Skip to main content
Article thumbnail
Location of Repository

Inclusion or insurance? National insurance and the future of the contributory principle

By John Hills


This paper examines the decline of National Insurance in Britain, as witnessed by its declining share of all social security spending and the steady dilution of the ¿contributory principle¿ on which it was originally based. It argues that this decline is not an accident: under governments of the Left, arguments in favour of inclusion have been predominant, non-contributory benefits expanded and contribution conditions softened; under those of the Right, the emphasis has been on focussing limited resources on the poorest through means-testing. Given where we are now, the strong arguments in principle for social insurance look much weaker. However, there are also reasons why the system has not been swept away, notably the way in which the bulk of the system is concerned with state pension rights which have already accrued. The paper explores current plans for the future development of state pensions, arguing that their combined effect is to restore something like a flat rate state pension, but with significant complexity. This could be developed into a more transparent system guaranteeing a total state pension at a fixed percentage of average earnings for those meeting a participation test, rather than being based on contribution records. This leaves a choice for the remaining sixth of National Insurance benefits: to separate out state pensions and absorb the other insurance benefits within the rest of working age social security, or to maintain the scope of National Insurance, but also based on participation, not past contributions

Topics: HV Social pathology. Social and public welfare. Criminology, HJ Public Finance
Publisher: Centre for Analysis of Social Exclusion, London School of Economics and Political Science
Year: 2003
OAI identifier:
Provided by: LSE Research Online

Suggested articles


  1. (1994). Beveridge and Social Security: An international retrospective. Oxford: doi
  2. (2002). British Social Attitudes: The 19th report. doi
  3. (2000). House of Commons Social Security Committee doi
  4. (2002). How Basic Income is Moving up the Policy Agenda: News from the Future, paper given at the Ninth Congress of the Basic Income European Network,
  5. (1995). Incomes and the Welfare State. Cambridge: doi
  6. (2002). Long-term public finance report: an analysis of fiscal sustainability.
  7. (1998). National Insurance and the Contributory Principle,
  8. (1999). Partnership in pensions’: Delivering a secure retirement for women?” in Partnership in Pensions? Responses to the Pensions Green Paper. CASEpaper 24. London: London School of Economics.
  9. (1998). Pensions and Retirement Planning,
  10. (2001). Public Attitudes towards Taxation. London: Fabian Society.
  11. (2002). Public-private partnerships in pensions policies” in
  12. (2002). Reforming the State Pension System: The State Pension Guarantee. London: Association of British Insurers.
  13. (2002). Simplicity, Security and Choice: Working and saving for retirement, Cm 5677. London: The Stationery Office.
  14. (1942). Social Insurance and Allied Services, doi
  15. (1992). Social Insurance and Poverty Alleviation, paper presented at conference on “Social Security 50 years after Beveridge”,
  16. (1994). Social Insurance and Poverty Alleviation”
  17. (2001). Social Insurance and the Contributory Principle: A paradox in contemporary British social policy”, doi
  18. (1993). Social Insurance: Reform or Abolition?,
  19. (1994). Social Justice: Strategies for National Renewal.
  20. (1995). The Dynamic of Welfare: The Welfare State and the Life Cycle. Hemel Hempstead: Harvester Wheatsheaf. doi
  21. (1995). The Five Giants: A biography of the welfare state. doi
  22. (1999). The proposed State Second Pension and National Insurance” in Partnership in Pensions? Responses to the Pensions Green Paper, CASEpaper 24. London: London School of Economics.
  23. (1984). The Reform of Social Security. Oxford: doi
  24. (1955). The Social Services, James Seth Memorial Lecture,
  25. (1999). Tightropes and Tripwires: New Labour’s proposals and means-testing in retirement, CASEpaper 23. London: London School of Economics.
  26. (2001). Welfare state and welfare society” doi

To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.