Why long term social welfare should be cut in the Budget

[Brendan Burgess]

I did an "opinion piece" for the Pat Kenny Show on TV3 on Wednesday night in which I argued that Social Welfare was too generous in this country and it should be cut.

You can watch it [broken link removed].

It's hard to explain a complex issue on TV. This is what I would say if I had an uninterrupted half hour


· Our welfare system is too generous

· We have the highest proportion of people depending on social welfare in the EU – twice the average.

· A single person in Dundalk gets €193 – a Single person in Newry gets £80 ( Exact figures to be checked)

· A person on £30,000 in Newry pays twice the PRSI as someone in Dundalk

· People who work should be better off than people who people who choose welfare as a lifestyle

· A person who works all their lives gets the same pension as someone who has never worked

· I propose a system where people’s PRSI goes into an account in their own name – their pension will depend on what they have in their pot when they retire

o If you work all your life, you will have a bigger pension

o You will always be better off working

o Self-employed people who hide their income will get lower pensions – at the moment they pay less tax and PRSI but get the same pension

o We would actually appreciate the true cost of providing the OAP – which is a lot more than the 4% PRSI we pay at the moment

· The social welfare system is unsustainable anyway. The idea that our national finances are sorted is crazy

o We have €200 bn of national debt

o When interest rates rise, we will be in deep trouble

o We have artificially high Corporation Tax receipts – when they fall we will be in deep trouble

o When we next have an ordinary recession we will be in deep trouble

o And we have lots of other risks such as Brexit and Trump.

 

[Brendan Burgess]

The Journal.ie was asked to to a FactCheck for the programme. Unfortunately, I did not see it until just as I was going into the studio, so didn't really get a chance to respond properly too it.

FactFind: How does Ireland's jobseeker's benefit compare to the rest of the EU?

It's based on a single person earning €30,000 who just lost their job.

I would like to see the comparative figures for a couple with three children on low earnings. They would definitely pay the lowest tax in Europe while working. I could be wrong, but I would think that their long term welfare in Ireland is higher than it would be in the rest of the EU.

And of course, it would be worth comparing how much Irish workers and employers pay in PRSI.

A single person without kids in Dunalk pays half the PRSI, yet gets paid twice the dole.

Under my proposals, someone who had been paying PRSI for years, would get more than €193 per week.

But someone who chooses welfare over work would be getting a lot less.


Brendan

 

[odyssey06]

I think you need to be clearer on the distinction between Job seekers benefit & Job seekers allowance... and what payments are made regardless of previous employment.

I think The Journal's fact check without bringing in the figures for both types across the EU is useless to be honest, actually I think it is worse than useless as it is incomplete. The topic of the discussion was Social Welfare, not Jobseekers Benefit, so I don't know why The Journal fact checked that one single aspect - in fact I find it suspicious.

 

[galway_blow_in]

i saw you on the pat kenny show brendan , is brid smith nice behind the scenes or is she always cross

anyway , i think the biggest concern in the forthcoming budget is the increase of the old age pension , for several reasons this should not happen

1. pensioners have it very good and do not need it

2. its exactly the wrong message to be sending out when its clear as mud that there will be a huge pension crisis in the future , all of europe is ageing and the figures are terrifying

of course we all know it will be increased as raising the pension is the easiest thing a politician can do and were FG not to , willie o dea would spend all of his time on the subject as opposed to half his time right now , regina doherty has been doing the predictable ( shooting fish in a barrel ) courting of this demographics vote since she got her new post in the spring

 

[TheBigShort]

I propose a system where people’s PRSI goes into an account in their own name – their pension will depend on what they have in their pot when they retire

I would like to ask two questions if I may?

1. Under this scheme, if an individual, working constantly for 30yrs+, paying taxes and PRSI, paid off mortgage, put kids through college and built a nest egg of €10,000 savings, is made redundant.
Would they have to use up their own resources first (€10,000) or would they automatically be entitled to payment from their PRSI fund?

2. Would it not be just the simpler if JSB was increased by 15% and JSA reduced by 15%?

 

[Brendan Burgess]

1) They would be fully entitled to get their own money back. They would not have to use the €10,000.

