IPPR’s new briefing National Salary Insurance, Reforming the Welfare State to Provide Real Protection represents the first significant attempt from the left to suggest how the next Labour government might tackle welfare reform. The IPPR proposals respond to public concerns (raised in the listening events that Labour’s been conducting as part of our policy review) about legitimacy, adequacy and affordability. They develop the notion of contribution that is becoming increasingly clearly the philosophical basis of Labour’s new approach to welfare reform. As such, they deserve serious attention and debate.
The proposals – a combination of an ‘after the event’ contribution model to provide more generous out-of-work benefits to those experiencing short term unemployment, and much stronger employment guarantees – contain timely, interesting and welcome elements. These are ideas we ought to explore. But there are nonetheless some shortcomings in what is proposed which must be addressed, not least if our ambition to eradicate poverty is to be achieved.
Labour has seized on the contribution principle as the means to rebuild public support for the welfare state – an updating of the ‘rights and responsibilities’ approach. I agree that is the right territory for us to be in, but, as the Fabians suggested two years ago in The Solidarity Society, contribution should be understood in the widest possible sense.
One limitation of the IPPR’s proposed national salary insurance is that it continues to emphasise labour market participation and financial contribution as the route to more generous entitlements. That, however, ignores both the value of other forms of contribution, and the need for protection for the most vulnerable. Those who can’t work, who can’t find work, or who face significant barriers to work, and those who aren’t able to make a financial contribution, yet contribute time and energy, for example through caring or community activity, will be left behind. That risks a two-tier system of ‘deserving’ and ‘undeserving’ recipients of social security, perhaps even worse than we have now.
Of course, NSI could be one component of a system of out-of-work benefits that are also more generous to those experiencing long, even permanent periods of worklessness, perhaps as a result of ill health, disability or caring responsibilities, tackling the entrenched poverty that can result. But suggestions in the briefing that we should revisit universal benefits to help pay for enhanced protections are wide of the mark. If one goal of welfare reform is to build legitimacy with the public, let’s not forget the most popular and most defended benefits are the universal benefits. Their simplicity, lack of stigma, and high levels of take-up make them among the most effective work incentive and anti-poverty tools too.
I’m also worried that the contribution – or repayment – proposals could further undermine social solidarity, as the model proposed for NSI introduces a degree of individualised responsibility for unemployment insurance. Yes, it’s in the context of a wider universal system, but the limitations of the individualised approach can be seen even in the IPPR’s own briefing: time-limiting of NSI and only one period of entitlement are proposed.
Yet many experience serial unemployment, or several separate periods of worklessness, which must be recognised as an important driver of poverty (the notion of ‘people on benefits who’ve never worked’ is a distortion of the true picture, which is more typically one of stop-go, sporadic and unsustained periods of employment as the route to poverty). Those people need adequate social protection too, and a pooled system of social insurance will be necessary to provide it – NSI as the IPPR proposed it won’t serve their needs.
Nor is it clear what the impact on in-work poverty would be of making ‘retrospective’ contributions on returning to employment. It certainly suggests increased complexity, especially, as IPPR acknowledge, with the introduction of universal credit – though that’s not of itself a reason for not pursuing the idea. And we need to consider carefully the distributional impact of the proposals: gender, spatial impact and poverty risks over the lifecourse all spring to mind.
There is, then, much to consider, develop, debate and build on in what the IPPR suggest, and I welcome their thoughtful and timely contribution to the debate. Labour needs bold ideas for welfare reform, based on clear principles of tackling poverty, rewarding employment, building social solidarity, and securing popular support. In aiming to address those challenges with a positive alternative to ‘talking tough on welfare’, NSI offers a welcome early contribution to the debate.
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Kate Green is MP for Stretford and Urmston