Workers could be forced to pay at least £5 a week to private insurers to receive higher benefits, under new plans being considered by the Tories.
The proposal included in a report from the right-wing think tank Policy Exchange, who have close ties to the Tories, would see people who work more than 20 hours a week paying into a compulsory “collective insurance scheme”.
Policy Exchange argue that this would help restore the “contributory principle” in the benefits system. The more workers paid into the private insurance scheme, the more they would be able to draw out if they lose their job.
Contributory benefits accounted for 41% of all benefit payments in the 1970’s. This has now fallen to just 10%.
The scheme would be run by private insurers and fund managers, reports the Independent newspaper, but would be guaranteed by the Government.
According to the Policy Exchange the plan would save the Government around £2.6 billion a year and would replace the £72 a week contribution-based Jobseeker’s Allowance (JSA).
Workers who have been in employment for at least two years can currently claim contributory JSA for up to six months if they become unemployed, funded through National Insurance contributions.
The introduction of a “welfare account” would see workers National Insurance contributions reduced.
Payments from workers would raise £8 billion a year, £2 billion of which would go into a collective unemployment insurance scheme. The remainder would go into each persons individual “welfare account”.
Individuals who pay £5 a week would be permitted to withdraw £20 a week from their personal account to top up their unemployment benefit. Higher earners would be able to pay as much as £100 a week into the insurance scheme, and could use the additional money to fund retraining or in the event of a personal emergency or ill-health. If they do did not use the money it would top-up their pension when they retire by £10,000.
The proposal is currently being considered by the Tories and could form part of their general election manifesto.
Author of the report Steve Hughes said: “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. A new collective insurance scheme alongside personal welfare accounts will form the backbone of these reforms.”
The scheme could eventually be extended to include maternity leave, mortgage interest payments and social care. In the long-term it could mark the beginning of the end for the Welfare State and usher in a privately run, or corporate welfare system.
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