Were We Being Sold a Lemon? Analysing the distributional implications for those Labour’s proposed social insurance scheme would have covered

Abstract

In February 2023, the Labour government announced that it was shelving its proposed income insurance scheme for now, but indicated that the scheme may be revived if Labour is re-elected in October. The proposal raised many equity and efficiency issues, including the inequities of a two-tier system which favours workers who would be covered by the scheme ahead of others who would not. This article focuses on differences in outcomes within the insured group. Using a family vignette methodology, it finds that the scheme, layered on top of existing welfare provisions, would have been highly regressive and poor value for money for many low- and middle-income families.