This is your money and you can use it as you please, within limits. So if you have been working for 10 years and want to take a year off, you could do so and draw from the fund. Again, you would be getting your own money not some form of state hand-out.

2) It would be even simpler to make no change at all.

But the idea is that people would get used to the idea that they should fend for themselves as much as possible, so an account system would really underline that.

The main problem is the disparity in incomes. If someone is low skilled, even if they work all their lives, 14.75% PRSI is not going to give them much. So there probably would need to be some system for boosting the contribution of those on low incomes through the taxation system.

But the main thing is to give everyone an incentive to work by making people who work better off than those who don't.

Brendan

 

[Protocol]

Cutting JSA would be politically very difficult.

Why not just leave it alone, and let inflation slowly reduce its real value?

 

[Brendan Burgess]

Why not just leave it alone, and let inflation slowly reduce its real value?

I know that these things are difficult. But we have to face up to the financial realities. We have €200 billion of debt and need to cut non-contributory social welfare and increase PRSI.

Brendan

 

[TheBigShort]

Some contributions from another thread that discusses these issues

I don't think somebody with meaningful savings should qualify for a (means tested) welfare benefit.

One can want to see the guy on €60k a year get €40k a year whilst he gets back on his feet and still want to see malingerers hammered and prevented from milking the system. Having said that, I'd want to see €60k man exhaust his savings before the State kicked in.

if a welfare recipient is eating takeaways or buying a coffee, he or she is being paid too much.

Ok BS, here's a very simple proposal for debate - increase JSB by 15% and reduce JSA by 15%.

The 15% increase \ decrease would be a step in the right direction and in the current political climate I think the only way a reduction could be delivered is via a carrot and stick...

Under this scheme, if an individual, working constantly for 30yrs+, paying taxes and PRSI, paid off mortgage, put kids through college and built a nest egg of €10,000 savings, is made redundant.
Would they have to use up their own resources first (€10,000) or would they automatically be entitled to payment from their PRSI fund?

They would be fully entitled to get their own money back. They would not have to use the €10,000.

This is your money and you can use it as you please, within limits. So if you have been working for 10 years and want to take a year off, you could do so and draw from the fund. Again, you would be getting your own money not some form of state hand-out.

I'll leave you to it.

 

[orka]

BS, in a shockingly unusual development, you are (deliberately?) misunderstanding what posters are saying.

The rigorous means-testing (the no-more-coffees stage) would only apply after a point - usually time-based (as with JSB and other European earnings-based systems) but potentially after one’s PRSI pot runs out (BB’s proposal). So you can have all the coffees you want and all the Madrid holidays you want and €1M in the bank while still receiving your initial, full non-means tested JSB-type benefit.

When you transition to the means-tested benefit (after a certain time or when your PRSI pot runs out), your actual NEED is assessed. If you have savings, you don’t need your fellow citizens to pay for your food or your shelter. And you don’t have a fundamental need for coffees and holidays so your fellow citizens should not pay for them.

 

[Easeler]

Why not put high vise vests on them and put them out picking rubbish cleaning our parks make them work for there few bob, and maybe give them bit extra.I do a bit of cycling and the rubbish on the side of our roads is a disgrace, a win win for everyone don't you think

 

[TheBigShort]

Why not put high vise vests on them and put them out picking rubbish cleaning our parks make them work for there few bob, and maybe give them bit extra.I do a bit of cycling and the rubbish on the side of our roads is a disgrace, a win win for everyone don't you think

Or you could put them in banks, to sieve through the list of mortgage holders that have had their trackers removed from them, to hurry up the repayments. Some clearly need help. There are lots of things you can do with the unemployed. You just need to study their skillsets and see what suitable work is out there for them.

 

[TheBigShort]

BS, in a shockingly unusual development, you are (deliberately?) misunderstanding what posters are saying.

The rigorous means-testing (the no-more-coffees stage) would only apply after a point - usually time-based (as with JSB and other European earnings-based systems) but potentially after one’s PRSI pot runs out (BB’s proposal). So you can have all the coffees you want and all the Madrid holidays you want and €1M in the bank while still receiving your initial, full non-means tested JSB-type benefit.

When you transition to the means-tested benefit (after a certain time or when your PRSI pot runs out), your actual NEED is assessed. If you have savings, you don’t need your fellow citizens to pay for your food or your shelter. And you don’t have a fundamental need for coffees and holidays so your fellow citizens should not pay for them.

