Sick and disabled claimants are about to have their contributory allowances severely capped. It marks an end to Beveridge’s concept of social insurance

Today marks a watershed in the history of the welfare state. It is the last day that the contributory principle – the concept of social insurance that underpinned Beveridge’s vision – remains intact.

This is because tomorrow 70,000 ill and disabled people will lose their Contributory Employment and Support Allowance – a benefit that provides financial support for those who become unemployed due to illness or disability, in return for the national insurance contributions they made during their working life.

160,000 people will eventually lose ESA this year. But they won’t lose this benefit because the amount they contributed in national insurance is inadequate. Oh no. They will lose their ESA because the government has decided that those claiming C-ESA should only be able to claim it for one year – regardless of how much they have contributed.

One year, the government reasons, is plenty of time for a disabled person to find a job. This rule only applies to those in the Work Related Activity Group, after all – a group who have been judged to be capable of work at some point in the future. So by ‘in the future’ one must now read ‘in twelve months’.

For those who don’t manage to find a job in this time frame, means testing is in order. ‘Income based ESA is available, but people with more than £16,000 savings or a partner who works more than 24 hours per week are ineligible. The remaining option is JobSeeker’s Allowance – at nearly £30 less per week, with additional penalties attached for (for example) missing an interview, and with less disability-specific welfare to work support. But this is also time-limited, to six months, before means testing applies.

Let me give an example. Mr Smith is a 58 year old man who has been working all of his life. He has to leave his job following a stroke and applies for ESA. His work capability assessment concludes that he will be capable of working at some point in the future, and so he is placed in the WRAG group.

Now, after a year, Mr Smith’s ESA stops. As his wife works, he isn’t entitled to income-based ESA, so his only option is to claim JobSeeker’s Allowance. The state no longer recognises Mr Smith’s 40 years of national insurance contributions, and the greater difficulties he faces in finding a job at nearly sixty and in poor health.

Mr Smith will receive ‘contributory’ JSA but after 6 months, in a parallel to the ESA process, Mr Smith will be means tested for income-based JSA and, as his wife works, will probably be found ineligible. So Mr Smith is in a situation where, having paid insurance premiums against illness and employment all his life, he will have no financial support for this after 18 months. Remember, Mr Smith has not yet been found ‘fit to work’. He remains disabled.

The time limits for ESA and JSA are wholly arbitrary. For ESA, the Department for Work and Pensions explains:  ‘One year was selected as the best balance between providing people claiming contributory ESA.. with enough support and reducing the cost of contributory ESA.’ – picked from thin air, in other words, and not linked in any way to the health of the job market or the actual time it takes disabled people to find a job.

And the result is extremely punitive. Ninety per cent of those claiming ESA will lose the benefit as a result of the time limit, because one year to find a job, in this economic environment, is a stretch for many people – let alone someone with additional health needs.

And how many people are we talking about? Well, 400,000 people will lose their contributory ESA this year, starting tomorrow. Of these 400,000, 40 per cent, will fail the means test for income-based ESA and have to claim Job Seeker’s Allowance instead. That’s 160,000 disabled people, each losing £28 per week. Most of these 160,000 disabled people will then find themselves with no support whatsoever within a further 6 months after their ‘contributory’ JSA runs out.

But alongside this human cost, there is a greater reason why we should all vociferously oppose the time limitation of C-ESA. It is because it breaks the reciprocity principle. It removes the ‘insurance’ from ‘national insurance’ by replacing a contributory benefit with a means-tested one.

All of us pay national insurance so that we are insured against illness and inability to work. From tomorrow, it doesn’t matter that you’ve ‘paid in’ for 40 years. You only get one year back in return. The average amount we pay over our working lives (of around 40 years) in national insurance is £78,040. For this sum, people like Mr Smith rightly expect the social insurance system will provide financial support for as long as he remains disabled and unemployed. Instead, he will receive less than £5k in ESA support before receiving around £1800 in JSA. And that’s his lot.

The government is fond of talking about ‘fairness’ in relation to welfare reform. Fairness means we help the hard-working taxpayer, and penalise the workshy scrounger. But tomorrow, along with the other 160,000 hard-working taxpayers who are being cut off, this will ring pretty hollow for Mr Smith.

http://opinion.publicfinance.co.uk/2012/04/beveridge-principle-bites-the-dust/