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

Photo: Getty
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If only I could wangle a job in the John Lewis menswear department I’d get to say, “Suits you, sir”

I’m afraid I am going to have to stick to writing.

So now that I have made the news public that I am even deeper in the soup than I was when I started this column, various people – in fact, a far greater number than I had dared hope would – have expressed their support. Most notable, as far as I can tell, was Philip Pullman’s. That was decent of him. But the good wishes of people less in the public eye are just as warming to the heart.

Meanwhile, the question is still nagging away at me: what are you going to do now? This was the question my mother’s sisters would always ask her when a show she was in closed, and my gig might have been running for almost as long as The Mousetrap but hitherto the parallels with entertainment had eluded me.

“That’s show business,” she said to me, and for some reason that, too, is a useful comment. (I once saw a picture of a fairly well-known writer for page and screen dressed up, for a fancy-dress party, as a hot dog. The caption ran: “What? And give up show business?”)

Anyway, the funds dwindle, although I am busy enough to find that time does not weigh too heavily on my hands. The problem is that this work has either already been paid for or else is some way off being paid for, if ever, and there is little fat in the bank account. So I am intrigued when word reaches me, via the Estranged Wife, that another family member, who perhaps would prefer not to be identified, suggests that I retrain as a member of the shopfloor staff in the menswear department of John Lewis.

At first I thought something had gone wrong with my hearing. But the E W continued. The person who had made the suggestion had gone on to say that I was fairly dapper, could talk posh, and had the bearing, when it suited me, of a gentleman.

I have now thought rather a lot about this idea and I must admit that it has enormous appeal. I can just see myself. “Not the checked jacket, sir. It does not become sir. May I suggest the heather-mixture with the faint red stripe?”

In the hallowed portals of Jean Louis (to be said in a French accent), as I have learned to call it, my silver locks would add an air of gravitas, instead of being a sign of superannuation, and an invitation to scorn. I would also get an enormous amount of amusement from saying “Walk this way” and “Suits you, sir”.

Then there are the considerable benefits of working for the John Lewis Partnership itself. There is the famed annual bonus; a pension; a discount after three months’ employment; paid holiday leave; et cetera, et cetera, not to mention the camaraderie of my fellow workers. I have worked too long alone, and spend too much time writing in bed, nude, surrounded by empty packets of Frazzles and Dinky Deckers. (For those who are unfamiliar with the latter, a Dinky Decker is a miniature version of a Double Decker, which comes in a bag, cunningly placed by the tills of Sainsbury’s Locals, which is usually priced at a very competitive £1.)

I do some research. I learn from an independent website that a retail sales assistant can expect to make £7.91 an hour on average. This is somewhat less than what is considered the living wage in London, but maybe this is accounted for in the John Lewis flagship store in Oxford Street. It is, though, a full 6p an hour more than the living wage in the rest of the land. Let the good times roll!

At which point a sudden panic assails me: what if employment at that store is only granted to those of long and proven service? God, they might send me out to Brent Cross or somewhere. I don’t think I could stand that. I remember when Brent Cross Shopping Centre opened and thought to myself, even as a child, that this was my idea of hell. (It still is, though my concept of hell has broadened to include Westfield in Shepherd’s Bush.)

But, alas, I fear this tempting change of career is not to be. For one thing, I am probably too old to train now. By the time I will have been taught to everyone’s satisfaction how to operate a till or measure an inside leg, I will be only a few months, if that, from retirement age, and I doubt that even so liberal an employer as John Lewis would be willing to invest in someone so close to the finish line.

Also, I have a nasty feeling that it’s not all heather-mixture suits with (or without) the faint red stripe these days. The public demands other, less tasteful apparel.

So I’m afraid I am going to have to stick to writing.

Nicholas Lezard is a literary critic for the Guardian and also writes for the Independent. He writes the Down and Out in London column for the New Statesman.

This article first appeared in the 22 June 2017 issue of the New Statesman, The zombie PM

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