By Marino Donati | 15 October 2014
UK workers should have to pay into a new unemployment insurance scheme to ensure that welfare provision is based on taxpayer contributions, the think-tank Policy Exchange has said.
Today's Making Contributions Count report called for people who have worked and paid their taxes will receive a greater level of out of work support.
Under its proposals, the next governemnt should establish a scheme where every worker contributes a small proportion of their weekly earnings into a new unemployment insurance scheme. The cost of participating would be offset through a reduction in National Insurance for employees.
This would help restore the link between contribution and benefits – contributory benefits accounted for 41% of the working age welfare bill in the late 1970s, compared to 10% now, the report stated.
The insurance scheme – which would be run by the private sector but guaranteed by the government – would cover the costs of the first three months of unemployment, replacing the contributory element of Jobseekers’ Allowance.
As well as this, all workers, including the self-employed who are currently not eligible for JSA, would be given a personal welfare account amounting to at least £260 a year. People would be able to build up their fund, and add to it, over the course of their working lives, and use it when necessary. Any money left in the account would go towards their pension package on retirement.
Policy Exchange said this could lead to billions in long-term savings for the government as individuals have savings they can draw on in event of unemployment.
Report author Steve Hughes said public trust in the benefits system would not be restored until the link between what people have put in and what they get out is improved.
‘The current system does not reflect the contributions that people make through their working lives. It does not reflect changes to the modern day labour market such as the rise in self-employment. And it does not meet the variety of needs that individuals have.
‘Successive governments have tried and failed to improve the system from the top down. This has created a culture of something for nothing with people becoming reliant on the state. Radical reform is needed to restore public trust in the welfare state. Personal responsibility must be at the heart of a change to the system.’
