Saving for when you’re sick? Not as daft
as it sounds.


I went on Radio Ulster on Tuesday to discuss Conservative not-quite-plans to change the way sick leave is paid for.

There wasn’t much detail to go on. Just a mooted idea from Work and Pensions Secretary Iain Duncan Smith, that had apparently received the nod from the Prime Minister, to scrap the current system of Statutory Sick Pay and replace it with a ‘fund’ we paid into every month that would cover us when we were ill.

Whether there would be some form of SSP left for those on low incomes who couldn’t put money aside, I had no idea. Whether the fund is insurance-based or relies on cold-hard, presumably invested, cash was also a mystery. Thankfully my opposite number, a nice guy who runs a party called People Before Profit was equally none-the-wiser.

SSP is currently paid by your employer for a period of up to 28 weeks and reclaimed back from the state through the tax system. If you’re lucky your employer will leave you on full pay for a couple of months. If you’re unlucky they won’t have a scheme to keep your wages at their normal level while they pay for someone else to do your job and you’ll be straight on SSP after four days.

Predictably there was a bit of outrage on the airwaves and on social media in the hours afterwards. How dare the government attack people who are ill, they asked. We already pay for our own sick pay, through national insurance, they pointed out.

These arguments are easily debunked.

National Insurance is a waste of time and energy. Sure, the state running an insurance scheme to cover us if we’re unemployed, ill and when we retire, sounds like a great idea. Or at least it did in the 1940s. We need never worry again about our own misfortune because the magisterial wisdom of our benevolent guardians has us protected, people thought. They were sadly mistaken.

An aging population, brought about mostly because of superb innovation in medicine, meant that people soon started taking out more than they had ever put in. The effect is that National Insurance is just a massive Ponzi scheme. We pay in, unwittingly funding the retirees of today in the hope that we will be provided with the money of people not even born yet when we retire.

Aside from being a complete failure, NI is just a brand, it’s just something nice that appears on a payslip to make you feel good. The money actually gets thrown into a central taxation pot which, unless you’ve been asleep for the last seven years, you will have noticed doesn’t even cover what the state spends.

That there are still some people out there who believe they’re paying something in to get something out is unfortunate. Though no government is ever going to admit openly that the whole system has failed – governments like to pretend that they’re doing good things with money, when they rarely ever do. What they should really do is abolish it, not least because people would see how much they really pay in tax.

The logic behind the attacking the sick jibe I couldn’t work out. If I had the choice between relying on SSP or getting my taxes cut to save for my own sickness I’d always choose the later. My reasoning for this is quite simple. I don‘t know where I’ll be working in a few years. Will it be somewhere where I be able to live on full pay if I get ill, or will I be stuck with SSP? At least if I’ve been putting money aside for myself I know that it will be there when I need it. Who is the best person to provide for me? An imaginary National Insurance scheme or myself?

Then there’s the question of moral hazard. If the state is going to pay for me to be ill (now that we’ve established that we’re not actually paying for ourselves through NI) then what’s the incentive to look after myself? On the other hand if I’m paying for myself to be sick I’m much more inclined to look after myself. And avoid taking unnecessary sick days. I could also be safe in the knowledge that a particular colleague wasn’t going to take themselves off to the doctor every five minutes for a sick note, leaving me to pick up the work, as they would have a clearer incentive to get on with it.

So behind the rhetoric this is actually a decent, common sense proposal. Not only are there significant cost savings involved in not taking people’s money away from them only to process it through a creaking bureaucracy, but because it’s a tacit acknowledgement that National Insurance really is an outdated and broken system. Making sure people are incentivised to take care of themselves but also have a way to take care of themselves doesn’t seem like an attack on anyone to me. If it’s an attack on anything, it’s the outdated, inefficient, falsehood that is National Insurance – and that’s fine with me.