And in a unsurprising development, you attack the man and not the ball. The point I'm making is that this subject crops up ad nauseoum on AAM. Posters have multiple views as to how our welfare system should operate. Very few agree a common approach.
BB proposal on the face of it, seems practical and doable. So why isn't it done? ( I can hear the clamour to blame the socialists, Paul Murphys et al, even though they are nowhere near power.)
Is it just political incompetence? Or are there other reasons? I would suggest it is most likely down to other reasons. One being, getting everyone, or most to agree to a common system.

In BB proposal, as you have interpreted, there would be a time limit to JSB, based on previous PRSI contributions. Once this runs out, you are means-tested.
What if two workers, same income, with same contributions are being means-tested and it transpires that one worker has savings of €10,000, lives in a terraced house, drives a small car, doesn't drink, doesn't smoke. The other worker, lives in a big house, still has €10,000 credit card debt, car loan, etc.
If you were the means test assessor, according to the above, the first worker would get €0 in welfare, as he has €10,000 to sustain him. The second worker will get full JSA because he has no means.
Is it fair? Why bother saving in the first place? Why should the state assist the debtor in paying down his debt, but pilfer the savings of the other worker?

Add to that the other proposals (in a separate thread) by other posters that savings should be utilised first before welfare is paid, despite having made contributions for years and years.
Other proposals suggest a +15% for JSB / -15% for JSA (which incidentally I raised no objection to)

And there are other proposals, right down to monitoring someone's coffee intake - I kid you not!

The point is, it is a complex issue, and I suspect that these threads are nothing more other than vent of anger against a perceived notion that there are swathes of people out there, living the life on welfare benefits sticking two fingers up at everyone else who goes to work. There isn't (accepting there are some, but they are thin end of wedge).

When employment opportunities arise, the figures show that people go out to work. If that work is low wage, then perhaps, for sure, they still need financial assistance, but they are going out to work nonetheless. At a minimum, contributing to the revenues of their employers business.
A thread posted by BB this week focused on a paper that observed (in) equality over a lifetime. The paper suggests that even those who are the poorest throughout their lives are, on average, at work a large % of the time.

The welfare 'culture' is over played on this site. The reality is it is hard to survive on low incomes in this society.
The system may not be fair, but it has nothing to do people simply trying to keep their heads above water.

 

[gnf_ireland]

In BB proposal, as you have interpreted, there would be a time limit to JSB, based on previous PRSI contributions. Once this runs out, you are means-tested.
What if two workers, same income, with same contributions are being means-tested and it transpires that one worker has savings of €10,000, lives in a terraced house, drives a small car, doesn't drink, doesn't smoke. The other worker, lives in a big house, still has €10,000 credit card debt, car loan, etc.
If you were the means test assessor, according to the above, the first worker would get €0 in welfare, as he has €10,000 to sustain him. The second worker will get full JSA because he has no means.
Is it fair? Why bother saving in the first place? Why should the state assist the debtor in paying down his debt, but pilfer the savings of the other worker?

The person in the big house in this case - if they don't get welfare, what are they expected to live off? Thin air? The first person (in the smaller house) has savings so has something.

Remember here, this is after a period of time (lets say 12 months) and the person has not been able to get a job, or is not able to get a job. If they are living off welfare for the year, then chances are the big house is under pressure with mortgage repayments anyway

Maybe there is an option where people have non-liquid assets such as family houses, then a 'charge/loan' can be placed against them similar to the fair deal scheme ?

Similar to the pension issue - everyone knows an issue exists but its politically toxic and no one is willing to tackle it. Better put our heads in the sand and hope it goes away...

 

[TheBigShort]

The person in the big house in this case - if they don't get welfare, what are they expected to live off? Thin air? The first person (in the smaller house) has savings so has something.

Remember here, this is after a period of time (lets say 12 months) and the person has not been able to get a job, or is not able to get a job. If they are living off welfare for the year, then chances are the big house is under pressure with mortgage repayments anyway

Maybe there is an option where people have non-liquid assets such as family houses, then a 'charge/loan' can be placed against them similar to the fair deal scheme ?

