A think tank has called on the Government to implement a new system of unemployment support based on compulsory savings backed up by guarantees from friends and family.
The Social Market Foundation says the system would require all citizens to open a “lifecycle account” into which they would save a compulsory percentage of their monthly income while nominating three friends or family as guarantors.
If a person became unemployed these savings would be used to make up 70 per cent of previous earnings. If the savings were insufficient the person could then borrow a limited amount from the account to be paid back within two years.
If they could not pay the money back the guarantors would be held responsible to pay any outstanding balance.
Funds in the account upon retirement would be used to purchase an annuity in addition to the state pension.
The SMF says the proposal would restore a contributory principle to welfare.
SMF director and report author Ian Mulheirn says: “Decades of unimaginative welfare policy have shown us that when the state alone funds unemployment support, the system is plagued by problems: perverse incentives, meagre benefits and demeaning monitoring regimes.
“Our national debate is bogged down in a fruitless argument about how to strike a balance between these apparently inevitable evils.”