Or “Crisis Loan Scheme for those with ‘the right sort of NI history’”
As they see it “"In other words, the social security system would add a new function: smoothing household income to help people to cope with the loss of a wage, keeping them out of the hands of payday lenders and loan sharks, while reclaiming the money once they are back on their feet."
What it will be in practice
“called "national salary insurance" and developed by the IPPR thinktank – people with sufficient national insurance contributions would be entitled to receive up to 70% of their previous income, capped at £200 a week [nb that £200 including any other “out of work benefits” being received], for a period of up to six months, to help prevent them falling off a financial "cliff edge".
More details here Labour plans student-style 'salary loans' for the unemployed and here Why Labour is right to consider a salary insurance scheme for anyone who wants to see how many words you can expend describing “a crisis loans scheme” as if it was something entirely new and exciting and different.
17 comments:
Yes, because we need higher marginal tax rates on people coming off benefits! You couldn't make it up.
And I wonder how it will work with the likely problem of unemployed people 'getting on their bike' and going to work abroad where there are jobs? Much the same as student loans, lots of these will have to written off.
BobE, congrats on length of post title. I'll have to see if I can beat that.
M, you beat me to it :-(
... and I'll be interested to see what the Blue Team's rapid policy response unit's rapid response will be.
They'll probably suggest privatising it.
MW: yes, but the state will be providing insurance on the loans, isn't that how it works?
I'm going to introduce a new concept here...
Why not just save 6 months income, just incase?
I know RADICAL!
Kj, yes,and the government will underwrite bad debts and set up a system to collect the loan repayments out of payroll taxes or welfare payments.
But apart from that, the private sector will take all the risk and bear the administration costs.
SB: Why not just save 6 months income, just in case?
That was my first thought. Splendid idea.
Sure, people should be saving. But between rents and hard taxation of labour, that may not be an option. Ofcourse a citizens income is first best, but in a less perfect world, actual unemployment insurance (as opposed to the stingy JSA) at 60-70% of previous income is actually a pretty cheap way of preventing liquidity crises in private households, compared to other government spending.
http://www.nationmaster.com/graph/lab_une_ben_as_of_gdp-labor-unemployment-benefit-gdp
"Why not just save 6 months income, just incase?"
Well the government aren't suggesting that because they know that they are about to trash the pound with inflation, making savings worth diddley squat. Anyway they don't want people to save, they want people to borrow, borrow, borrow and spend, spend, spend.
The UK is falling into a very deep State of Dependency.
Forget the detail. Think about how we are giving up the final slithers of our freedom.
Kj, that chart is a load of rubbish. The UK spends about 3% of GDP on unemployment benefits and another 2% on child benefits. Which seems fair enough to me - but it is a lot more than the 0.3% shown.
International comparisons like this are usually meaningless as different countries define "unemployment" and "unemployment benefit" in wildly different ways.
As policy guru, how would you see this "unemployment insurance" working? A government can, to some extent, force people to "save" but all that will happen is that they will borrow more to make up the shortfall, so if they lose their jobs and have to release their savings, it all goes on repaying the debts.
As far as I can see, the best option is give people a Citizen's Income (and social housing) and leave them to make their own spend and save decisions.
B, yes, inflation and low interest rates erode the long term value of savings, so you might have to top your "six months income" up by twenty pounds a month to maintain its real value, but that does not detract from SB's basic point.
RS, of course we are all totally dependent on each other.
I do not know how to grow food, generate electricity, heal illnesses or treat sewage or kill marauders in unarmed combat. So on my own, I would have a life expectancy of a few weeks at most.
So what? The same applies to everybody else, which is why we try and stick together and specialise and co-operate. Outside of society we would all be even more unfree than within it (however shit we find the rent seeking by the usual suspects).
Kj, that chart is a load of rubbish. The UK spends about 3% of GDP on unemployment benefits and another 2% on child benefits. Which seems fair enough to me - but it is a lot more than the 0.3% shown.
I assume you them mean all combined out of work benefits, not just JSA?
As policy guru, how would you see this "unemployment insurance" working? A government can, to some extent, force people to "save" but all that will happen is that they will borrow more to make up the shortfall, so if they lose their jobs and have to release their savings, it all goes on repaying the debts.
I'm saying that Bismarckian style UI, which is x% of what you earned previously, as opposed to the JSA + HB + means tested whatnot model, is not what's breaking the bank where it's applied. And you know very well that between high taxes on income, and rents kept as high as they can be, saving 6 months of income is not an option in the mid- to lower spectrum. As long as you are taxing income, you can do a lot worse on people than providing proper unemployment benefits.
As far as I can see, the best option is give people a Citizen's Income (and social housing) and leave them to make their own spend and save decisions.
Ofcourse, I'm saying that second best is policies that at least attempts to pay back workers as much as they screw them over.
Kj, yes, I mean all benefits received by people who are unemployed i.e. not working and earning.
As to "unemployment insurance", does this have to be through the tax system?
How about making employers pay people more redundancy money? Is that better or worse than using the tax system?
MW: agreed, there'd be some advantages to that. As long as you don't design redundancy payment so that it discourages hiring inexperienced employees or firing old ones. Italy has severance pay that was essentially employers owing 7 or 8% of all salary paid out, payable on termination, which they can choose to keep on the books in the mean time. That's about as neutral as it can get, but it's also essentially forced savings.
http://www.egm.org.tr/konferans/OECD_forum/15_Istanbul%20Discussion%20TFR_Ambrogio%20RINALDI_OECD%20WPPP_COVIP.pdf
Some sort of redundancy payment would probably be a part of labour contracts without any statuatory obligations anyway, depending on bargaining power.
Kj, that could be a good idea if done properly.
Ideally, all businesses would be partnerships or "deposit funded" (like the old building societies) and employees would be paid (say) 90% of their salary every month and the other 10% is retained to finance expansion of the business.
When an employee/partner is sacked or retires, he can then draw out his "partnership capital" or "deposit" in cash.
A simple example would be somebody actually working for a building society. 90% of his salary is paid into a current account with the same building society, and 10% into a longer-term account, which he cannot access until he leaves (or dies) and then that balance can be paid out over a certain period of time (depending how long it took to build up).
For example, if he worked there for less than one year, he can have it all straight away, if he worked there for forty years, he gets it spread out over his retirement etc.
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