging people not to share it, and those who said that it didn't matter that it was fake - the sentiment was what was important. 

Moore agrees with the latter camp. "I never claimed it was a real tube sign, I never claimed that at all," he says. "In my opinion the only fake news about that sign is that it has been reported as fake news. It was literally just how I was feeling at the time."

Moore was motivated to create and post the sign when he was struck by the "very British response" to the Westminster attack. "There was no sort of knee-jerk Islamaphobia, there was no dramatisation, it was all pretty much, I thought, very calm reporting," he says. "So my initial thought at the time was just a bit of pride in how London had reacted really." Though he saw other, real Tube signs online, he wanted to create his own in order to create a tribute that specifically epitomised the "very London" response. 

Yet though Moore insists he never claimed the sign was real, his caption on the image - which now has 100,800 shares - is arguably misleading. "Quintessentially British..." Moore wrote on his Facebook post, and agrees now that this was ambiguous. "It was meant to relate to the reaction that I saw in London in that day which I just thought was very calm and measured. What the sign was trying to do was capture the spirit I'd seen, so that's what I was actually talking about."

Not only did Moore not mean to mislead, he is actually shocked that anyone thought the sign was real. 

"I'm reasonably digitally savvy and I was extremely shocked that anyone thought it was real," he says, explaining that he thought everyone would be able to spot a fake after a "You ain't no muslim bruv" sign went viral after the Leytonstone Tube attack in 2015. "I thought this is an internet meme that people know isn't true and it's fine to do because this is a digital thing in a digital world."

Yet despite his intentions, Moore's sign has become the centre of debate about whether "nice" fake news is as problematic as that which was notoriously spread during the 2016 United States Presidential elections. Though Moore can understand this perspective, he ultimately feels as though the sentiment behind the sign makes it acceptable. 

"I use the word fake in inverted commas because I think fake implies the intention to deceive and there wasn't [any]... I think if the sentiment is ok then I think it is ok. I think if you were trying to be divisive and you were trying to stir up controversy or influence people's behaviour then perhaps I wouldn't have chosen that forum but I think when you're only expressing your own emotion, I think it's ok.

"The fact that it became so-called fake news was down to other people's interpretation and not down to the actual intention... So in many interesting ways you can see that fake news doesn't even have to originate from the source of the news."

Though Moore was initially "extremely shocked" at the reponse to his post, he says that on reflection he is "pretty proud". 

"I'm glad that other people, even the powers that be, found it an appropriate phrase to use," he says. "I also think social media is often denigrated as a source of evil and bad things in the world, but on occasion I think it can be used for very positive things. I think the vast majority of people who shared my post and liked my post have actually found the phrase and the sentiment useful to them, so I think we have to give social media a fair judgement at times and respect the fact it can be a source for good."

Amelia Tait is a technology and digital culture writer at the New Statesman.