Ireland’s social security in crisis

Ireland’s social security provision is comparatively low. Among the worlds of welfare capitalism, Ireland’s welfare state has been broadly characterised as ‘Anglo-Saxon’ or ‘liberal’, together with Australia, the United States, New Zealand, Canada and the United Kingdom. ¹⁴ Welfare provision in this model tends to be targeted or means-tested rather than universal and predominantly based on cash transfers rather than public service provision. Both Ireland and the UK have historically built their systems around insurance (alternatively described as ‘national’ or ‘social’ insurance) and, to a lesser degree, general taxation. ¹⁵ One further distinguishing feature of Ireland and the UK is the separation of income maintenance from health care. ¹⁶ The Irish state commits a comparatively small proportion of aggregate wealth to support social services or income transfers. Not unlike the US, it offers tax incentives as a form of state subsidisation to avail of market provision in areas such as housing, health and pensions. ¹⁷ The limitations of the Irish

13 See Charles Epp, 1998, The Rights Revolution: Lawyers, Activists and Supreme Courts in Comparative Perspective.

Chicago: University of Chicago Press.

14 Gosta Epsing-Andersen, 1990, Three Worlds of Welfare Capitalism. Oxford: Polity Press. Though the standard work of reference, this typology overlooks systemic divergences between European cores and peripheries as well as political and economic variables that may be of more explanatory value in peripheries such as Ireland. See Mel Cousins, 2005, Explaining the Irish Welfare State: An Historical, Comparative and Political Analysis. Edwin Mellon: New York, pp. 9-11.

15 Anthony McCashin, 2004, Social Security in Ireland. Dublin: Gill and MacMillan, p. 56.

16 There are minor exceptions to this in Ireland: social insurance contributions cover entitlement to Treatment Benefits (Dental, Aural, and Optical benefits) for some categories of contributor. See McCashin, Social Security in Ireland, p. 56, n. 1.

17 Niamh Hardiman (ed.), 2012, Irish Governance in Crisis. Manchester: Manchester University Press, p. 3.

state’s welfare effort in this regard tend to be ameliorated somewhat by highly gendered, voluntary and family networks of care. ¹⁸

Social security in Ireland is the responsibility of the Minister for Social Protection. The Department for Social Protection consists of a central policy section and a separate Social Welfare Services office headed by a Director-General, responsible for the operational activities of the department. ¹⁹ There are three key forms of payment scheme: social insurance, social assistance and universal. Under social insurance schemes, eligibility for benefit is determined by the level of social insurance contribution paid. Social insurance schemes are mainly financed from compulsory contributions made by employers, employees and the self-employed. PRSI (pay-related social insurance) contributions are normally deducted from an employee’s wages or salary, with a maximum of 52 contributions per annum. In certain instances, the Government may also contribute to the Social Insurance Fund. Social assistance or means-tested payment schemes are aimed at those who have not paid sufficient social insurance contributions and are based on an assessment of individual or family income. Finally, under universal schemes, payments are made to citizens without respect to income or social insurance contributions. The primary example here is child benefit. Non-contributory schemes are financed from general taxation.

The Irish health care system consists of a two-tier mix of public and private service provision. About 80 per cent of total spending on healthcare provision in Ireland comes from public sources, primarily, as in the UK, from general taxation. ²⁰ However, with both forms of health care often provided in the same institution, and by the same personnel, successive Irish governments have increasingly subsidised private care at the expense of public provision. Ireland is the only EU health system that does not offer universal coverage of primary care. ²¹ Entitlement to a medical card, ensuring entitlement to general practitioner and hospital services free of charge, is based on a means test. In 2001, eligibility for medical cards was extended to all persons aged 70 and over irrespective of income. In 2005, a GP visit-only medical card was introduced, setting higher qualifying income limits and entitling the holder to free GP services but not free prescribed medicines. Those without medical cards are liable to GP fees but are entitled to a subsidised hospital service in a public bed in a public hospital. ²²

There are a number of distinguishing features to note about Irish provision for old age. In contrast to the more unified arrangements of Scandinavian or Continental countries, Irish social security pensions are built largely around private sector employees and the self-employed while public sector employees’

pensions are financed and structured differently. (A number of low-income self-employed and part-time employees are therefore excluded). Social security recipients’ pensions tend to be a flat rate while the latter’s pensions are predominantly income-related. ²³ The Irish system has additional flat-rate payments in respect of spouses and children. Also, Ireland has no provisions for deferred or earlier pensions; the only age differentiation is between the Retirement Pension payable at age 65 for a greater contribution record and the Contributory Pension payable at age 66.

