Replace ‘furlough’ with permanent earnings-based unemployment benefit

A new Fabian Society report today calls for a transformation of unemployment benefits, following the conclusion of the Covid-19 furlough scheme at the end of this month. The furlough scheme has been a huge success in supporting people unable to work during the pandemic and the Fabian research finds it has changed how the public think about protection against unemployment.

The report, funded by Standard Life Foundation, calls for a new scheme that combines features of existing Jobseeker’s Allowance (JSA) and furlough. Like furlough, the new benefit would pay 80 per cent of unemployed people’s previous earnings up to a £30,000 cap. Like JSA, the benefit would be available for six months and eligibility for the scheme would be based on National Insurance contributions. The proposal is new to the UK but is similar to unemployment benefit schemes used across continental Europe.

Modelling for the report projects that the average payment for a recipient would be £250 per week and the maximum would be £460 per week (today JSA is worth £75 per week for over-25s). This would lift 430,000 people out of poverty – including 110,000 children.

The policy is designed to increase the number of people receiving help. The modelling assumes a caseload of 390,000 recipients at any one time – a significant increase from the 80,000 recipients currently projected to receive JSA. On this basis the cost of the policy is estimated at £4.8bn – which equates to an extra penny on National Insurance for employees.

The proposal was the central recommendation of a citizens’ jury of 22 people convened by the Fabian Society. Despite knowing the cost and the likelihood that the policy would lead to higher taxes the proposal was by far the most popular option to support the unemployed that the jury considered. This links to other research presented in the report that shows public attitudes towards unemployment support are becoming more generous.

In a YouGov poll commissioned following the citizens jury, 49 per cent of people who expressed an opinion supported the furlough-replacement proposal after being told it could lead to a rise in national insurance.  51 per cent supported the existing system of JSA with no tax rise (excludes people who said ‘don’t know’ or ‘neither’).

The report concludes that the demise of the furlough scheme is the moment to grasp the nettle and change how we support the recently unemployed. This policy would keep thousands out of poverty and support people back to work without them having to face a cliff edge.

Report author and senior researcher Josh Abey said:

“Now is the time for the government to grasp the nettle and provide a fair safety-net for those who find themselves out of work. This scheme is practical and pragmatic and will prevent families falling into poverty where a breadwinner loses their job. At a time when the temporary uncertainty of Covid-19 is being replaced by enduring labour market insecurity, we must continue to provide generous support to those who lose their livelihoods.”

General Secretary of the Fabian Society, Andrew Harrop said: 

“The furlough scheme was invented in a moment of crisis and proved how the state can step in to help individuals in need. It established the principle that we should match the support people get if they stop working to the earnings they have lost. For hundreds of thousands of people still out of work, we can’t allow that protection to end. “The Fabian Society convened a citizens’ jury of randomly selected members of the public. They overwhelmingly recommended replacing today’s flat-rate jobseeker’s allowance of £75 per week with a generous new benefit where the amount people receive in the early months of unemployment is based on how much they used to earn.”

Mubin Haq, chief executive of Standard Life Foundation said:

“The pandemic laid bare the holes in our safety net. The introduction of furlough saved many from serious financial difficulties and protected livelihoods. If we are going to build back better, increasing the support available to the newly unemployed is an essential element of a fairer society. The benefits far outweigh the costs and public attitudes have shifted towards more generous support.”

– Ends –

Notes 

1. Contact: Emma Burnell, Media Consultant, Fabian Society – emma.burnell@fabians.org.uk or 07851 941111.

2. Security for everyone: the public case for non-means-tested benefits is published by the Fabian Society and written by Josh Abey and Andrew Harrop.

3. The YouGov poll surveyed 1,647 adults weighted to be representative of Great Britain, and was conducted over 12th and 13th February 2021.

4. The Fabian Society is Britain’s oldest political think tank. Founded in 1884, the society is at the forefront of developing political ideas and public policy on the left. The society is alone among think tanks in being a democratically-constituted membership organisation, with over 7,000 members. It is constitutionally affiliated to the Labour party.

5. The report was generously supported by the Standard Life Foundation. The Foundation funds policy work, campaigning and research to tackle financial problems and improve living standards for people on low-to-middle incomes in the UK. It is an independent charitable foundation registered in Scotland.