Labour proposes higher benefit payouts for unemployed workers
Under Labour’s new welfare overhaul, employees who lose their jobs will receive higher benefit payouts compared to those who have never worked, reports BritPanorama. Work and Pensions Secretary Pat McFadden is drafting a Bill that aims to deliver larger short-term payments to individuals who have contributed to National Insurance prior to unemployment.
The proposed changes are intended to expedite the process of returning individuals to employment while also reducing the overall welfare expenses. The new system will replace the existing policy with a straightforward “Unemployment Insurance” scheme, which will pay approximately £140 per week for a duration of up to one year.
Individuals who have not made contributions will remain dependent on lower support from Universal Credit, which is means-tested. The enhanced payments will last between six to twelve months before recipients transition to standard benefits.
A spokesperson for the Department for Work and Pensions stated: “We consulted on reforming the contributory benefit system to better support those who have made National Insurance contributions. Our plan is to create a single new Unemployment Insurance to replace both New Style Jobseeker’s Allowance and Employment & Support Allowance. The new Unemployment Insurance would make the contributory system simpler and more pro-work by providing a stronger, time-limited level of financial support for people who lose their job. We’re now considering responses to the consultation as we develop our proposals, and we will set out more details in due course.”
Experts estimate that the overhaul could save up to £3 billion annually once implemented. Currently, around £9 out of every £10 spent on contributory benefits goes to individuals claiming assistance for more than a year. This development comes as Prime Minister Sir Keir Starmer grapples with increasing welfare costs, following the abandonment of plans to cut welfare spending after a backbench revolt over tightening disability benefits earlier this year.
The proposed changes reflect a shift in Labour’s approach to welfare, focusing on incentivising work while addressing the financial sustainability of the benefits system.