Turning to unemployment payments, Ireland’s provision is again less comprehensive than Scandinavian or Continental systems. Unemployment Benefit is payable to insured persons except

self-18 See Kathleen Lynch (2013) 'Why Love, Care and Solidarity are Political Matters: Affective Equality and Fraser's Model of Social Justice' In: Anna Jónadóttir and Ann Ferguson (eds). Love: A Question of Feminism in the Twenty-first Century. New York: Routledge, pp.173-189.

19 The Department of Social Welfare (1947–1997) was renamed the Department of Social, Community and Family Affairs (1997–2002), the Department of Social and Family Affairs (2002–2010) and, most recently, the Department of Social Protection (2010–present). When an application for payment is refused, a right of appeal exists to the legally independent Appeals Office.

20 Claire Finn and Niamh Hardiman, ‘Creating two levels of healthcare’ in Hardiman, Niamh (ed.), 2012, Irish Governance in Crisis. Manchester: Manchester University Press, pp. 110-131, p. 113.

21 Social Justice Ireland, Analysis and Critique of Budget 2014, p. 18. Available at: http://www.socialjustice.ie/sites/

default/files/file/Budget/2013-10-16%20-%20Budget%20Analysis%202014%20FINALFINAL.pdf.

22 At the end of 2008 there were 1,352,120 medical card holders and 85,546 GP visit card holders. Together they represent about 30 % of the total population.

23 Anthony McCashin, Social Security in Ireland, 56-7.

Ireland

employed and public servants, with eligibility based on social insurance. Benefits are included in annual taxable income. Partial Benefit is payable for shirt-time working and part-time working. Unemployed aged 55-66 were entitled to a Pre-retirement Allowance after 15 months unemployment. Unemployment Assistance is payable to those with insufficient contributions or after Unemployment Benefit is ended, subject to a means-test. There are two rates of Unemployment Assistance, short-term and long-term.

Ireland has flat-rate benefit and assistance payments plus adult and child dependent payments depending on spouse’s income.

In terms of ‘last-resort’ provision for those without specific coverage under insurance or assistance categories, Ireland has a national statutory framework for ‘safety net’ provisions in its Supplementary Welfare Allowances provisions. This gives a legal right, subject to a means test, to a statutorily-determined payment, and permits additional payments for exceptional needs and emergencies. Such frameworks occur in Scandinavian and Continental systems; in contrast, Southern European systems tend to have more regional arrangements, with considerable discretion and variation. Finally, Ireland is unusual in its use of non-cash benefits (or ‘free schemes’) as supplements to cash payments. These comprise of provisions such as universal free (public transport) travel for pensioners, seasonal fuel allowances for welfare-dependent households and for pensioners living alone, or a free television license. ²⁴

Over the 1990s and 2000s, in the context of unprecedented levels of economic growth, social security provision in Ireland increased significantly in real terms. However, social security functioned in a wider context of higher overall levels of prosperity and rising employment, as well as profound changes in social and family structures. A number of long-standing challenges to sustaining welfare effort became apparent throughout this period, including the shift from industrial to services employment, the country’s ageing demographics as well as the introduction of budgetary limits in the course of European Monetary Union. The crisis of 2007-08 has accentuated political pressures towards less welfare effort, greater means-testing and increased marketization of social services.

Since the beginning of Ireland’s economic crisis, austerity measures totalling just over €30 billion have been introduced. Budget 2014 marked the ninth fiscal adjustment. Taken together, the total scale of these adjustments has been equivalent to the removal of 17.8 % of GDP from the economy. ²⁵ In terms of the nature of these adjustments, social expenditure cuts have outweighed tax increases by two-to-one.

The IMF and European Commission have accepted the reverse ratio (one-to-two) as the means to address fiscal adjustments in other countries such as Italy. Successive Irish governments, however, have persisted with reducing expenditure rather than bringing Ireland’s total tax take closer to the European average.

Public spending in recent years has approximated 42.6 % of GDP, compared to 49.3 % of the EU-28.

