Think Tanks
Printable version E-mail this to a friend

Think-tank calls for two-tier benefits system to reward contributors

Workers who have made sufficient National Insurance contributions should be rewarded with a higher £95-a-week rate of Job Seeker's Allowance, according to the think-tank Demos.

The proposal is one of a number of fully-costed ideas put forward by a new policy paper that aims to restore a contributory attitude to welfare by rewarding work and tackling criticisms about a 'nothing for something' culture in benefits.

According to Demos researchers, the Government would fund the increase to contribution-based JSA by reducing spending on the Support for Mortgage Interest (SMI) scheme, which currently covers the interest on up to £200k of loans or mortgages for homeowners out of work, up to a maximum of two years.

Closing the scheme to new entrants from the working-age, non-disabled population from 2015 would save £270 million a year, allowing contribution-based JSA recipients, numbering approximately 226,000 at any one time, to receive an extra £23.04 a week.

Homeowners losing their entitlement to SMI would instead be auto-enrolled into mortgage payment protection insurance, allowing them to either actively choose to not be covered or protecting themselves at a cost of, at most, £33 a month - less than the price of an average mobile phone bill.

The British Social Attitudes survey shows public support for a greater contributory element to welfare spending. The percentage of people agreeing that 'the government should spend more money on welfare benefits for the poor, even if it leads to higher taxes' peaked in 1989 and has fallen ever since, with a majority disagreeing for the first time in 2007.

Similarly, the percentage of people who agree 'if benefits were not so generous, people would learn to stand on their own two feet' has increased from around a third in 1987 to over half in 2010.

A contributory principle in welfare has also attracted growing political interest from across the spectrum. Shadow work and pensions secretary, Liam Byrne, said that, if elected in 2015, Labour would 'strengthen the old principle of contribution'. This echoes Ed Miliband's promise that 'Labour will be a party that rewards contribution, not worklessness.'

Others on the centre-right have also pursued similar interests, with Conservative MP Chris Skidmore recently arguing that the contributory principle could be revived through a system of loans to welfare claimants, paid back through future contributions.

Applying the contributory principle to ESA

To reinforce the contributory principle, the Demos paper also argues to bring out-of-work benefits for disabled and non-disabled benefits into alignment, leading to a similar two-tier system whereby contributory ESA is £94.74 a week and income-based ESA matches the current JSA amount of £71.70 a week.

All money saved from these changes would be directly transferred from the government's ESA budget to the Personal Insurance Payment (PIP) budget, which covers the living costs for all disabled people.

The shift would firstly prevent the cost of being disabled being conflated with the cost of being unemployed, and lead to a simpler model allowing disabled people's costs to be supported by virtue of their disability, regardless of employment status.

Secondly the changes would reduce the increasing stigma attached to disability benefits and reduce any incentive for people out-of-work to claim disability benefits rather than Job Seekers Allowance.

Deputy Director at Demos, Duncan O'Leary, who authored the paper said:

"These proposals are designed to tackle the 'nothing for something' problem - when people have contributed for many years but find themselves entitled to just £71.70 per week when they lose their job.

"Increasing that figure to around £95 for contributors would send an important signal and help restore public support for welfare."

Labour peer Maurice Glasman said:

"I welcome this work from Demos and hope the Labour party looks closely at the idea. There needs to be a much stronger relationship between what people put in and take out of the welfare system. A two tier system, with higher entitlements for contributors, is definitely the way to go.


The paper, Something for something: Restoring a contributory principle to the welfare state, written by Duncan O'Leary, is published by Demos on Monday 3 June 2013.

To arrange an interview with the author, or for further comment or information about the proposals please contact Rob Macpherson.

For more information on Demos's upcoming research project looking at inter-generational public attitudes to welfare, with IpsosMORI and supported by JRF, see here:


Rob Macpherson

020 7367 6325
(out of hours: 07809 280 643)


PDNS: Mandatory Active Cyber Defence for Public Sector Networks. Latest Guide