RAISING INCOME taxes in order to protect those at risk of poverty may not be a priority for the Government at this time of economic gloom. That is why a report from the Economic and Social Research Institute (ESRI) makes for refreshing reading. It suggests the necessary funding can be raised through reforming the pension system and limiting tax relief to the standard rate for everyone. Savings of €1,500 million a year are envisaged.
It would take political courage to adopt this approach. There has been a great deal of talk in recent years about reforming the pension system. It was urged by the Organisation of Economic Co-operation and Development and is supposed to be high on the Government's "must-do" list. But because 80 per cent of tax relief goes to top income earners, there has been a marked reluctance to give offence. Now, however, economic circumstances and changing demographics may encourage a more assertive approach. And Minister for Finance Brian Lenihan has indicated the Government's first priority is to protect the most vulnerable in society.
The ESRI study of low incomes and deprivation is designed to influence the evolution of government policy over a ten to twelve year period, rather than provide an immediate response to current economic difficulties. In spite of that, a start must be made somewhere. What better time to begin than now when, traditionally, the least well off and those at risk of poverty can be expected to suffer from the severe belt-tightening as services are cut back.
Progress has been made in reducing poverty among old age pensioners in recent years. The most vulnerable groups are now lone parents, the unemployed and people with disabilities. Overall, nearly one in five people is at risk of poverty and the situation is likely to worsen. Research has shown that those countries with the best record in reducing child poverty have the lowest levels of deprivation. The ESRI suggests we should follow their example. That will involve not just improving income supports and encouraging people to take up work or return to education/training; it will also require more State-assisted childminding facilities. More contentiously, a commitment to increase old age pensions may have to be modified in order to benefit the more needy groups.
We are entering a period of considerable economic uncertainty that will require firm leadership and social cohesion in order to overcome the likely difficulties. Better-off people should be encouraged to contribute a little more. In reality, the establishment of a standard rate of tax relief for pensions would not amount to hardship for well-to-do individuals; rather it would symbolise necessary, egalitarian reform. Ireland already spends less than the EU average on social protection programmes. We are one of the richest countries in Europe, but our record on poverty prevention is dismal. This ESRI report finds that a restructuring of welfare spending and pension reforms, rather than scaling up the existing system, would provide better results.