Similar to the pension issue - everyone knows an issue exists but its politically toxic and no one is willing to tackle it. Better put our heads in the sand and hope it goes away...

I agree, they can't be expected to live off thin air. The 12 months period though is in dispute, the proposal was to take welfare from your PRSI contributions, if PRSI contributions are same for both workers, won't they use up their contributions at same time? Or can someone (the saver) opt to take less welfare, in order to extend the benefits? The debtor will surely require all of his welfare to pay down debt and keep roof over head. Once that's used up (3 months, 6 months?), he gets JSA. The (saver) will not want his savings touched, but if it transpires that his pot runs out, he has to fend for himself from his own savings, the (debtor) gets a dig out from the state to pay down his debt - is that fair?

 

[gnf_ireland]

The 12 months period though is in dispute, the proposal was to take welfare from your PRSI contributions, if PRSI contributions are same for both workers, won't they use up their contributions at same time? Or can someone (the saver) opt to take less welfare, in order to extend the benefits?

I think the draw down should be based on the person's wishes subject to restrictions such as x% of the pot per month and/or up to average wage etc... Bigger questions would be whether all my contributions to date get transferred into the pot [I have 20 years contributions made...others will have more, others less]

The (saver) will not want his savings touched, but if it transpires that his pot runs out, he has to fend for himself from his own savings, the (debtor) gets a dig out from the state to pay down his debt - is that fair?

Same could be said about the Fair Deal scheme. Is there not a precedence here?


As I said in another thread, lots of people want increased spending but with other people's money

 

[Sarenco]

I agree with Brendan that our mean tested welfare benefits are (somewhat) overly generous but I don't think our other welfare benefits are particularly generous by international standards or by reference to our contribution rates.

 

[TheBigShort]

I think the draw down should be based on the person's wishes subject to restrictions such as x% of the pot per month and/or up to average wage etc... Bigger questions would be whether all my contributions to date get transferred into the pot [I have 20 years contributions made...others will have more, others less]

I think BB proposal though is quite specific. You draw down only from what you have put in. So if you only have 2 yrs contributions and your contract expires, if there is a time lag between that and your next contract, you could find your pot being used up very quickly.

In the end, the questions you are raising points to the complexities inherent in the issue.

 

[Brendan Burgess]

I think BB proposal though is quite specific. You draw down only from what you have put in.

Hi Shortie

I have outlined a principle. That people should have a fund in their own name. The more they put in, the more they take out.

It wouldn't have to be on a euro for euro basis. It could be that the payout from the fund would be limited to say €50,000 a year. And on the other end, your maximum fund size might be €1m. After the fund is that size, you would not contribute any further.

If someone has worked for years and then gets sick, lose their job, or just wants to take a career break, it's easy enough - they have a big fund and they take a percentage of that fund based on their age.

If someone has never worked in their life, they would not have a fund, so they would get a means tested welfare payment which would be funded by general taxation and would be much lower than someone who had worked all their life would get.

The biggest problem I see is the issue of people who are in low paid work all their life. They lose their job or retire and their pension would be based on their fund and their age. With a 4% employee contribution and a 10.75% employer contribution, they would get very little as their fund would be very low. I don't know the best solution to this. It could be that the taxpayer doubles the contribution of the low paid. But low pay is often temporary, so that would be too generous to people who start off low and end up on high pay. So maybe double the contribution but put it into a separate fund. If the fund doesn't reach a particular level by the time the person retires, then release that fund. This would mean that we would help people who are in low paid jobs all their lives.

Maybe 90% goes to the pension fund and 10% to sickness. So if you get sick and can't work for longer than 6 months, the sickness insurance pays out.

But if I could convince people that the principle is worth adopting, then the scheme could be debated and developed further.

Brendan

 

[Sophrosyne]

I think you need to cover all of the payments made out of the Social Insurance Fund:

· Jobseeker's Benefit

· Illness Benefit

· Maternity Benefit

· Adoptive Benefit

· Health and Safety Benefit

· Invalidity Pension

· Widow's, Widower's or Surviving Civil Partner's (Contributory) Pension

· Guardian's Payment (Contributory)

· State Pension (Contributory)

· Treatment Benefit

· Occupational Injuries Benefit

· Carer's Benefit