From the TUC

Something for nothing or nothing for something?

25 May 2012, by in Society & Welfare

Guest Post from Matt Oakley of Policy Exchange – see also the contributions by Richard Exell and Declan Gaffney and Kate Bell.

Two weeks ago the TUC launched the pamphlet Making a Contribution: social security for the future, introducing the concept of the “nothing for something” welfare state and arguing that we should return to a system which is based more strongly on the contributory principle.

Many readers of this blog may be surprised to hear that Policy Exchange completely agrees: the welfare system must be made to better reflect contribution.

Our report, No rights without responsibility: rebalancing the welfare state, showed that there is still widespread public support for the contributory principle in welfare. We highlighted evidence from a poll on the attitudes of the public towards the welfare state and fairness that showed that 51% of people thought that benefits should only be paid to those who had contributed in tax and NICs. That is a startling result. Over half of those questioned thought that no benefits at all should be paid out unless a contribution had been made.

However, despite this support for the contributory principle, successive Governments have undermined the principle to a situation where there is barely a distinction between those who have contributed all of their lives and those who have not. This means that those who have paid in, expecting to see the rewards of their contributions should they fall on hard times, do not get back what they expected.

In this respect the pamphlet is right to say that a “nothing for something” situation has arisen. However, No rights without responsibility also outlined that a parallel situation of “something for nothing” has also arisen. This means that those who have not paid in receive much the same benefits as those who have and that the system does not do enough to ensure that all jobseekers are fulfilling their obligations to actively seek work: an obligation that the vast majority of jobseekers take very seriously.

These joint problems of “something for nothing” and “nothing for something” mean that widespread disillusionment with the welfare state has grown. This is unsurprising: those in work on low incomes and those on benefits struggling to make ends meet and doing all they can to find work now see that their previous contributions count for nothing. Others who have not contributed and do not try, can enjoy a better lifestyle than they do. These are the reasons that attitudes towards welfare and benefit recipients have hardened.

A return to the contributory principle can tackle these issues. By distinguishing benefit levels and conditionality requirements between those who have contributed and those who have not, the system can both recognise and encourage contribution. This would reward personal responsibility as well as building a strong sense of reciprocity into the welfare system.

The TUC pamphlet contributes to a growing discussion of how this could operate and Policy Exchange will publish our own thoughts later this year. Until then, continuing this debate around the return of the contributory principle will be key to ensuring that welfare system protects the vulnerable while incentivising and rewarding the right behaviour.

See also the contributions by Richard Exell and Declan Gaffney and Kate Bell on this topic.
GUEST POST: Matthew Oakley is Head of Economics & Social Policy at Policy Exchange. His team focuses on welfare reform, growth and the UK economy, public sector reform and financial policy. Prior to joining Policy Exchange he was an Economic Advisor at the Treasury, where he worked on a number of tax and welfare issues for the previous eight years. He was closely involved in analysing the labour market impacts of and responses to the recession and in the Green and White Papers on Universal Credit.

One Response to Something for nothing or nothing for something?

  1. Clare Fernyhough
    May 25th 2012, 5:19 pm

    I seem to remember that at one time you received a percentage of your previous wage for a year (or maybe more) until you found another job; after then your unemployment benefit reduced to a basic level.

    That over 50% of people that were polled who said that they though that if someone had not paid into NI they should receive no benefit is shocking. I mean what do they really expect an unemployed person to do without any benefit at all? I have worked in part time jobs where I would not have paid in enough NI, so would it be fair to punish me because I had to take part time work so that I could be there for my children? It would be a completely unacceptable move that would cause homelessness among other things.

    Yes, I agree that there should be a distinction between those who have paid inn for many years, and those who have not. That is why reverting to the system whereby you receive a percentage of your wage for a limited time, and other people receive the basic benefit is more reasonable.

    I also think you may be confused about current ‘conditionality’ with regard to those who claim unemployment benefits, and ESA ‘working group’. These people are not being overlooked with regard to the ‘Work Programme’ and other mandatory work schemes. Claimants are indeed being forced onto such programmes.

    My carer’s partner who lost his job at the county council – and who by the way receives NO Jobseeker’s Allowance, and only signs on for his stamp – has been told this week that he is required to go onto a long-term work programme. Fortunately, he applied to the NHS to volunteer at the local hospital with a view to gaining full time work there, so he was able to avoid being forced to work in the local warehouses. He really was going to be made to work for NOTHING AT ALL!! I find that absolutely unacceptable. If he was going to be forced to do that, they should at least pay him JSA!!

    I have found that the idea of ‘making work pay’ along with attitudes towards people getting more benefit if they have paid in, often really means that other people – who for whatever reason have no job and haven’t paid in enough NI – amounts to cutting the benefits of people who already have nothing. The arguments above are good of course, but talk of removing benefits altogether is sailing into very dangerous territory indeed. Hopefully common sense will prevail!