Overview

Britain's National Insurance system was founded by William Beveridge on 'the contributory principle' that we should pay in when we are working so that we can be supported when we are sick, unemployed or retired. This principle expressed an instinctive sense of fairness: if you want to take something out of the kitty, you should be willing to put something in. Over the last 70 years, this core principle has been eroded. People who have made National Insurance payments all their lives are nowadays treated little differently from those who have paid little or nothing. Unemployed claimants with weak or non-existent employment records get the same money as those with a long history of NI contributions. Retired people with no contributions record can claim Pension Credit that pays almost as much as a full, contributory state pension. National Insurance has effectively become just another tax, but unlike income tax, it is poorly understood and lacks transparency. Many economists now believe it should be scrapped. But what would then become of Beveridge's contributory principle? In Beyond Beveridge, Peter Saunders asks how this important fairness condition might be retained and strengthened if National Insurance were abolished. He finds the answer in a new system of personal welfare accounts. The new workplace pension scheme provides a golden opportunity to move in this direction, but participation has to be made compulsory, and the scheme needs developing so more of us can support ourselves in retirement. The state pension could then be means-tested, which would relieve much of the pressure which is threatening to bankrupt the existing system. As people accumulate more assets in their accounts, their purpose could be expanded to cover other life-events such as sickness, unemployment, parental leave and nursing care in old age. This would ease mounting pressures on the state budget as benefits would be limited to claimants who cannot make provision for themselves through their own accounts. This would in turn help to renew a culture of personal responsibility and self-reliance.

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9781906837570

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