Hundreds of thousands of people would be guaranteed up to 80% of their earnings for a maximum of six months if they lose their job, under furlough-style proposals to overhaul the current unemployment benefit system.
Under the proposed scheme, people who have paid sufficient national insurance credits prior to losing their job would be eligible for payments of up to £460 a week – rather than the current job seeker’s allowance (JSA) of £75 a week for over 25-year-olds.
The scheme, proposed by the Fabian Society thinktank, addresses criticisms that current arrangements offer an inadequate safety net for many people who have “paid into the system” and yet receive little in the way of financial support when they most need it.
The proposals grew out of the experiences reported by people unexpectedly made jobless during the pandemic who saw their household incomes dip drastically only to discover means tested, flat-rate unemployment benefits offered them little or no help.
Official figures published earlier this year show at least 300,000 people were turned down for universal credit during the first lockdown – one in 10 of all applications – because they had over £16,000 in savings or their partner was in work, in many cases making it hard for them to meet rent, mortgage and bills, as well as causing debt and stress.
Although they were technically able to claim JSA, those rejected by universal credit were often unaware of this option, or surprised by how little support it offered. An airline pilot made redundant during the first lockdown told a Guardian investigation how he had been turned down for universal credit because he had £16,000 in savings, leaving him just £300 a month JSA to live on.
“There was no safety net for me at a time when, through no fault of my own, I was in financial crisis,” he said. “I did not realise that the social security system in this country was in such bad shape.”
The proposal, influenced by social insurance-style income protection schemes common in much of Europe, would be claimed alongside universal credit, and claimants would be subject to job-seeking requirements. It would not be means tested and would prevent many people falling foul of current benefit eligibility rules.
The Fabian Society said the scheme, costed at £4.8bn a year and paid for by a 1p in the pound rise in national insurance, would offer about 400,000 people more generous income protection. Half of people polled supported the idea, though this rose to 80% in Citizen’s jury-style forums where it was discussed in detail.
Many jurors strongly supported an unemployment insurance benefit that replaces contributory JSA with a scheme that mimicked the pandemic furlough scheme and paid up to 80% of previous earnings for six months, seeing it as fairer than existing arrangements.
“Furlough established the principle that we should match the support people receive to the earnings they have lost. For hundreds of thousands of people still looking for work, we must extend that approach and create a new permanent system of unemployment protection,” said Andrew Harrop, general secretary of the Fabian Society.
Although it would help middle-earning professionals and graduates ineligible for universal credit, the Fabian Society said the proposed scheme would be redistributive. Most beneficiaries would be households in the bottom half of earners, and £1.5bn of the annual cost spent on households in the poorest income decile.
