If the British Labour party had a foot, it would have shot it on welfare reform. The Financial Times’s Janan Ganesh very eloquently points out that the Labour party leader, Ed Milliband, has made a grievous strategic decision by staunchly opposing the coalition government’s welfare cuts but not coming up with a decent alternative.
Indeed, Britain’s generous welfare state is undoubtedly unsustainable. “Pretending otherwise”, says Ganesh, “is making Labour feel righteous, but at potentially vast political cost”, making the party unelectable. Well…finally, Labour has a plan.
It’s two years old and comes from the independent think-tank the Institute for Public Policy and Research, but at least it’s an idea. The general gist is that Labour feels that too many people becoming unemployed are falling off an “income cliff” – even the generous welfare system can’t insulate them from a sudden loss of earnings which often leads to the sale of a house, car or a change in quality of life. The IPPR proposes to allow people to borrow, interest free, up to 70 per cent of their previous income if they’ve paid enough National Insurance Contributions (automatic deductions from a salary).
On the face of it, the idea, dubbed “national salary insurance”, sounds rather attractive. It proportionally rewards those who worked hard and paid high contributions. But it’s not perfect. The “loan” is only provided to a maximum of £200 per week for six months and must be paid back when the unemployed person finds another job. As the blogger Ben Baumberg pointed out in 2011 when this issue was last discussed, £200 per week is well below the (then) average £344 per week. But the biggest problem is that to pay the loan back, you’d have to have some of your salary deducted for a period of time, so the longer you are unemployed (and likely feeling miserable and demotivated) the greater the penalty to your wages when you do work again – that’s a big disincentive to find a job.
Yet the proposal is not a bad one. It’s also a damn sight more radical than most policies Labour has come up with. In the interests of a functioning democracy, when there is only one sizeable opposition party (as the other two are in power), it falls to Labour to generate debate. As the opinion polls have shown so far: yelling “no!” every time the government says something is the kind of opposition worthy of a tired and angry toddler.
Bottom line: a step in the right direction for Labour