Whereas health and education expenditure tend to match the EU-28 average, social protection spending tends to be lower; 16.4 % to 19.9 %. IMF forecasts suggest that by 2018, under current budgetary policy, primary public spending (i.e. not including debt interest repayments) will have fallen to the second lowest level in the EU as a proportion of GDP. ²⁶

The expenditure and taxation changes from Budget 2009 to Budget 2013 have had a significant cumulative impact on households in Ireland, particularly the old, the young, those with children and those on low incomes. In terms of health care, an international review of the Irish healthcare system in 2012 concluded that continuing budget cuts could lead to a reduction in access to necessary services for certain groups as it is not possible to have a sustainable health system with 3% reduction in expenditure year on year. Access to free GP care to all over 70 was rescinded in 2008 with a return of a means test. On return to work, unemployed people now lose their full medical card status for a GP visit only card. The Government, however, has provided for Free GP Care for children aged 5 and under. Government has also withdrawn subsidies for care and medical expenses, increasing the Drug Payment Scheme threshold by 37 % (€54) per month and trebling prescription charges for medical

24 Anthony McCashin, Social Security in Ireland, 63.

25 Social Justice Ireland, Analysis and Critique of Budget 2014, pp. 1-2.

26 International Monetary Fund (2013) World Economic Outlook, April.p. 33.

cardholders to €1.50 per item. ²⁷ The weekly Disability Allowance and weekly Carers Allowance has been reduced by almost 8 % (€16.30) each, while the Respite Care Grant has been reduced by 19 % (from €1780 to €1375 p.a.).

In terms of old age provision, the age of eligibility for the State pension has increased to 66, the first in a series of changes which will raise the qualification age for the pension by a further two years over the next decade and a half. It will increase to 67 years in 2021 and to 68 years in 2028. Various changes have further restricted eligibility to the contributory State pension, including a requirement for ten years PRSI contributions to qualify, up from just five previously. A new ‘total contributions’

approach is due to come into force in 2020, with the level of pension paid to be directly proportionate to the number of social insurance contributions made by a person over their working life. A total contributions requirement of 30 years contributions for a maximum pension will be introduced. ²⁸

Regarding unemployment assistance, the personal rate of social welfare has been reduced by 8 % (€16.30 per week) to €188 per week. Austerity has disproportionately affected the young, with the personal rate of Jobseekers allowance for those under 24 reduced to €100 per week and to €144 a week for those aged 25. The government has increased the number of paid contributions to qualify for Jobseekers Benefit from 52 to 104 paid contributions. Ireland’s duration of entitlement to benefit was 390 days in comparison with Finland’s 500 days and Germany’s sliding scale with a maximum of 64 months. ²⁹ The maximum length of time for claiming Jobseekers Benefit has been cut to 9 months for those with 260 contributions and to 6 months for those with less than 260 contributions. ³⁰

In terms of universal payments, successive government have reduced Child Benefit by 21 % (€36) per month for the 1st and 2nd child, and by 26 % (€54) per month for the 3rd child. Child Benefit is no longer payable to children aged 18 in fulltime second level education. ³¹ Finally, in terms of ‘last resort’

provision, fuel allowance payments have been reduced by 18.7 % (€120) per annum. Since 2008, there have also been reductions in the Household Benefits Package, including the abolition of the Telephone Allowance.

The European Social Model of public services and supports are only attainable if Irish society is willing to maintain European levels of public spending. Ireland’s overall tax-take, however, remains peculiarly low. In 2011, Ireland’s total revenue, including social security contributions, was 28.9 per cent of GDP compared to the EU-27 weighted average of 38.8 per cent – less than three-quarters of the average level of European taxation. ³² The primary factor involved in this ‘low tax’ regime is the very low level of social security contributions. In Ireland, social contributions were only 5 per cent of GDP compared to 12.7 per cent of the EU-27; they made up 16.4 per cent of all tax revenue, less than half the EU-27 average (37.3 per cent). Other important factors include the relatively low levels of local government revenue-raising, and the above average levels of tax expenditures or tax breaks, the latter greatly undermining equity in the income tax system. Social justice and human rights organisations have called for much greater transparency in the budgetary process and suggest that the constitutionalisation of social security rights may aid this process. ³³