The Department for Work and Pensions is consulting on a new contributory benefit provisionally called ‘Unemployment Insurance’ for those who have paid into the system
The Department for Work and Pensions ( DWP ) has proposed new welfare reforms, including the introduction of a contributory benefit provisionally named ‘Unemployment Insurance’. Sir Stephen Timms, Minister for Social Security and Disability, outlined how this new benefit would “simplify the contributory system by removing the distinction between jobseekers and those considered unable to work”.
In addition, the DWP Minister stated that the implementation of Unemployment Insurance would “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”, reports the Daily Record.
These remarks were made in a written response to Conservative MP Wendy Morton’s query about the DWP’s plans to “help improve work incentives within the benefits system and reduce long-term economic inactivity”.
Sir Stephen further elaborated: “At the heart of our reforms is the principle that 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.
“We’ve recently published draft regulations on our Right to Try guarantee, which will give disabled people the confidence to try work and, in July, the Universal Credit Act provided for the first ever, sustained rise in the standard allowance of Universal Credit, benefitting millions of those on the lowest incomes.
“We have also introduced reforms through the Universal Credit Act 2025, to rebalance support within UC, to address perverse incentives and better encourage those who can work to enter or return to employment.
“We have also put in place the equivalent of over 1000 full-time Pathways to Work advisers, offering tailored support to support people into work across Britain and we have begun testing our new support conversation.”
Within the Pathways to Work Green Paper, the DWP floated the idea of launching ‘Unemployment Insurance’ as part of an overhaul of contributory working-age benefits.
According to the DWP Green Paper, this benefit would “provide greater income protection for those who have paid into the system, supporting people to find a new job that makes the most of their skills, in support of a dynamic and productive economy alongside the employment support offer”.
Official guidance on GOV.UK explains: “Unemployment Insurance would be a new non-means tested entitlement for people who have contributed into the system. It would be created by replacing New Style Jobseeker’s Allowance (NS JSA) and New Style Employment and Support Allowance (NS ESA) with a new single entitlement, paid at the current ESA rate (currently £138 per week) and will be time-limited.
“This would provide stronger income protection during periods of unemployment for those with a recent work record, while revitalising the ‘something-for-something’ contributory principle in the working-age system. People claiming this would be expected to actively seek work, with easements for those with work-limiting health conditions.”
In tandem with raising the payment rate, the DWP confirmed this modification would terminate the unlimited entitlement to contributory ESA for new claimants assessed as having limited capability for work-related activity.
Individuals who remain jobless beyond the time-restricted period would have the option to apply for Universal Credit, subject to their individual circumstances.
The DWP further explained: “We believe this reform would align with the removal of the Work Capability Assessment, by offering a route to financial support for those with temporary and short-term health conditions, including for those who may not be entitled to Personal Independence Payment (PIP) and therefore not entitled to the health element of Universal Credit.”
Consultations are underway to introduce a straightforward “Unemployment Insurance” benefit by overhauling contributory benefits—specifically New Style Jobseeker’s Allowance (NS JSA) and New Style Employment and Support Allowance (NS ESA).
