Workers could be forced to pay at least £5 a week into a personal “welfare account” to get higher benefits if they lose their job, under a plan being considered by George Osborne.
In a report published today, the Policy Exchange think-tank proposes a shake-up of the welfare system to strengthen its original “contributory principle”, under which the amount people receive in benefits is linked to how much people have paid in.
Allies say the Chancellor is keen to extend “personal responsibility” in the welfare system. The report is being studied by the Downing Street Policy Unit and such reforms could be signalled in the Conservatives’ general election manifesto.
The Policy Exchange plan would set up a “compulsory collective insurance scheme”, into which everyone working more than 20 hours a week would pay £5 a week.
It would be run by private-sector providers such as insurers and fund managers, but guaranteed by the Government.
The think-tank calculates that the shake-up would save the Government £2.5bn a year as people became more self-reliant.