A decade ago, when I was frittering my precious life away covering the Beef Tribunal, the Dublin commercial radio station 98 FM did a survey in which it asked its youthful listeners to name the things that interested them most, writes Fintan O'Toole.
Top of the list, of course, was sex. At the bottom was the Beef Tribunal. I had a flashback to the sense of being hopelessly weird which I felt then when I recently found myself reading, with some enthusiasm, a new book called Reforming Pensions in Europe.
There is an inverse relationship between the sexiness of a subject and the amount of advertising money devoted to making us take an interest in it. On that basis, it is clear that most of us find pensions about as exciting as limp lettuce. We are bombarded with ads urging us to think about them because, presumably, most of us prefer not to. But the subject actually deserves some thought, not least because wrapped up within it is a vivid example of the deliberate inequity of social policy in Ireland.
If you listen, for example, to the rhetoric at the recent Fianna Fáil ardfheis, you will note how heavily the claim to any kind of social conscience on the part of the coalition that has been in power since 1997 rests on the steady improvement of the old-age pension. Providing for the elderly is one of the basic marks of a decent society and there is no doubt that some progress has been made. Maximum rates of €154 a week for the non-contributory and €167.30 for the contributory pension are not exactly generous but they do represent significant progress. So where's the inequity?
In an important article in Reforming Pensions in Europe (edited by Gerard Hughes of the ESRI and Jim Stewart of TCD), Hughes and Adrian Sinfield look at the real cost of public subsidies for private pensions in the countries which follow "the Anglo-American model", among them of course Ireland. Their findings show quite clearly that State generosity to the holders of private pensions far exceeds that shown to the recipients of social welfare pensions.
In 1981, the cost to the State of tax relief on private pension funds was very small - £40 million or about 0.4 per cent of GDP. By 1999, the latest year for which full figures can be calculated, it had risen to £844 million or 1.4 per cent of GDP. And here's the rub: in that same year social welfare pensions cost the State just £728 million. In other words, the State spent around €150 million more on supporting private pension funds than it did on the old-age pension.
This wouldn't be a problem, of course, if the money spent on subsidising private pensions was used in an equitable way. But it isn't. Tax relief on private pensions, of its nature, tends to favour the well-off to an overwhelming extent. In Ireland, 93 per cent of those in the top tenth of earners are able to claim tax relief on pension contributions.
The corresponding figure for the bottom tenth of earners is half of one per cent. The benefits from tax relief on pension contributions are correspondingly skewed. Forty per cent of the benefit goes to the top tenth of earners, and just 0.1 per cent to the bottom tenth. Seventy-six per cent of the benefit goes to the richest 30 per cent. Just 1.3 per cent of the benefit goes to the poorest 30 per cent.
Even these figures, staggering as they are, probably underestimate the extent of the imbalance. They don't take account of tax relief either on lump sums paid on retirement or on investment gains made by pension funds. There is also a huge element of gender inequity to consider, since women are far less likely to be able to take advantage of private pension schemes. The gap between the State pension benefits delivered to a typical contract cleaner, on the one hand, and a typical managing director on the other is utterly abysmal.
Yet it is also invisible. Tax relief is never counted in the budgetary arithmetic. If a government was to spend an extra €250 million on the old-age pension, the standing army of stockbroker economists would be on the march with dire warnings of fiscal recklessness. But if it was to forgo €250 million in taxes in order to boost the pensions of those who are least likely to be poor in their old age, that's just good planning for the future.
As Hughes and Sinfield sum it up: "Governments have been reluctant to improve benefits for the poorest because of the public expenditure cost, while actively encouraging more private provision which has reduced the tax revenue available for public expenditure. Yet there is little awareness of this because official statistics do not reveal these tax subsidies alongside public spending."
This is the hidden reality behind all the claims of concern for social inclusion: government policy is to make sure that the stark inequalities of working life are built into old age as well.
Behind the façade of generosity to those who depend on State pensions, there is a relentless determination to favour the well-off. But since pensions are boring except for those who have to live on them, they get away with it.