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.

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Everyone's forgotten the one issue that united the Labour party

There was a time when Ed Miliband spoke at Momentum rallies.

To label the row over the EU at Thursday’s Labour leadership hustings "fireworks" would be to endow it with more beauty than it deserves. Owen Smith’s dogged condemnation of John McDonnell’s absence from a Remain rally – only for Corbyn to point out that his absence was for medical reasons – ought to go down as a cringing new low point in the campaign. 

Not so long ago, we were all friends. In the course of the EU referendum, almost all of the protagonists in the current debacle spoke alongside each other and praised one another’s efforts. At a local level, party activists of all stripes joined forces. Two days before polling day, Momentum activists helped organise an impromptu rally. Ed Miliband was the headline speaker, and was cheered on. 

If you take the simple version of the debate, Labour’s schism on the EU appears as an aberration of the usual dynamics of left and right in the party. Labour's left is supposedly cheering a position which avoids advocating what it believes in (Remain), because it would lose votes. Meanwhile, the right claims to be dying in a ditch for its principles - no matter what the consequences for Labour’s support in Leave-voting heartlands.

Smith wants to oppose Brexit, even after the vote, on the basis of using every available procedural mechanism. He would whip MPs against the invocation of Article 50, refuse to implement it in government, and run on a manifesto of staying in the EU. For the die-hard Europhiles on the left – and I count myself among these, having run the Another Europe is Possible campaign during the referendum – there ought to be no contest as to who to support. On a result that is so damaging to people’s lives and so rooted in prejudice, how could we ever accept that there is such a thing as a "final word"? 

And yet, on the basic principles that lie behind a progressive version of EU membership, such as freedom of movement, Smith seems to contradict himself. Right at the outset of the Labour leadership, Smith took to Newsnight to express his view – typical of many politicians moulded in the era of New Labour – that Labour needed to “listen” to the views Leave voters by simply adopting them, regardless of whether or not they were right. There were, he said, “too many” immigrants in some parts of the country. 

Unlike Smith, Corbyn has not made his post-Brexit policy a headline feature of the campaign, and it is less widely understood. But it is clear, via the five "red lines" outlined by John McDonnell at the end of June:

  1. full access to the single market
  2. membership of the European investment bank
  3. access to trading rights for financial services sector
  4. full residency rights for all EU nationals in the UK and all UK nationals in the EU, and
  5. the enshrinement of EU protections for workers. 

Without these five conditions being met, Labour would presumably not support the invocation of Article 50. So if, as seems likely, a Conservative government would never meet these five conditions, would there be any real difference in how a Corbyn leadership would handle the situation? 

The fight over the legacy of the referendum is theatrical at times. The mutual mistrust last week played out on the stage in front of a mass televised audience. Some Corbyn supporters jeered Smith as he made the case for another referendum. Smith accused Corbyn of not even voting for Remain, and wouldn’t let it go. But, deep down, the division is really about a difference of emphasis. 

It speaks to a deeper truth about the future of Britain in Europe. During the referendum, the establishment case for Remain floundered because it refused to make the case that unemployment and declining public services were the result of austerity, not immigrants. Being spearheaded by Conservatives, it couldn’t. It fell to the left to offer the ideological counter attack that was needed – and we failed to reach enough people. 

As a result, what we got was a popular mandate for petty racism and a potentially long-term shift to the right in British politics, endangering a whole raft of workplace and legal protections along the way. Now that it has happened, anyone who really hopes to overcome either Brexit, or the meaning of Brexit, has to address the core attitudes and debates at their root. Then as now, it is only clear left-wing ideas – free from any attempt to triangulate towards anti-migrant sentiment– that can have any hope of success. 

The real dividing lines in Labour are not about the EU. If they were, the Eurosceptic Frank Field would not be backing Smith. For all that it may be convenient to deny it, Europe was once, briefly, the issue that united the Labour Party. One day, the issues at stake in the referendum may do so again – but only if Labour consolidates itself around a strategy for convincing people of ideas, rather than simply reaching for procedural levers.