Introduction
In most cases, social security is looked at as if it’s only concern is the liberation of poverty; which has given rise to debates on how effectively to do that. However, social security is offered to cover many other aspects which includes; economic policy and redistribution, relief of poverty, social protection, prevention, and social and economic measures that are intended to benefit the entire society. According to Paul (2011, pp. 39-45), social security is used to refer to any form of personal financial assistance which is mostly provided by the government. In general terms it is income maintenance that is given by the government. In England, this system is referred to as National Insurance and it is comprised of benefits that are managed by the Department for Work and Pensions- for instance, Jobseeker’s Allowances, Retirement pensions. The main objective of this system in its formative years was to provide insurance against unemployment and illness; however, it later came to include retirement pensions as well as other benefits as time went by. Funds for this system come from National Insurance payments and general taxation.
Development of the system
Understanding of the present Social Security System in England is based on its historical precursors as it has evolved over a significant period of time. To be more precise, the current system has its foundation on both the present-day political scheme as well as adjustment of the pre-existing system to shifting societal needs and circumstances. The origin of this system in England dates back to immediately after World II, which was then referred to as “Welfare State”. In England, equal rights on basic contingency and insurance-based are provided for both the self-employed and the employed individuals within the sane national insurance scheme. Initially, it was believed that the self-employed were in a position to plan for their social risks based on the assumption that they were wealthy, (Stanley, 2007, pp. 103-09). Later on, this view changed as it was observed that many people moved from employment and self-employment in their life time. Therefore, a system that brought together the employed and self-employed had to be developed; hence, the Social Security System. Nevertheless, it should be noted that several changes have been made within this system since its foundation in order to suit changing circumstances.
Reasons for social security system
As mentioned early, the major reason for the introduction of the social security scheme in England was to help in the eradication or rather reduction of poverty. Poor relief implies that despite the fact that people are poor; their resources have been improved to the minimum level. For instance, if sickness occurs among the poor they do not to sell all their properties in order to get treatment. The second reason for social security scheme is to enhance social protection. This implies that individuals should be able to feel secure. Paul (2011.pp. 57-61) asserts that, social security includes besides protection against poverty, being secure against any contingency that could occur due to a change of circumstances. These circumstances include such things as loss of employment, old age, and sickness. According to the United Nations, the term “Social protection” is used to imply to the policies that are aimed at reducing the exposure of people to risks, improving their capability of protecting themselves from for instance, loss of income and hazards.
Compensation is another reason for the introduction of this scheme. People are compensated for instance, in cases of costs that are incurred due to sickness or disabilities, some sort of loss of personal nature. Compensation is one of the principles under which social security scheme is based. Lastly but not least, redistribution is another reason for the formation of social security scheme in the world in general, and in England to be specific. Basically, this is not a form of spending but a form of transferring resources from those who have to those who have not. This is aimed at reducing the gap between the few who have and the majority who have not, and not necessary to create equality between the poor and the rich, (Ditch, 2002. Pp. 95-99). Redistribution occurs in two ways; progressive if it is the transfer from the rich to the poor, and regressive if it involves transfer to the rich from the poor.
Benefits
Basically, there are five major benefits of social security in England. The first benefit is the Social Insurance which is basically the benefits that are paid for by contributions. Social Insurance operates under the principle that people are paid benefits by contributions which are paid while working. Under this system, contributions made by those who are working now are used to pay the benefits of those who have already retired; hence, creating a form of intergenerational dependence, (Millar, 2003. pp. 125-8). Some of the advantages of this scheme include; a feeling of entitlement to the benefits, continuous funding of the system through contributions, and lastly, it is difficult to put an end to benefits as people have paid for their benefits. However, this scheme has disadvantages as well; for example, individuals have to work in order to qualify, thus, it excludes a large number of the unemployed, secondly, low contributions have to be set in order to accommodate more people, thirdly, poor people cannot afford to pay the contributions, lastly, with demographic changes, those who are contributing are becoming less than those who are receiving benefits leading to difficulties in paying benefits.
The second benefit of social security fund is means tested benefits which is mainly for the low income group. Many people have criticized this scheme based on the argument that it is a source of lingering system of welfare. Some of its advantages include; concentration of resources on the neediest and it is progressive in the sense that resources are redistributed vertically to the poor from the rich. The disadvantages of this scheme are; difficult and complex to run, in most cases; those who are in need are unreachable mostly due to ignorance, fear and stigma. The other disadvantage is that the income of people change rapidly which means that people have to report for such changes from time to time whenever they occur.
Third is the non-contributory benefits which is a wide term which is used to refer to all non-insurance benefit which are intended to be used for non-means tested benefits. They are mostly applied in cases of people who have been physically disabled as a kind of compensation as a way of achieving special needs for instance social care or compensation for severe disability. Administration of this kind of benefits is usually challenging due to the fact that there must be an existence of a test, (Paul, 2011.pp. 70-7). For instance, medical scrutiny is needed in the case of disability. The fourth benefit of Social Security System in England is the Discretionary benefit. Notably, this type of benefit is usually awarded at the prudence of officials. It operates under that assumption that some needs are unpredictable; hence, they are designed to deal with extraordinary or urgent needs mostly in cases where social assistance depends on social work. In some situations, they can also be applied as a way of motivating and directing suitable patterns of behavior. However, due to the fact that it is impossible to cater for every need in advance, some benefits of this nature are taken to be a necessity.
