Politicians put self-interest ahead of national interest
Dan White investigates the reasons for the government's reluctance to cut social welfare rates despite them being hugely overinflated in comparison with UK and German rates
19 November 2012
As the countdown to the budget on 5 December continues the government is desperate to avoid cuts in headline social welfare rates. By not cutting social welfare rates our political masters hope to divert attention from the still excessive salaries and pensions prevailing in the public sector.
Over the past 14 months the ESRI, the government’s favourite think-tank, has been wheeled out not once but twice to deny claims that many of those on social welfare would be worse off if they returned to work.
In September 2011 the ESRI, over half of whose funding comes from the public sector, criticised research carried out by the OECD which showed that Irish social welfare rates were seriously out of line with those paid in other European countries.
According to the ESRI, the OECD has "misinterpreted" Irish social welfare rates.
Even before such add-ons as rent allowance and a medical card are taken into account, the basic Irish social welfare payment for the long-term unemployed, lone parents and those certified as being unable to work, is €188 per week.
In the UK the equivalent payment is just Stg£71 (€88.75) per week while long-term German jobless must scrape by on just €83 per week.
Then in June of this year the ESRI re-entered the social welfare debate when, in an unprecedented move, it disowned a report compiled by one of its own former professors, Richard Toll. In his report Professor Toll had calculated that up to 44% of all families would be better off on social welfare than in work.
The reaction to Professor Toll’s explosive report was remarkable with the ESRI pulling it from its website and claiming that it was "misleading". The ESRI went on to state that it had "serious concerns" about the methodology used by Professor Toll. To which one can only reply that the vast majority of us not in receipt of public funds thought that his use of the available data was perfectly valid.
Even more embarrassing for the ESRI was the fact that Professor Toll, who left the ESRI for the University of Sussex earlier this year after loudly criticising his former employer for what he claims is its lack of independence and transparency, has continued to stand over the conclusions of his report.
And it’s not just Professor Toll who is pointing out the problems being caused by our seemingly excessive social welfare rates. Last month the Department of Social Protection was forced to announce new measures designed to simplify the process by which unemployed people who take up temporary jobs can reclaim their social welfare benefits when the job comes to an end.
Declining temporary jobs
The move came after employers, particularly retailers, complained that many suitably qualified unemployed people were declining temporary job offers due to the difficulties they would later encounter reclaiming their benefits. This created the prospect of tens of thousands of temporary jobs going unfilled over the Christmas period while more than 430,000 people were signing on the Life Register.
So why is the government apparently so reluctant to tackle the issue of social welfare, which this year will cost over €21bn – more than half of all public spending? The internal dynamics of the coalition, with Labour apparently determined to prevent any cuts in headline social welfare rates, provide a partial explanation.
There are also, not entirely unjustified, ethical arguments that can be made in favour of not cutting social welfare payments. Even with the other bells and whistles added on, trying to live on €188 per week is no fun. While there is undoubtedly a hard core of recipients for whom social welfare dependence is a lifestyle choice, the huge increase in the numbers on the live register – up from 155,000 in October 2006 to 435,000 in October 2012 – provides at least circumstantial evidence that a large proportion, probably a majority, of those claiming social welfare are doing so because they have no other choice.
The tipping point
Added to these arguments is one only ever uttered sotto voice by our politicians. With one fifth of all mortgages in trouble and a seventh of all workers without a job, would cutting social welfare rates be the tipping point that resulted in serious unrest and public disorder? Unfortunately, given the seriously-stressed state of both our society and economy, that’s not an entirely unreasonable fear.
However, none of these factors, either individually or in combination, provides a wholly convincing explanation for the government’s extreme reluctance to reduce social welfare rates to more affordable levels. What are we missing?
The official myth of the Irish economic downturn is that we have all rallied together and borne our fair share of the burden. Bull droppings! The reality is that most of the sacrifices have been imposed on the private sector with virtually all of the 368,000 jobs that have been lost in the past five years having been in the private sector. Contrary to the shared sacrifice myth what has actually happened is that the public sector has circled the wagons and let the private sector go hang.
According to the latest CSO figures, average hourly weekly earnings in the public sector are now a massive 50% higher than in the private sector; €919 vs €611 per week. This disparity is widened even further by the gold-plated pensions enjoyed by public sector workers. And who are among the best-paid and most lavishly-pensioned public sector workers of them all? Yes you’ve guessed it, our TDs and ministers.
Could the politicians’ reluctance to grasp the social welfare nettle have anything to do with their fear that if social welfare recipients on the poverty line were forced to accept cuts then public sector workers, 2,270 of whom earn more than €150,000 a year and a further 26,000 of whom earn between €70,000 and €150,000 a year, could hardly be exempted from the same treatment?
Politicians and senior civil servants have formed an unholy de facto alliance whose aim is to minimise the cuts to their lavish pay and pensions, regardless of the impact on the wider economy. For these very well-paid individuals it seems as if self-interest takes precedence over the national interest.