We should not yearn for another state's social system – instead we must base payments on what Ireland can afford, writes SARAH CAREY
BACK IN March, I wrote a column about taxation. I argued that the overwhelming political consensus that resulted in exchequer overdependence on indirect taxation over direct taxation was unjust and insane. Unjust because indirect taxation is regressive and insane because its revenues collapse at the first sign of trouble.
In it, I mentioned that Ireland has the most generous social welfare payments in Europe. This isn't true at all and I most humbly apologise for leading Irish Timesreaders into error. Apart from that I'm rather pleased I made the mistake because it has opened up a rather interesting hornet's nest.
In researching the article, I’d asked the Department of Finance to provide me with statistics on the distribution of taxation payments. Their briefing document consisted mostly of hard numbers with some political arguments thrown in.
One bullet point read: “Although it may be of little comfort for those living on social welfare, Irish social welfare rates are among the highest in the EU.”
I read, internalised, mangled and then regurgitated the line a few days later. By omitting “among” I made a grievous error. My bad, as they say. However, it has been drawn to my attention that not only was I incorrect to say that our payments are the most generous, but they are not even “among” the most generous.
If that’s true, not only was I wrong, but the department is wrong too.
Before and since I wrote that column, variations on the phrase have appeared with increasing regularity from other commentators and politicians. Either everyone has managed to come to the same conclusion because the statement is true or because we’ve all been soundly spun. If it’s the latter, then the boys in the department’s press office are very good at disseminating possibly incorrect information.
In making the claim, the department is implicitly suggesting that since social welfare rates are extremely generous, then having them cut will be no great loss. Those on the self-proclaimed left hotly dispute the accuracy of the statement. Membership of the right is never proclaimed – it’s an accusation rather than a boast. The left says that we are way down the EU tables and are actually quite parsimonious with our payments. Their implicit argument is that the payments should be preserved at their current rate, irrespective of how close we get to national bankruptcy.
So, is the statement “amongst the highest in the EU” true or not? Enter the two-handed economist. On the one hand, when tables showing lists of payments in the EU15 are examined, we are near the bottom for some payments such as unemployment benefit and midway or above average for others. On the other hand, the tables themselves are almost impossible to compile fairly and what’s “EU” anyway? The 15 or the 27? It’s extremely difficult to measure the true benefit of a payment when wage levels, costs of living, quality of public services and the point of my original column – amount of tax paid – are taken into account. How do you compare free travel, free TV licence, subsidised telephone bills and the pension for OAPs in Ireland with pension payments in Germany? It’s almost impossible.
Forced to make a call, I’d say the department’s interpretation of the facts is what might be generously described as “loose” and they should stop making the claim unless they can convincingly back it up.
Anyone else who makes the same claim because they read it somewhere – say, in a column in The Irish Times– should stop making it too.
However, I’d go one further. The department should stop making the claim not just because it’s wrong, but because it’s irrelevant. The French, the Swedes, the Germans and the Italians aren’t paying our bills – yet. We have to raise sufficient money through taxation or borrowing for what we believe is essential spending. It’s up to us to define “essential”.
Even if we had the highest payments in Europe, that is no argument to cut them and if we had the lowest, it’s no reason to raise them. Other countries have different political cultures, taxation systems and levels of public services. They also have different balance sheets. There are only two factors relevant to what Ireland should pay its citizens in social welfare – what we can afford and what we think is the amount necessary to cover a person’s basic costs.
Both of these are entirely subjective and a matter of political economy rather than mere economics. Should a minimum family income cover the cost of a Sky subscription, the mortgage on the family home or meat just once a week? Working out what we can and can’t afford is a debate taking place in every home and in every government department and the price of bananas in Belgium is neither here nor there.
Last year, we could afford the early childcare supplement – this year we can’t. Apparently, we can’t afford special needs assistants, but we can afford to recapitalise Anglo Irish. One person’s injustice is another’s pragmatism. The winner of the argument is quite simply the one who happens to be in power. Right now, that power lies in Merrion Street. As harsh as the current regime might seem, the imperative is to prevent that power shifting to Frankfurt or Washington DC. That has to be our focus now and yearning for some other country’s welfare system is a waste of time.