How 'Facebook welfare' could reshape the benefits system

Putting social relationships, rather than the impersonal state, at the heart of the welfare system offers a route out of the negative debate about ‘scroungers’.

Generous benefits stop people working. That view, crudely put, is at the centre of the political debate about contributory welfare and benefit ‘scroungers’. It also explains why financial support for unemployed people in the UK is among the most meagre in the developed world. Stingy benefits give people little choice other than to get back to work as quickly as possible: nine in ten unemployed people are back in work within a year.

But for many workers, meagre benefits and tough sanctions create problems. A big drop in living standards during unemployment affords skilled workers no time to find jobs that put their skills to productive use – something that would benefit them, their employer and the taxpayer. It makes little economic sense to push our computer programmers into the nearest retail job just to save the state £71.70 per week in Jobseeker’s Allowance. The trouble is that while higher benefit levels would alleviate this problem, they would compromise work incentives.

There is a way to get the best of both worlds. By 2018, tens of millions of employees will be saving in a private pension thanks to auto-enrolment. That offers an opportunity to build an integrated system of pensions and unemployment savings – one that doesn’t risk diminishing people’s already low rainy-day savings in favour of retirement saving. Let’s call it a lifecycle account.

On hitting unemployment, benefits would automatically be topped-up to 70 per cent of a person’s prior earnings for up to six months, funded from their personal lifecycle account. They would get time to look for the right job, and in spending their own retirement money, jobseekers would have strong incentives to strike the right balance between taking a job today versus a better one tomorrow.

Can this approach tackle the sense that people who’ve not worked enough get “something for nothing” from welfare? Yes, but it will mean putting social relationships – rather than the impersonal state - at the heart of the benefits system.

Account holders would have to nominate three guarantors from their friends or family. They could go into the red while unemployed, giving them a better level of financial support. But their guarantors would be liable to repay a proportion of the money borrowed if their friend failed to find work and repay the cash.

People would be better supported in early unemployment, but in return their closest friends and family would have a direct interest in their work search activities. Harnessing the power of social networks, you might even call it ‘Facebook welfare’.

There is a route out of the negative debate about ‘scroungers’ but it will take a radical rethink of contributory welfare, putting compassionate obligation at the heart of the 21st century welfare state.  

People enter the Jobcentre Plus office in Bath. Photograph: Getty Images.

Ian Mulheirn is the director of the Social Market Foundation.

Photo: Getty
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Cabinet audit: what does the appointment of Liam Fox as International Trade Secretary mean for policy?

The political and policy-based implications of the new Secretary of State for International Trade.

Only Nixon, it is said, could have gone to China. Only a politician with the impeccable Commie-bashing credentials of the 37th President had the political capital necessary to strike a deal with the People’s Republic of China.

Theresa May’s great hope is that only Liam Fox, the newly-installed Secretary of State for International Trade, has the Euro-bashing credentials to break the news to the Brexiteers that a deal between a post-Leave United Kingdom and China might be somewhat harder to negotiate than Vote Leave suggested.

The biggest item on the agenda: striking a deal that allows Britain to stay in the single market. Elsewhere, Fox should use his political capital with the Conservative right to wait longer to sign deals than a Remainer would have to, to avoid the United Kingdom being caught in a series of bad deals. 

Stephen Bush is special correspondent at the New Statesman. He usually writes about politics.