Whilst the change would provide a considerable boost for those hunting for jobs, it could prove detrimental to those with long-term health issues
The Government’s proposals to combine two out-of-work benefits could deliver savings of billions of pounds annually, according to a fresh report. The Institute for Fiscal Studies (IFS) has determined the suggested reforms could generate between £2 billion and £3 billion per year, though a charity has cautioned the Government must “avoid pulling the rug out” from under long-term claimants with health conditions.
In March, a Government green paper outlined proposals to “fix the broken benefits system”, including a consultation on combining Jobseeker’s Allowance (JSA) and Employment Support Allowance (ESA) into one unemployment insurance (UI) benefit. New style JSA is accessible for up to six months for those actively seeking employment whilst new-style ESA is provided to those with health conditions that impact how much they can work, and is accessible indefinitely for most claimants.
UI would be time-limited but is anticipated to be paid at the higher ESA rate, which is presently £140.55 a week. This would represent a substantial increase from the current JSA rate of £92.05.
Whilst the change would provide a considerable boost for those hunting for jobs, it could prove detrimental to those with long-term health issues. When the consultation was launched in March, Work and Pensions Secretary Liz Kendall declared: “If you have paid into the system, you’ll get stronger income protection while we help you get back on track.”
The IFS has calculated that a 12-month UI benefit would encompass the complete out-of-work periods of approximately 53% of those who become unemployed and generate savings of roughly £2 billion annually in the long term, reports Chronicle Live.
A six-month UI scheme would deliver savings of about £3 billion per year.
Nevertheless, they cautioned that these savings would take more time to emerge if the policy exclusively applied to fresh claimants.
Martin Miklos, research economist at IFS and one of the contributors to the Green Budget report, explained: “Contributory benefits in the UK, available to those who have previously ‘paid in’ and not means-tested based on household income, are a small but significant part of the overall social safety net.
“Their design has been neglected for many years and it is high time they were modernised, not least so that they work better alongside the rest of the benefits system.”
Mr Miklos stated that reform presents a chance to address problems with the existing system and would considerably boost the benefit rate for jobseekers.
However, he noted the rate would remain modest by European standards.
“Most European countries pay unemployment insurance benefits for 12 months or more,” he explained.
“Making the new UI available for 12 months would still yield fiscal savings relative to the current system.”
Anvar Sarygulov, programmes manager at the Nuffield Foundation charitable trust, which funded the report, stated: “Given the UK’s internationally low levels of support for the newly unemployed, there is a strong case for strengthening the level and duration of support offered to them through contributory benefits.
“However, the Government needs to avoid pulling the rug out from under existing long-term claimants with health conditions by thinking carefully about the delivery and design of any transitional support.”
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