Wow! A Fair Change to Welfare*

*Almost.

Like the majority of people I know, I always open the newspaper with a sense of foreboding. What has the Coalition messed up today? And the chances are that another employer has folded, the environment is enduring worse damage, and there’s another war going on somewhere. However, I’m generally not one for becoming depressed at the state of the world, as there is a lot of good news that we don’t talk about so much. And occasionally, even the Conservative Party will draw up a policy that is borderline acceptable. Knowing how to react to this is, as I’m sure you’ll appreciate, difficult for me. I shall explain what has happened.

The old age pension is the oldest and second most important component of the welfare state, after the National Health Service. Contrary to scare stories which I gather are spread liberally over in the United States, both work. Admittedly, the state pension is horribly modest, but with top-up benefits in place we can guarantee a basic income for the elderly. The concept behind it is sound: the more years’ National Insurance (usually equivalent to an 11% income tax) you pay, the larger the pension you receive in retirement. Employers are required to make similar contributions, with the result that the Treasury has a large fund which part funds the support in place for anybody who has contributed over their working life.

The trouble is, the state pension goes to people who haven’t contributed. I’m not talking about those who’ve had their National Insurance contributions made for them, such as the disabled: I’ll leave it to a nasty tabloid rag to make snide implications. I’m not even talking about the small group of immigrants who sometimes milk the system (reports of which are hideously exaggerated, by the way). No, I’m talking about the families in which a British expat automatically entitles their foreign national spouse to an allowance of up to £66 per week based solely on the expat’s NI contributions.

In effect, people who have never so much as set foot on UK soil, let alone pay anything in National Insurance, are able to claim £3432 a year. That’s not huge. But it does add up to as much as £400 million per annum at a national level, which is over half the cost of fraud in the pensions budget. The upcoming Queen’s Speech features a measure to redefine state pension criteria, so that payouts will be based only on the NI contributions of the claimant. The move can only affect new claimants, and will affect many more UK-domiciled couples than one would expect if we listened to the Government’s rhetoric. I have only one issue with this: women are likely to disappointed as they are more likely to take time off work to care for young children or disabled relatives, and will therefore not pay NI in those years.

It’s unfortunate that our society hasn’t developed to the point that stay-at-home dads aren’t a rarity, but we have to base the system on social reality. The solution lies in the existing system of National Insurance credits, where the state ‘pays’ an individual’s contributions on their behalf. There’d be nothing to worry about were the Conservatives not itching to reduce these…

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  1. Pingback: Wow! A Fair Change to Welfare* | Rodney Willett

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