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 Images
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Let 2016 be the year that Ireland gives women the right to choose

As we commemorate and celebrate the centenary of the Easter Rising next year, we must remember that while the constitution was hard fought for it cannot be static. 

There is mounting pressure for the Irish government to look into decriminalising abortion. It has been growing since Savita Halappanavar’s death three years ago in a hospital in Galway due to complications during pregnancy. She was refused an abortion because Irish law forbids it. Earlier this month Irish women tweeted the Taoiseach Enda Kenny about their periods using the #repealthe8th in an attempt to bring attention to the issue. Now last Friday, Amnesty International published a letter calling for the decriminalisation of abortion internationally, signed by 838 doctors, most importantly this included some of Ireland’s leading healthcare professionals. This is the perfect time for political parties to commit to holding a referendum on the issue if elected they are elected and form the next government in 2016.

One part of the Irish legislative process I have always been proud of is the use of referendum and bringing serious questions to the electorate. It protects the constitution from changing on political whims or based on the beliefs of whatever party is in government. As such it remains a document of the people, it was after all put to vote before it was instituted in 1937. It also passes issues, which have proved contentious and in other countries have relied on the sympathy of lawmakers, by popular consent. Same sex marriage was legalised in a beautiful display of support, 62% of the electorate came out to vote for equality. Social media was full of pictures of Irish people living abroad going home especially for the referendum.

There has previously been a number referendums on abortion and following Savita’s death, the  Protection of Life during Pregnancy Act 2013 was brought in which allowed abortion if the mother’s life was in danger. It was important and a sensible measure to bring in. However it resulted in serious splits and some contentious situations. Lucinda Creighton defied Fine Gael’s whip and found herself stripped of her ministry and ostracised, leading to the creation of her new party Renua Ireland. Creighton was recently asked if she would agree with aborting baby Hitler. This is the ridiculous side of the debate which doesn’t help either side. Many thought that the 2013 act was too quickly done and not properly explained or understood. A referendum is the best way to avoid this. The question can be explained properly and debated to give people access to more information. Once passed, it is done so with consent from a majority of the electorate and this makes it much more difficult to argue against its legitimacy than if it is forced through. The result is also binding regardless of the current government’s stance, you can have a second vote but you can’t force people to vote the other way.

Public support for legalising or extending abortion rights is there. A RedC poll for Amnesty International in July showed 67 per cent of people thought abortion should be decriminalised while 81 per cent thought it should be allowed in more situations. 45 per cent were in favour of abortion whenever a woman wanted it. It is not an overwhelming figure but if 45 per cent of people believe this should be instituted then they ought to be listened to and the question brought to the country.

Realistically, nothing will be done before the next election which is expected to be held in early 2016. However now is an excellent time for political parties to examine their stance on abortion and look at holding a referendum and making it part of their manifestoes. The new government will then be in a position to announce a new referendum on abortion as soon as they are in power. The last one was held in 2002, meaning that many young people particularly women at the height of their fertility have never actually had a say on this matter.

As we commemorate and celebrate the centenary of the Easter Rising next year, we must remember that while the constitution was hard fought for it cannot be static. The world that its authors inhabited is not the same as the one we live in today. The constitution has changed to bring peace to Northern Ireland, to legalise divorce and same sex marriage, let 2016 be the year it changes to give women the freedom to choose.