The Department for Work and Pensions (DWP) has announced plans to introduce a new benefit for claimants across Great Britain, a move that could significantly impact UK households. The proposed Unemployment Insurance (UI) scheme would replace two existing benefits, simplifying the system and offering enhanced financial support for those out of work.
Minister Outlines Reform Principles in Commons
DWP Minister Sir Stephen Timms, a member of the Labour Cabinet, set out the government's vision in response to a question from Conservative MP Wendy Morton. Morton, the MP for Aldridge-Brownhills, had asked about plans to improve work incentives and tackle long-term economic inactivity.
Timms stated the core principle driving the changes: "those who can work should work, but if you need help into work the government should support you, and those who can’t work should be supported to live with dignity." He highlighted recent reforms, including the Right to Try guarantee for disabled people and the sustained rise in the Universal Credit standard allowance enacted in July.
Details of the Proposed Unemployment Insurance
The new Unemployment Insurance benefit was consulted on in the Pathways to Work Green Paper. It is designed to replace the two current contributory out-of-work benefits:
- New Style Employment & Support Allowance (NS ESA): For those with health conditions, currently available indefinitely for most.
- New Style Jobseeker’s Allowance (NS JSA): For those actively seeking work, available for up to six months.
The key changes under the proposed UI system are:
It would be a time-limited payment. Crucially, it would be paid at the higher NS ESA rate of £140.55 per week. This represents a substantial increase from the current NS JSA rate of £92.05 per week.
Simplifying the System and Boosting Incentives
Sir Stephen Timms explained the dual purpose of the reform. "The introduction of UI would simplify the contributory system by removing the distinction between jobseekers and those considered unable to work," he said.
He added that the change aims to "improve the income protection available to people who lose their job to give people the time and space to find the right job, while time-limiting that entitlement to create a strong incentive to return to the labour market."
The minister also noted other supportive measures, including the deployment of over 1,000 full-time equivalent Pathways to Work advisers and the testing of a new support conversation for claimants. These reforms, alongside the Universal Credit Act 2025, are intended to rebalance support and address what the government sees as perverse incentives within the benefits system.
