David Cameron is open to the idea of workers funding their own unemployment or sickness benefits privately through financial products, Downing Street has said.
The Prime Minister’s Official Spokesperson told a briefing of journalists in Parliament today that the Prime Minister agreed with a suggestion by Iain Duncan Smith about the role of private finance in the welfare state.
“We need to support the kind of products that allow people through their lives to dip in and out when they need the money for sickness or care or unemployment,” Mr Duncan Smith told the Sunday Telegraph at the weekend.
“We need to encourage people to save from day one but they need to know that they can get some of the money out when their circumstances change. This is not government policy but I am very keen to look at it, as a long-term way forward for the 21st century.”
The PM’s spokesperson reiterated that the idea was not the official policy of the Government but that Mr Cameron was prepared to look at it.
“I think the PM shares the work and pensions secretary’s view that we should be doing more to encourage people to take personal responsibility for how they manage their affairs,” she said.
“This isn’t government policy, it’s an idea that’s out there. It’s an idea that should be looked at. That’s where it’s at, at the moment.”
A move towards a private saving and insurance system for unemployment and other benefits would be a huge departure from the welfare state as it is currently constituted.
Unlike some other countries like the United States and many on the continent, the UK has a universal system of benefits rather than a so-called ‘social insurance on’ based on contributions.
Under those systems, those who have not had time to make a minimum contribution before they lose their job or become ill often do not receive any payments.
The involvement of private companies in such a system would go even further, with the privatisation of social security a key demand of the right-wing of the US Republican Party.
Nye Bevan, the Labour health secretary who set up the National Health Service, warned against the wastefulness of insurance systems in his 1952 book In Place of Fear.
“All the insurance company does is to assess the degree of risk in any particular field, work out the premium required from a given number of individuals to cover it, add administrative cost and dividends, and then sell the result to the public,” he wrote.
“This profit is therefore wholly gratuitous because it does not derive from the creation of anything. Group insurance is the most expensive, the least scientific, and the clumsiest way of mobilizing collective security for the individual good.
“…The means of collecting the revenues for the health service are already in the possession of most modern states, and that is the normal system of taxation.”
What does five more years of the Tories mean for Britain?
What does five more years of the Tories mean for Britain?
1/8 Welfare payments will be slashed
One of the most controversial parts of the Conservative manifesto was to cut benefits for the working age poor by £12 bn over the next three years. But during the campaign they only said where £2 bn of these savings would come from. That leaves £10 bn still to find. Some experts think the only way they can close that gap is by means testing child benefit – with millions of families losing out
2/8 There will be tax cuts for those in work and those who die
The Tories will increase the threshold at which the 40p rate of tax becomes payable to £50,000 by 2020. They haven’t said so but it is also likely that at some point in the next five years they will abolish that 45p rate of tax altogether for the highest earners. They also want to increase the effective inheritance tax threshold for married couples and civil partners to £1m
3/8 There will be an in/out EU referendum in 2017
The next two years are going to be dominated by the prospect of a referendum on Britain’s membership of the EU. First off David Cameron has the daunting task of negotiating a deal with other EU leaders an acceptable deal that he can sell to his party so he can go into the referendum campaigning for a ‘yes’ vote. This may be unachievable and it is possible that the Tories may end up arguing to leave. Opinion polls show Britain is divided on EU membership, one poll this year showed 51% said they would opt to leave compared to 49% who would vote to stay in
4/8 There will be more privatisation of the NHS
Having won the election the Tories now have a mandate to go further and faster reforming the NHS. In order to make cost savings there is likely to be greater private involvement in running services, while some smaller hospitals may lose services they currently provide like A&E and maternity units
5/8 There will be many more free schools – and traditional state schools will become a thing of the past
The Tories plans to create 500 new free schools and make 3,000 state schools become academies. They will also carry on reforming the Department of Education and remove more powers from local authorities over how schools are run
6/8 On shore wind farms will be a thing of the past and fracking will be the future
Government spending on renewable energy is under real threat now the Lib Dems are no longer in power with the Tories. Subsidies are likely to be slashed for off-shore wind farm and other green energy supplies. Meanwhile there will be generous tax break for fracking as ministers try and incentivise the industry to drill for onshore oil and gas
7/8 There maybe more free childcare – but not necessarily
In the campaign the Tories pledged to double the amount of free early education for three- and four-year-olds from 15 hours a week to 30. The extra hours would only be offered to working families where parents are employed for at least eight hours a week. However they have not said where the money will come from to fund the pledge
8/8 Workers' rights could be reduced
The Tories want to slash business regulation, merge regulator and cut costs. The Lib Dems stopped them from reducing the employment rights of workers in power – but these are now under threat
In a paper published last year the right-wing Institute for Economic Affairs think tank found that the introduction of competitive elements in the Swedish welfare state had had an “injurious” effect and that it had in turn caused a “backlash in Sweden against the notion of privatisation”.
Labour toyed with the idea of increasing the contributory aspects of the welfare state in the previous parliament but few elements ultimately made it into their manifesto.Reuse content