The fifth benefit under this system is universal benefits. These are the benefits that each and every class of the population; for instance, old people and children are entitled to without any other tests. Arguably, in terms of administration they are simple but they are expensive based on the fact that they have a broad coverage. Those who advocate for this kind of benefits assert that there is need to put into place a different kind of social security system which could be financed through taxation and also it must be unconditional, (Millar, 2003. Pp. 145-50). The arguments behind this is that, this kind of benefit will become simpler to run, fair, and also it would be more effective in protecting the most needy individuals as compared to the current systems. However, those against this proposal assert that it would be weakening the incentives to work, it would be relatively expensive, and also its simplicity would be deceptive in case of special circumstances.
Data and Analysis
As mentioned above, the system gets its funding from tax revenues and the contributions of both the self-employed and the employed to the National Insurance. In England, contributions to the National Insurance have been categorized into classes. I.e. class 1, 2 and 3. It should be noted that one gets a National Insurance number once he/she gets employed. This is the number that will be used as a reference for this individual in the social security system. In most cases, this number is acquired from the Department of Social Development in Northern Ireland or from the Department of Work and Pensions in England. Besides, the National Insurance account is used to establish the suitability of some kind of benefits in addition to the state pension. Notably, class 1A, 1B as well as 4 NIC do not form part of the entitlement to benefits but they have to be paid if due.
Class 1
Class 1 contributions are made by the employees as well as their employers. According to the laws of England, these contributions are usually referred to as ‘primary’ and ‘secondary’ respectively. The process of payment of these contributions has been designed in the sense that the employee’s contribution is deducted directly from his/her gross salary by the employer who then adds to it his contribution before submitting the total to HMRC in addition to the income tax. The rate of contribution to be paid to NICs is determined by three objective figures: Upper Earnings Limit (UPL), Lower Earnings Limit (LEL), and Earnings Threshold. The cash value of the various limits varies from year to year depending on the amount determined by the Chancellor or the level of inflation, (Stanley, 2007, pp. 45-9).
It is of importance to note that under the LEL level, NICs are not paid due to the fact that there are no benefits which will be accrued under this limit. Above the LEL limit but under ET, the government recognizes the contributions as if they were paid but they are not paid. This is purposely to ensure that the working poor are in a position to receive benefits. On the other hand, between the ET and the UEL, contributions to the NIC are made depending on the rates that are established based on the following factors: the marital status of an individual, type of occupation, age of an individual, as well as the occupational pension scheme to which contributions are made. Above the UEL, rates of contribution are determined based on the above factors but with an exception of the type of scheme of contribution, (Ditch, 2002, 74-78). Notably, limits for class 1 in the case of common employees are determined periodically based on when they are paid, unlike for the case of directors of companies whose contributions are annually calculated.
Other classes
Class 1A is a category of contributions that are made by employers based on the value of benefits that are given to their directors as well as employees. They are usually calculated at a rate of 12.8% of the benefit value. Class 1B is a recent category of contribution and they are usually paid by only the employers who form part of the PAYE Settlement Agreement. Class 2 contribution is the amount that is paid to NI on a monthly basis but calculated on a weekly basis. They are usually made by those who are self-employed. The contributions must be made no matter the outcome of their business, (Paul, 2011pp. 100-4). Class 3 are the contributions that are made by individuals who feel that they should reduce the gap in their contributions that has come up as a result of low earnings or losing their jobs. The major objective of this class is to offer individuals an opportunity to record the minimum contributions which will qualify them for the state pension. In England, the minimum contribution for one to get state pension is 10 years for women and 11 year for the case of men. Lastly, class 4 is the contribution that is made by self-employed individuals depending on the amount of profits earned and it is submitted yearly with the income tax.
Summary and Conclusion
According to Walker (2004. Pp. 23-9), social Security Schemes have their advantages and disadvantages not only in England, but in all the economies in which they are applied. Of the advantages of this scheme is that it helps to redistribute resources in the society. Secondly, they also offer social protection. The third advantage is that it helps people to plan for their future by saving a share of their income. Lastly, it is important in compensating individuals who have been unfortunate in one way or another. On the other hand, some of the disadvantages of this system include: mismanagement of contributions paid, it promotes dependency of people on the government to plan for their future; hence, some individual may fail to make their own saving hoping that the government will cater for their needs at the later years, and lastly, the system seems to incur funding problems due the fact that the number of those retiring is exceeding those who are working, thus, creating a big difference between those who are contributing and those who are benefiting.
Finally, social Security Systems have been put in place in most economies to enable the government meet its objectives. Some of the reasons why the system was established in England are: to help in reducing poverty, compensation, as well as resource distribution purposes. Social Security System in England is similar to other systems that are used in other economies; for instance, United States. However, its structure is a bit different from the other structures mainly as it is structured in terms of classes. Although this system has proved to be beneficial, it also has its disadvantages which include: the public depending on the government to plan for their future, mismanagement of funds, and difficult in meeting its objectives in the recent times due to demographic changes that are taking place.
Works Cited
Ditch, J.S. Introduction to Social Security: Policies, Benefits, and Poverty, 2002
Millar, J. Understanding Social Security. London: Policy Press, 2003
Paul, S. How Social Security Works: An Introduction to Benefits in Britain. London: Policy
Press, 2011.
Stanley, A.T. Social Security Benefits Handbook. New York: Sourcebooks, Inc., 2007
Walker, R. Social Security and Welfare. Boston: Open University Press, 2004.
