Iain Duncan Smith has hinted that the future of Britain’s welfare system could rest in the arms of private insurance schemes.
Speaking to the Telegraph, the Work and Pensions Secretary says young people should be encouraged to save into flexible accounts, from which they can then draw out money at times of sickness or unemployment.
The model is very similar to unemployment insurance schemes in the United States, but would work more like systems that exist in the far East – such as ‘Fortune Accounts’ in Singapore.
Instead of a government-run pensions system, Singapore residents are required to save for their own retirement. “These savings can be used to buy life insurance and disability insurance, to make a down-payment on a home, or finance a child’s education”, says the Adam Smith Institute (pdf).
“Like a bank account, the Fortune Account (pdf) can be drawn upon when needed, with the crucial difference that it can only be accessed for specific and designated circumstances such as retirement, or temporary periods of unemployment, disability, or sickness, or to fund insurance for more expensive or longer-term contingencies.”
And instead of a government-run healthcare system, people in Singapore are required to save 6% of their annual income into medical savings accounts.
“We need to support the kind of products that allow people through their lives to dip in and out when they need the money for sickness or care or unemployment”, said Iain Duncan Smith.
He added: “We need to encourage people to save from day one, but they need to know that they can get some of the money out when their circumstances change.
Iain Duncan Smith said that although this is not yet official government policy, he is “keen to look at it, as a long-term way forward for the 21st century.”
He also told the Telegraph that businesses “have to change the sickness culture in the UK”.
“At the moment the system is all about you having to prove you are too sick to work when we should be saying can you do some work and how can we support you? We are the worst country at this.
“Businesses have to understand that if you let them go you will have to hire someone new and start all over again. There is no economic logic to this so how about investing a bit of money in them now and we will help and see if we can turn this person around.”
“There aren’t many good companies out there with good programmes to say I really care about your well-being because that costs me money. We are not good at that.
“This is to change a culture in business, just as the living wage is, to say value your workforce for God’s sake and invest in them.”