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Friday, 30 March 2012

Benefits or Insurance?

In the March issue of Prospect magazine there is an interesting feature on contemporary attitudes to Welfare, for which the cover strapline is "New poll: Britain says cut benefits".

One of the big problems we now have is that people understand by "Benefits" handouts from general taxation destined to those who don't pay taxes (or not so many taxes). And many Benefits are just that - transfers from those who had (until they paid their Taxes) to those who had not (until they received their Benefits).

But in the past it was always intended that the core of Benefits provision should be funded by insurance schemes. To this day, we all have our National Insurance numbers even if we don't know them any longer and certainly don't carry our cards. This is a great loss.

Everyone at birth should be assigned a National Insurance number which enrolls them in a compulsory scheme. Either their parents or the State should start paying in for future benefits: unemployment benefit, sickness benefit,incapacity benefits, National Health insurance-based benefits. The contributions should be big enough to allow for the fact that some insurees will require Benefits from birth: the seriously disabled.

We should also start paying into Old Age Benefits funds and a certain minimum level of contribution should be compulsory and organised by the state. The aim should be to ensure that people can be self-sufficient in retirement without having to rely on endless pension top-ups or gratuitous freebies like the Bus Pass.

Both the state National Insurance scheme and (probably separately) the state Old Age Pension scheme should send us an annual statement setting out what we have contributed and to what Benefits we are currently entitled. This is not a big demand to make. After all, every time a credit card provider changes its Terms and Conditions, however trivially, it mails the changes to every card holder.

The contributions required for such schemes would be substantial. There is, after all, no such thing as a free lunch - except someone else's. But as Insurance contributions increase so general taxation should go down. Dramatically.

Politicians and bureaucrats love general taxation. It is money they can do what they like with. It's not ear marked. If they want to attack a foreign country or roll out the red carpet for the Pope or handout Benefits to those who might as a result vote for them, they have the wherewithal to do it.

This must be stopped. General taxation, along with general borrowing ("the bond market") is the core of the unaccountability of government. Money should be raised for specific purposes and spent on those purposes. In the bond market, the purpose to which the money being borrowed is going to be put should be specified.

Go down this route and you break the equation Benefits = Scrounging. And through insurance based schemes, you really do create a situation in which we are all in this together.

1 comment:

  1. Imagine how the government (any UK government) would implement your scheme. First, you would need consultants to tell you how it should work. They, in turn, would recommend that the project be handled by a US based company who - having landed the contract - would screw up the whole programme,leaving the tax payer with a whopping bill and nothing to show for it; by which time the government minister responsible would have shuffled off to another department