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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Donald Trump promises quick Brexit trade deal - but the pound still falls

The incoming President was talking to cast out Brexiteer, Michael Gove. 

The incoming President, Donald Trump, told the Brexiteer Michael Gove he would come up with a UK-US trade deal that was "good for both sides".

The man who styled himself "Mr Brexit" praised the vote in an interview for The Times

His belief that Britain is "doing great" is in marked contrast to the warning of current President, Barack Obama, that Brexit would put the country "at the back of the queue" for trade deals.

But while Brexiteers may be chuffed to have a friend in the White House, the markets think somewhat differently.

Over the past few days, reports emerged that the Prime Minister, Theresa May, is to outline plans for a "hard Brexit" with no guaranteed access to the single market in a speech on Tuesday.

The pound slipped to its lowest level against the dollar in three months, below $1.20, before creeping up slightly on Monday.

Nigel Green, founder and chief executive of the financial planners deVere Group, said on Friday: "A hard Brexit can be expected to significantly change the financial landscape. As such, people should start preparing for the shifting environment sooner rather than later."

It's hard to know the exact economic impact of Brexit, because Brexit - officially leaving the EU - hasn't happened yet. Brexiteers like Gove have attacked "experts" who they claim are simply talking down the economy. It is true that because of the slump in sterling, Britain's most international companies in the FTSE 100 are thriving. 

But the more that the government is forced to explain what it is hoping for, the better sense traders have of whether it will involve staying in the single market. And it seems that whatever the President-Elect says, they're not buying it.


 

 

Julia Rampen is the editor of The Staggers, The New Statesman's online rolling politics blog. She was previously deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines.