HEAD TO HEAD: Paula Clancyargues 'Yes' that universal provision transforms us from mere consumers into full citizens while Moore McDowellsays 'No' that universal entitlements are both inequitable and economically inefficient.
YES:IT HAS been a bad year for conservative economic principles. The markets have proven all too fallible. Around the world, banks are on a state-funded life-support system. And now Irish citizens are taking to the streets and airwaves in defence of universal service provision.
The universalism debate highlights the philosophical gulf between those who believe that public service provision must be subordinated to the "needs" of the economy, and therefore adopt a selectivist means-tested approach to such services, and those who believe that high-quality, universal public services are fundamental to an equal society.
The former position has dominated Irish social policy for decades, and has enjoyed a near-hegemonic position in Irish political thinking during recent years. Even those who would be considered progressive remained largely silent in the face of this overwhelming consensus.
Underlying the attempt to limit medical card entitlement for those over 70, ostensibly to "save" €100 million in public expenditure, is a fundamental political aversion to the provision of universal public services.
The ideological faultlines become apparent when one considers that the €100 million cost of medical cards for the over-70s is precisely matched by the €100 million earmarked in 2008 for the National Treatment Purchase Fund, which has proven to be highly lucrative for private hospitals.
When tax revenues were buoyant, it was politically expedient to make a modest gesture towards universalism in the form of medical cards for the over-70s but, now that times are hard, normal service has been resumed.
When faced with a choice between cutting services and increasing taxes the outcome was never in doubt. Increased taxation is, after all, the great Irish political taboo. The Irish political establishment long ago embraced a simple logic: improvements in public services would require increased taxation.
Increases in taxation would act as a disincentive to work and/or investment in the Irish economy, thus putting a brake on economic growth. Ergo, high-quality public services and economic growth are incompatible.
Given current budgetary constraints, arguing for universal service provision may appear counter-intuitive. Can we afford to expand services during a recession? The question should be rephrased: can we afford not to expand public services?
Contrary to accepted neo-liberal wisdom, there is persuasive evidence correlating positive economic performance and high growth levels with high levels of social spending. The Nordic countries enjoy high levels of productivity and economic growth together with historically high tax levels, high standards of public services and universal access to those services.
The universality debate is not merely about hard statistics - costs, take-up and outcomes. It is about investing in social capital. Swedish political scientist Bo Rothstein argues that institutions and public policies which treat all as equals create generalised trust. The fact that middle and high income groups access universal public services makes it easier for low-income groups to retain a sense of dignity when accepting welfare benefits.
Universality also gives middle and higher income groups a sense of tangible benefit from the taxes they pay - and therefore a motivation to defend the survival and quality of public services when they come under threat. Universal provision thus transforms us from mere consumers into stakeholders - and consequently into full citizens.
There is another dimension to the social capital argument: the fact that universal public services are accessed by all affirms our common humanity and acknowledges that certain fundamental needs are shared by all.
In contrast to this sense of inclusion, means-tested services reinforce a sense of exclusion. The stigmatisation and intrusiveness inherent in means-testing reduces take-up.
There is a sense that services for "poor people" are generally poor services. It is thus unsurprising that the take-up of Family Income Supplement, which is means-tested, is estimated to be as low as 30-40 per cent, while take-up of the universal Child Benefit is close to 100 per cent.
There are indications that public opinion is now shifting in favour of increased equality and - as shown by the reaction to the medical card decision - universality. As recently as 2002, most people were unwilling to pay the higher taxes needed to fund improved public services.
However, a survey conducted earlier this year on behalf of TASC found that over 40 per cent of respondents would now accept higher taxes in return for better public services. Unsurprisingly, the same survey found 80 per cent of respondents were concerned about wealth inequalities.
Whether demonstrating against the decision to means-test medical cards for the over-70s, or asserting the need for higher taxes in a survey: in 2008, it is the public who are providing political leadership and the politicians who are scrambling to follow.
