Link unemployment benefit to personal contributions, urges thinktank
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Version 0 of 1. An unemployment insurance scheme reflecting personal contributions is being examined by the Treasury as it seeks £12.5bn in welfare savings for if the Conservatives are re-elected in May. The radical proposal is one of several set out by the right-of-centre thinktank Policy Exchange, including cuts in child benefit for those with more than four children. The thinktank, which has close ties to the chancellor, George Osborne, also proposes that pensioners should be asked to opt in to receive their winter fuel payment rather than receive it automatically. The package comes ahead of speeches on Wednesday about how to make welfare savings by the work and pensions secretary, Iain Duncan Smith, his opposition Labour counterpart, Rachel Reeves, and the former Labour cabinet minister David Blunkett. Policy Exchange believes its proposals on child benefit and the winter fuel allowance would save up to £1.5bn by 2020. The winter fuel allowance is not means tested and goes automatically to all those receiving the basic state pension, regardless of their financial situation. The Treasury is known to be studying plans for the contributory jobseeker’s allowance to be replaced with a new national unemployment scheme and system of personal welfare accounts, funded by a 1% cut in the National Insurance rate. Every worker in Britain would contribute a small proportion of their weekly earnings into both a new nationwide unemployment insurance scheme and a personal pot called MyFund. The funds would be used in times of unemployment, with people who have been in work all their lives set to benefit from £10,000 on retirement. Supporters see the scheme as a way of rewarding hard work, and reducing EU migrants’ access to the UK benefits system. In an attempt to get the public to think more closely about the cost of benefits to the elderly, the thinktank proposes that spending on the state pension – which already accounts for more than 40% of welfare spending – to be included in the overall cap on government welfare spending. It claims that including pensions in the cap would not actually reduce spending but would at least highlight the consequences of such high spending. Aware of the political barriers to tackling the protection given to pensions, the report simply implies this spending will have to be addressed: “The older the population gets, and the more of national income that pension costs consume, the more there needs to be a debate about what we want our social security system to be.” Policy Exchange says three-quarters of people would tolerate means-testing of the winter fuel allowance. It also not only proposes ending child benefit after the fourth child but also reducing the level of the benefit after each child. In a move that will not be welcomed by hardliners in the Department of Work and Pensions, the thinktank also urges the government to rethink the way it is imposing benefit sanctions on those that fail to meet job centre requirements. The minister for work, Esther McVey, is due to appear in front of the work and pensions select committee on Wednesday about the issue. Policy Exchange proposes pre-paid benefit cards as a non-financial warning – instead of a complete withdrawal of financial benefits – to people who have repeatedly broken the terms of their job search requirements. It points out that around 14% of claimants are referred for sanctions, and 6% sanctioned, each month. This means the requirements placed on claimants need to be clearly communicated, ensuring that only those who are not making genuine efforts to find work are sanctioned. It argues: “There is a risk that sanctions can have a counterproductive effect for certain groups – causing them to become distracted. A system of conditionality cannot work if people do not understand what is required of them, and why they should carry it out.” It also calls for reform of the work programme, saying the payment to work providers for getting somebody with many barriers to work into sustained employment does not reflect the difficulty of achieving it. The report says: “This is not a criticism of providers, who are taking the rational course of action to deliver the best outcomes for the highest number of individuals, but does highlight that the most vulnerable claimants may not always receive the most effective support from the programme’s current design.” Contracts should be based around claimants’ barriers to the labour market, rather than just primary benefit type and claim. |