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Think tank calls for savings-based unemployment welfare

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.”


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There are 4 comments at the moment, we would love to hear your opinion too.

  1. Moronic. 50% of the population of Sweden have a negative net worth. I doubt it’s much better here.

    This idea is predicated on an individual having surplus income prior to becoming unemployed. A big assumption.

    A negative income tax would restore the incentive to work, be able to be deployed immediately and still ensure a minimum level of income for the most vulnerable.

  2. So, for generation rent there is…

    Cost of living as a proportion of earnings higher than ever before, without any asset association.

    Student loan contributions of 9% on earnings above £16K, essentially = 41% in one form or another of taxation out in one form or another.

    And the Social Market foundation want to add another burden? Great idea.

    I think they underestimate the level of hand to mouth living in this country among those with lower paid jobs too.

  3. Imagine the serially unemployed or the long term unemployed. These are perhaps the greatest burden. How likely are they to save? Family or friends acting as guarantors? Obviously no one at the Social Market Foundation has much of a clue of Sociology.
    The people to whom they refer generally have friends and family in the same social bracket. Even if from a better off social bracket, who is going to be daft enough to act as guarantor?
    Will the person who is out of work need the permission of the guarantor before they go off to borrow money? If not then the guarantor is in effect writing out a blank cheque. I couldn’t imagine a dafter idea. But then I’ll lay odds that the authors of this report are:
    Not long out of University
    Are unlikely ever to have had a real job
    Have never experienced unemployment
    And come from the better off elements of society.

    Why do we take any notice of these numpties in their ivory towers?

  4. What is the application process for getting into a ‘think tank’? Clearly common sense wasn’t a requirement.

    I want to have a go at coming up with ‘radical’ ideas that could revolutionise this country.

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