09/02/2018 10:52 GMT | Updated 09/02/2018 10:52 GMT

Providing A Social Security System Fit For The Future

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The fact that a majority of people in poverty live in working households is a scandal, and one that Labour, the party of dignity at work, will have a special responsibility to address on returning to power. Correcting the mistakes and false promises that underlie the Tory government’s flawed universal credit will be an early priority. Last month, I suggested five ‘quick fixes’ to universal credit, to help make work pay and achieve its stated goal of ‘[removing] the barriers to work and earning more by providing the stronger financial incentives to encourage people to work and for those in work to increase their earnings’.

But pausing universal credit and implementing these early fixes can only be the first step in reforming the social security system to meet the needs of a changing and increasingly insecure labour market. Indeed, universal credit itself was meant to achieve much more, promising greater responsiveness to more fluid working patterns by operating in ‘real time’, and guaranteeing gains from every additional hour of work undertaken that would lift 950,000 people out of poverty. As an in- and out-of-work benefit, it was also supposed to smooth the transition for people entering work after a period out of the labour market, to improve take-up, and to reduce the stigma associated with receipt of benefits.

But it is already failing to achieve these objectives. Poverty is increasing. Confidence in our benefits system remains low, both among recipients of welfare benefits themselves, and the wider public. Those in receipt of benefits feel stigmatised, and that the system is ‘done to’ them rather than affording them agency, dignity and autonomy. Meanwhile, predictions of increasingly unstable employment patterns, of many – not necessarily low-skilled – jobs to be replaced by ‘robots’, the rise of the ‘gig’ economy, increased self-employment, and the spread of so-called ‘portfolio’ careers, and an expectation that we’ll be working into our late 60’s or later, demand that we think more imaginatively now about the kind of social security system that we will need in future.

One suggestion for meeting these challenges has been to introduce a universal basic income (UBI). UBI would act as a floor to provide both a minimum level of protection, and a platform to build on as income increases, while avoiding problems of stigma and complexity. Universal benefits certainly have an important role to play (and Labour should give priority to reinstating universal child benefit at the earliest opportunity). But it must also be acknowledged that the arguments for universal basic income are hotly contested, with concerns raised around cost, the impact on work incentives, public attitude, and gender equality. Useful experiments in the UK and overseas which are taking place now will enable us to test out the extent of these perceived disadvantages, and of the proclaimed benefits.

Another starting point, however, which could sustain greater public support for working age benefits, offer a measure of choice and autonomy to claimants, and meet some of the challenges of a changing labour market, would be to return to a founding pillar of our social security system, the contributory principle. We know that people value and expect a right to protection that comes from having contributed to the system. Yet, as I highlighted in a debate in parliament earlier this week, the importance of contribution is underplayed and undermined in our benefits system.

An urgent task for an incoming Labour government, if we’re serious about the role of contributory benefits, must be to reinstate the rewards for contribution that Tory governments have removed or eviscerated, such as the twelve month time limit on contributory employment and support allowance, or the deduction pound for pound of the basic state pension from pension credit (and to add insult to injury, in some cases, taxing it). But beyond that, there’s scope for Labour to develop an active contributory system that both helps build greater public buy-in, and addresses the challenges of longer working lives and more unstable employment patterns in future.

So a modern contribution-based system of support could, for example, incorporate an entitlement to financial support while retraining to acquire new skills as part of Labour’s national education service offer. Those approaching retirement or with caring responsibilities could personalise their entitlement to benefit to enable them to reduce their hours in paid employment, gradually over time, or for a set period. Parents could choose to access additional, tailor-made, childcare support over and above a free universal entitlement, to enable them to balance their family responsibilities and children’s needs with their obligations to their employers.

These contributory benefits would of course be underpinned by a safety net that meets minimum starts of decency. And it is also important to state that recognising individual contributions in this way should not mean that individuals are effectively ‘self-insuring’: pooling and sharing risk must remain at the heart of a social [italics added] security system. But being a contributor could and should confer greater autonomy on individuals to determine the nature and timing of the support they receive, and to access advice that enables them to make informed choices. Moreover, an individual might choose to earmark a proportion of their contribution at certain times in their working life to build up additional ‘assets’ for planned events or life changes (such as retirement, changing jobs, or becoming a parent), with their contributions matched by government.

No one suggests that social security can or should do all the ‘heavy lifting’ in a rapidly changing working environment, nor that shifting hostile public opinion is easy. But in the aftermath of sweeping Tory austerity cuts, the real risk that Labour must address is that progressively meaner, residualised and punitive benefits become embedded at precisely the moment that new and challenging demands are made on the system. There is however an alternative: a positive, forward-looking, socialised system of protection and enhanced participation that responds to unpredicted and changing circumstances, with contributory benefits playing a significant role and benefits recipients given more choice and autonomy. An incoming Labour government must seize the opportunity to demonstrate that it has the confidence, the ambition, the authority, and the values to create that system.