Labour is thinking about contributions again

According to an article in the Daily Telegraph, the Labour Party is considering relating benefits to a claimant’s work history. This is not quite the departure it might sound. The Beveridge scheme was based on flat-rate benefits and contributions, but the realisation in the 1950s that other European schemes provided better benefits than the UK scheme led to a rethink. The Party’s proposals for National Superannuation, in 1957, argued for an earnings-related pension – a proposal which eventually led, by a circuitous route, to SERPS and S2P. There used to be earnings-related supplements for National Insurance unemployment benefits and sickness benefit, which were removed by the Thatcher government.

It’s true that an emphasis on work history can lead to uneven, and sometimes perverse, results. People who have a limited ability to contribute, including women with home responsibility or people with long term disabilities, can lose out. People who work abroad are liable to have lower entitlements. There has always been a concern that earnings-relation leads to greater benefits for better-off claimants. But the best benefit systems in Europe – such as Sweden’s pensions, which have been described as ‘selective by occuptional experience’, or Denmark’s unemployment benefits – are often unequal in these terms. Contributions legitimate benefits; destroying the link, and confining benefits to people on low incomes, has made it difficult to defend them against cuts. Those of us who want benefits to be simpler and more liberal may have to compromise.

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