A political paradigm shift will be required if Ireland is to achieve the level of social services enjoyed in Scandinavia. Given the events of recent weeks, we may be on the brink of such a shift.
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• Paula Clancy is director of the think tank TASC
NO:
The furore orchestrated by pensioners and students was not just a matter of third level fees or medical cards. It was about a threat to end universal entitlements, something that the Government had signalled as unavoidable.
This fundamental policy shift was made explicit by statements from ministers, who believed (and intended acting on this belief), the policy of universal and uniform entitlements under social welfare, health and education was simply not sustainable in its present form and extent.
In my opinion, this perception was absolutely correct, and nothing to do with the immediate fiscal problem. Of course, the latter provided the reason to make a change, but it should have been made when fiscal circumstances would have made it politically easier.
The Budget failed in this respect to the extent that it did not (initially and later by virtue of U-turns) proceed to implement the proposed changes.
Delivering the Budget, Minister for Finance Brian Lenihan signalled he was unwilling to accept the political cost of doing what was right. This was when he announced that because of "technical issues" affecting taxing children's allowances he would do nothing until the commission on tax reform had reported.
It's the old story: right or not, it's always harder to get a bone back from a dog than not to give it in the first place.
And now, for all practical purposes, the Government, while stoutly supporting the principle, has in effect abandoned the implementation of selective benefits in the face of a riotous assembly of the elderly and the perennially idle.
Universal and uniform entitlements are strongly supported by recipients, many, perhaps most, social workers and populist politicians.
However, many economists have argued for a long time that whatever the advantages of simplicity and absence of discrimination, such policies are both inequitable and economically inefficient.
The easier point to explain concerns equity. Social and similar policy measures are supposed to compensate the less well off and redress inequalities in opportunity and outcome. It is hard to see why a family on €300,000 a year after tax should be awarded a further subsidy to its living standards, and one equal to that received by a family on €30,000 or less.
It makes a nonsense of the concept of a progressive fiscal structure to have only moderately progressive tax rates coupled to substantial transfers to taxpayers independently of their incomes.
Moderately progressive tax rates make sense for reasons related to economic growth and efficient labour markets. But if we want a meaningful redistribution of income (affecting inequality of outcome) this means having a system of selective access to income support payments. If we want to improve equality of opportunity, it makes no sense to subsidise those with high incomes who already secure social advantages for their young, by providing higher education to them at the same (or a zero) price as that available to those children from disadvantaged backgrounds.
The efficiency argument is a bit more subtle. All taxes (barring Mrs Thatcher's poll tax) impose what economists call excess burden: a tax costs the economy more than the government gets as revenue. The simplest example is to think of how a high marginal income tax rate results in higher labour costs and lower work effort. The government gets its revenue, but the economy loses real output. Universal social welfare entitlements mean higher taxes being levied. This means a higher excess burden cost, and this is far from trivial. Lower direct taxes since the 1980s have contributed significantly to the economic growth of the 1990s and the early part of this decade.
A shift to selective entitlements means either being able to lower taxes, or pay higher benefits to the less well off from the existing tax revenue or a bit of both. The first improves economic efficiency; the second improves the efficiency of the income redistribution system. Either way we are collectively better off.
You may ask why, if they were to tax children's allowances, and limit access to medical cards, the Government does not act consistently and tax non-cash benefits if people take them? There is no good reason for excluding any form of income from income tax.
We already tax income when it's not in the form of cash: benefits in kind. If benefits in kind are taxed, where free cars provided by the employer are benefits, why are travel passes, free TV licences and so on not also liable to tax if your total income is high enough?
I have no problem with increasing credits and allowances for older taxpayers because they face higher costs of living than the young. But I don't see why their incomes should be wholly or partly outside the tax net in 2009 simply because they were born before 1944. And, before you start to explode: I was born in 1943.
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• Moore McDowell lectures in economics at UCD
THE PROTESTS last Wednesday may have unnerved the Government parties, but they should have unnerved the rest of us even more.