Our plan to reform support for those out of work would offer new security to all

Andrew Harrop

If you have to stop work in Britain today, your financial position will plummet. Government-mandated minimum payments for sick leave, maternity, caring and unemployment are totally inadequate. Statutory sick leave is under £100 per week, and carer’s allowance is less than £70 per week. Successive governments have neglected the problem for decades and allowed the value of these payments to decline. Jobseeker’s allowance is now worth just 12% of average earnings, statutory sick pay 16% and maternity payments 25%. It is unsustainable.

This week, the Fabian Society proposes a bold new solution. We call for a comprehensive system of ‘British employment insurance’, which we think could be a big idea for Labour as the party develops its election offer for people in work. The new system would provide generous paid leave and temporary benefits when people have to stop working, with payments based on recent earnings. People would be paid half their current or recent earnings for a fixed time (with the amount payable to high earners capped). In the case of sickness, the plan goes further and recommends paying 80% of earnings in sick pay.

Our proposals for earnings-related payments take inspiration from the Covid-19 furlough scheme and are modelled on Canada’s system of employment insurance. The UK has provided earnings-related support in the past (from the mid-1960s to the early-1980s), and it is the norm in most rich countries.

A Fabian Society YouGov poll of UK adults indicates that these would be popular reforms, with 79% of people who expressed a view (i.e. excluding those who said ‘don’t know’) supporting the introduction of employment insurance.

The plan delivers a major overhaul of maternity and parental leave. Parents on maternity or parental leave would receive half their usual earnings for up to 12 months. Six months would be reserved for mothers, and each parent could then receive up to six months parental leave. For the first time, self-employed fathers would be able to claim paid paternity leave and parental leave.

The proposal would also transform sick leave, which the Labour Party has already promised to improve. We suggest sick leave should be paid at 80% of earnings from day one to week 28 of absence. This proposal is affordable for business because most large employers already provide sick pay above the minimum level set out in law. Small businesses would receive new money to help meet this cost as well as free occupational health services.

British employment insurance would benefit business by helping firms retain and recruit more workers. Overall, employers would gain financially from the new measures, because there would be new state subsidies to cover the higher costs of maternity pay, and sick pay in the case of SMEs.

The full plan may be too pricey for a carefully costed manifesto. But we hope Labour will commit to the principle and gradually phase in individual entitlements over a decade. To begin that process, the report lists a series of measures that could be implemented immediately at either zero or low cost. A good place to start would be new rights for the self-employed.

Employment insurance is a bold plan that will offer new security to hard-pressed voters. Over the course of ten years, we can build genuine financial protection for all.

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