The Department for Work and Pensions (DWP) has set out concrete proposals for a major overhaul of the welfare system, with plans to introduce a new Unemployment Insurance benefit. This new scheme, first floated in Labour's welfare reforms last year, is designed to streamline support for those out of work.
What the New Benefit Entails
According to new guidance published on Gov.uk, the proposed Unemployment Insurance (UI) would be a non-means-tested, contributory benefit. This means eligibility is based on an individual's National Insurance record, not their savings or partner's income. The benefit is intended to provide better financial protection for people who lose their jobs.
The current proposal, as highlighted in a response to Conservative MP Wendy Morton, would see UI paid at a single rate of £138 per week. This is the current rate for New Style Employment and Support Allowance (ESA). The new benefit would directly replace both New Style Jobseeker's Allowance (JSA) and New Style ESA, merging them into one simplified payment.
Ministerial Vision and Wider Reforms
Sir Stephen Timms, the Minister for Social Security and Disability, outlined the thinking behind the change. He stated that introducing UI would simplify the contributory system by removing the distinction between those seeking work and those considered unable to work due to health conditions.
"Introducing UI would also 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," Sir Stephen explained in a parliamentary answer on 19 January 2026.
He positioned this change within a broader suite of welfare reforms, including the recent Universal Credit Act 2025, which increased the standard allowance, and the rollout of over 1,000 full-time equivalent Pathways to Work advisers.
Active Seeking and Time Limits
A core condition of receiving the new Unemployment Insurance will be that recipients must be actively seeking work. The DWP has indicated there will be some flexibility for individuals with health conditions that limit their capacity to work. However, entitlement to the support will be time-limited, a measure explicitly designed to encourage a return to employment.
The DWP's consultation on establishing this "simple and clear" new benefit is currently ongoing. If implemented, it would mark one of the most significant changes to the contributory benefits landscape in recent years, aiming to balance stronger initial support with clear work incentives.
