The Department for Work and Pensions has unveiled a significant proposal to overhaul the UK's social security system, targeting a benefit currently claimed by 1.4 million individuals. The DWP aims to scrap the 'new style' Employment and Support Allowance (ESA) and replace it with a new benefit tentatively named Unemployment Insurance.
Details of the Proposed Reform
As outlined in a recent green paper, the DWP's plan involves establishing a new, simplified Unemployment Insurance benefit by reforming contributory working-age benefits. This new entitlement would replace both the contribution-based Jobseeker's Allowance (JSA), which is currently claimed by 90,000 people, and the new-style ESA.
The proposed Unemployment Insurance would be a non-means tested benefit, available only to those who have contributed into the system through prior work. It would be paid at the current ESA rate of £138 per week and would be time-limited, marking a shift from the existing structure.
Objectives and Rationale
The DWP stated that this reform is part of an effort to restore faith in the social security system, ensuring that people who have paid in receive support when needed. The initiative seeks to revitalise the 'something-for-something' contributory principle within the working-age benefit framework.
Under the new system, claimants would be expected to actively seek work, with adjustments made for individuals with work-limiting health conditions to accommodate their needs.
Expert Analysis and Reactions
Martin Mikloš, a Research Economist at the Institute for Fiscal Studies, commented on the proposal, noting that contributory benefits in the UK, while a small part of the overall safety net, have been neglected for years and are due for modernisation.
He highlighted that the reform could address issues within the current system, though he pointed out that even with the proposed increase, the benefit rate would remain low by European standards. Most European countries offer unemployment insurance for 12 months or longer, and extending the UK's version to 12 months could still result in fiscal savings compared to the current setup.
Anvar Sarygulov, Research Grants and Programmes Manager at the Nuffield Foundation, emphasised the need to strengthen support for the newly unemployed, given the UK's internationally low levels of assistance. However, he cautioned that the government must carefully consider transitional support to avoid negatively impacting existing long-term claimants with health conditions.
Implications for Claimants
This proposed change represents a major shift in how unemployment and disability benefits are administered in the UK. The move to a time-limited, contribution-based system could provide stronger income protection for those with recent work records but may raise concerns about the adequacy of support for vulnerable groups.
The consultation on this reform is ongoing, and stakeholders are urged to provide feedback to shape the final policy design.
