Checks and truth. The most generous welfare payments in Europe… reprise…

You’ve got to hand it to Sarah Carey.

For she has decided to deal with her comments earlier this year where she asserted that Ireland had the most generous social welfare payments in Europe, a point she made at the time in order to demonstrate that the state spending was extravagant and – presumably – unnecessary.

But let me allow her to make her own case(s)…

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 Times readers into error. Apart from that I’m rather pleased I made the mistake because it has opened up a rather interesting hornet’s nest.

She doesn’t really tell us much about the hornet’s nest, which is a pity. I’d certainly like to hear more.

So how did this ‘error’ happen? Let us further appraise her mea culpa.

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.”

Go on…

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.

Perish the thought. A government department being wrong…

There’s something odd about this, though. And that’s because it’s not quite the explanation she gave to Donagh on the Irish Left Review some while back.

There she initially argued that the information she received from the Department was ‘clear’ and that it stated that they were the ‘most’ generous. It was only in a subsequent communication that she admitted that ‘perhaps’ she had ‘used one misplaced word’…

I look forward to Donagh’s take on all this.

But for she now seeks safety in numbers… it’s not just our Johnny (or Sarah) who was out of step with the rest of the marching soldiers… oh no, this was contagious. They were all moving in the wrong directions…

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.

Yes. I like the ‘possibly’…

Still, what of this?

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.

Well disregarding her, as we’ve previously noted, idiosyncratic understanding of political categories it’s entertaining to see her in the first sentence attribute to the Department something that was actually a characteristic of her own use of the information in the original piece. And it’s also interesting to see that at no point does she reference examples of this ‘spinning’ that she potentially ascribes to the Department (again, perish the thought that perhaps the notion that we have ‘generous’ social welfare rates was a pre-existing myth circulating amongst the great and the good in our society and commentariat).

The woes of the newspaper columnist are many and this forces her to grapple with the issue…

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.

Actually, it’s not. It’s not at all impossible, although it is a bit time consuming.

Sure, there may be some variations and variability – local factors may skew things a bit – but somehow when representing economic statistics across a range of states commentators and institutions from the OECD down manage to do it – otherwise how does she explain the fact that we are so readily able to have a world engaged in globalisation, international finance, or indeed the operation of the EU which remarkably appears to function with 27, count ‘em 27, different members, so I think it’s reasonable to argue that we (and she) can attempt to make some reasonable comparisons. We can also, as a rule of thumb argue that,; for example even if payments were higher in this state say than the UK, the broader provision of services there on the health/etc side would vastly outweigh those available here. And perhaps inevitably even she is pushed towards this conclusion…

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.

Yeah. Well there’s a surprise.

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.

But…

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.

With one thrust the Gordian knot is cut. She may have been ‘mistaken’.. but it doesn’t matter! Because we can only ‘afford’ what we can ‘afford’.

But while I agree in part with that point, it being self-evident, I’m less impressed by its use as a conceptual scorched earth policy wherein being wrong and disseminating incorrect information is but a trifle… Because, she only mentioned the idea in the first place in the context of the following statement:

Of course, there are few specifics. I have no idea what “middle-income” means. Most Irish people claim to be middle class, so presumably they labour under the illusion of earning “middle incomes” too.

I do know that almost 40 per cent of the 2.4 million income earners in the State are entirely exempt from income tax and that every party thinks this number should be increased.

When asked who should pay tax so that there’s enough money to fund the most generous social welfare payments in the EU, we are back to – you’ve guessed it – the tax exiles. Of course, that’s hardly surprising. Tax exiles don’t vote and the 900,000 exempted earners do.

Mmm… as a leftist I think that’s a parody of the viewpoint I hold whereby I believe services and welfare should be funded by all from general taxation including income taxes and including increased taxation for all. Not because I like increased taxation but because I tend to follow the old dictum that there’s no such thing as a free lunch and that we can’t get what we don’t spend. Sadly I’ve lived in a polity where for the last fifteen or so years the opposite has been the credo of the political classes high on growth and convinced that lower taxation was the only way to go. But this isn’t about me…

None of this is in a self-contained bubble either. She may not believe in multiplier effects, or indeed in the fiscal stimulus effects that operate for the unemployed or those on low incomes, but other states and economies clearly do. Big states. Although if we take her line there’s no point in making comparisons.

Still, away from her new-found Year Zero approach to inconvenient facts, in all other matters we do take cognisance of comparatives between states, and more particularly between our nearest partners in Europe. And so indeed does the government and business in relation to wage levels, standards of living and so forth. It’s basic stuff, it’s entirely necessary. We need yardsticks, we need standards, we need goals. It is central to any analysis both of our own structures and possible alternatives. And the idea that we can simply ignore or resile from these is an absurdity – not least because we still remain in global, and arguably in European terms, a rather wealthy country.

While you’re thinking about that, think about this, from the president of the Irish Taxation Institute comes an interesting snippet…

Another surprising finding of the survey relates to public perception of the burden of income tax in Ireland. In 2006, the last time the Irish Taxation Institute National Tax Survey was conducted, 53 per cent of respondents felt the personal tax burden in Ireland was high compared with the rest of Europe.

That figure has dropped to 50 per cent in the 2009 survey, even though we’ve seen significant increases in taxation in the two emergency budgets in October 2008 and April 2009.

In fact, the reality is quite different. Some 18 per cent of respondents to our 2009 poll correctly hold the view that our income tax burden is typically lower than the rest of Europe (again, surprisingly, an increase from the 11 per cent result in 2006). Prior to October 2008, the personal tax burden in Ireland was quite low in terms of the Organisation for Economic Cooperation Development (OECD) average.

While the tax burden has increased in the wake of the recent changes, the tax burden in Ireland is still below the OECD average. In fact, despite recent budget tax hikes, Ireland – along with New Zealand, Korea and Mexico – has one of the lowest tax burdens in the industrialised world, according to figures from the OECD.

That’s another inconvenient truth which we hear little of.

But Carey’s point is one which clearly positions the idea of the ‘most generous’ social welfare payments as yet another unreasonable expense pushed onto the ‘hard-working middle-income’ earners.

And that’s a specifically political argument she seeks to make, and while sure, as I’ve noted affordability enters into the equation so too does the structure of our economy, the nature of that society and the amount we are willing to see taken in taxation (in all its myriad forms) to provide services/welfare. She I suspect holds a different view from me as to where the dial should be set on those matters. That’s fine, it’s a perfectly legitimate viewpoint, but in all her columns she seems strangely hesitant to simply come out and say it, that she doesn’t want a more Central and Northern European model to be followed with higher personal taxation and more public services/welfare and that instead she prefers a low tax lower provision model. Indeed look back at the column which initiated all this and you’ll see that she was keen to charge almost everyone – as far as I can see – with some degree of guilt. That’s an intriguing approach and allied with the aforementioned hesitancy perhaps worth of consideration another day.

Incidentally, entertaining at this remove, to read the opening paragraph of her original article…

“SURE THEY’RE all the same,” goes the bitter refrain. The funny thing is, I’ve checked and it’s true. A comparison of each party’s 2007 manifestos reveals remarkably similar policies, especially on taxation – the bedrock of the economy. Sinn Féin’s are the best written and the Green Party’s have some peculiar extras, but by and large they are the same.