How Labour can offer something for something on welfare

A two-tier system of benefits for job seekers, with higher entitlements for those with strong work records, could be funded by reducing spending on mortgage interest.

This is set to be a big week for Labour. Today Ed Balls launched a foray into pensioner benefits, later this week Ed Miliband is set to address the question of working age welfare. The question is what principle (or combination of principles) should underpin any new approach. The shadow chancellor’s announcement today points towards more means-testing but in January, Miliband defended universal benefits and since then Liam Byrne has promised that Labour would "strengthen the old principle of contribution". 

Means-testing and the contributory principle are, of course, uneasy bedfellows; one judges eligibility by what people need to take out of a system, the other by what people have put in. Labour should plump for more emphasis on the latter. This matters most for working age welfare, which has been haemorrhaging support in recent years. International evidence shows that the UK has one of the least generous welfare systems for the unemployed –and one of those with the weakest relationship between what people have paid in and what they get out. The two are linked: people tend to support systems with a stronger contributory element.

In a paper published today Demos argues that the government should create a two-tier system of benefits for job seekers, with higher entitlements for those with strong work records. This would end the ‘nothing for something’ system, in which many people contribute over a number of years, only to find themselves entitled to very little when they require help. This would be paid for by reducing spending on the Support for Mortgage Interest (SMI) scheme, which currently covers the interest on up to £200,000 of loans or mortgages for homeowners out of work, up to a maximum of two years.

The principle behind this is that if people make the choice to take on a mortgage, they should also insure themselves against the associated risks. Homeowners losing their entitlement to SMI would instead be auto-enrolled into mortgage payment protection insurance, leaving them to choose to not cover themselves or to purchase insurance for mortgage interest payments at a cost of £33 a month at most - less than the price of an average mobile phone bill. The money saved from this change would allow for a higher payments for those with strong work records – roughly £95 a week compared to the £71.70 that all job seekers currently get for at least six months.

These changes would promote personal responsibility, through homeowners insuring themselves against risk incurred by their own choices. They would engender reciprocity, through a system which rewarding contribution. And they would avoid increasing the deficit by reallocating existing spending, rather than adding new commitments. 

Duncan O'Leary is deputy director of Demos

A street cleaner passes the Jobcentre Plus office on January 18, 2012 in Bath, England. Photograph: Getty Images.

Duncan O’Leary is deputy director of Demos

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Donald Trump's healthcare failure could be to his advantage

The appearance of weakness is less electorally damaging than actually removing healthcare from millions of people.

Good morning. Is it all over for Donald Trump? His approval ratings have cratered to below 40%. Now his attempt to dismantle Barack Obama's healthcare reforms have hit serious resistance from within the Republican Party, adding to the failures and retreats of his early days in office.

The problem for the GOP is that their opposition to Obamacare had more to do with the word "Obama" than the word "care". The previous President opted for a right-wing solution to the problem of the uninsured in a doomed attempt to secure bipartisan support for his healthcare reform. The politician with the biggest impact on the structures of the Affordable Care Act is Mitt Romney.

But now that the Republicans control all three branches of government they are left in a situation where they have no alternative to Obamacare that wouldn't either a) shred conservative orthodoxies on healthcare or b) create numerous and angry losers in their constituencies. The difficulties for Trump's proposal is that it does a bit of both.

Now the man who ran on his ability to cut a deal has been forced to make a take it or leave plea to Republicans in the House of Representatives: vote for this plan or say goodbye to any chance of repealing Obamacare.

But that's probably good news for Trump. The appearance of weakness and failure is less electorally damaging than actually succeeding in removing healthcare from millions of people, including people who voted for Trump.

Trump won his first term because his own negatives as a candidate weren't quite enough to drag him down on a night when he underperformed Republican candidates across the country. The historical trends all make it hard for a first-term incumbent to lose. So far, Trump's administration is largely being frustrated by the Republican establishment though he is succeeding in leveraging the Presidency for the benefit of his business empire.

But it may be that in the failure to get anything done he succeeds in once again riding Republican coattails to victory in 2020.

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.