Social Welfare Payments and the Price of Bananas in Belgium

So, Sarah Carey has apologised to Irish Times readers for deceiving them about Irish social welfare payments being the ‘most generous in the EU’, and made a correction in her column, saying, as Michael Taft argued, that they are not even ‘among the highest in the EU’, as the document she used to base the claim suggested, but that they are below average. Should the Irish Left Review celebrate at winning the argument with an Irish Times columnist? No, not quite, as she now argues that the basis of the original claim is irrelevant – rates should be based on what ‘we can afford’ and ‘what is enough to cover a persons basic costs’.

What those levels are, she argues, is subjective and will be decided by those in power:

“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.”

This argument is based on a simple point of view: the only way out of our economic misery is the fiscal contraction of government spending. If we do not show the ‘markets’ that we are capable of this sort of contraction, even to the point of making unpopular decisions about social welfare payments, we will quite simply go broke and have to rely on money from the IMF or the European Central Bank who will force us to make even more draconian cuts in public expenditure. For the Right, membership of which is not a privilege but a damnation, the IMF is a very effective boogyman – a discredited neo-liberal institution that has a legacy of stripping economies for the benefit of major banking interests. Looking at the just published June report from the IMF its clear they are happy to fulfill the boogyman role and have put social welfare payments in the firing line.

But this is all about our attempt to find out the factual basis upon which the claim was made in the first place – to see if one existed – so let’s go back to the beginning.

First Carey wrote a column which argued that we need to broaden our tax base, reverse our economy’s over-reliance on cyclical taxes such as VAT and Stamp Duty and put all those lower paid workers who were taken out of the tax during the ‘Celtic Tiger’ years back in. How else, she added, are we going to pay for the most ‘generous social welfare payments in the EU’?

“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.”

What is important here is the emphasis on exempted earners. This will matter later on.

Next Michael Taft in an open letter to Carey published in the Irish Left Review challenged the claim about the most generous social welfare payments in the EU. Michael went through the figures in the OECD database indicating levels of social welfare payments throughout the EU and illustrated that Ireland’s were indeed not the most generous. In the article he asked her to let him know the source of her claim or to provide a correction in her Irish Times column.

I contacted Carey to follow this up, and to see if she was willing to respond. She was forthcoming in her emails and expressed a desire to respond but ultimately could not provide any substantial evidence to support the claim. However, in the aftermath of that article I found out a little more of how she got her information, and the details she provides in her most recent column describe it well.

“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.”

And then the clincher:

By omitting “among” I made a grievous error. My bad, as they say.”

The thing is, she is omitting the use of the word ‘generous’ which is also her invention. She changed ‘among the highest’ to ‘the most generous‘. This use of ‘generous’ and what it implies in relation to social welfare payments seems to have escaped her attention completely. As Fintan O’Toole mentioned in his column last Tuesday, in Ireland the Church behaves like a government, while the government acts like a charity.

“Our problem in Ireland is that the peculiar intertwining of nationality and religion, predating even that of church and State, left us without a clear sense of what governments should do. We have never, to this day, developed a strong sense that there are basic aspects of health, education and welfare that belong to citizens as of right. Partly because the church would not allow it to do so, the State has never accepted the responsibilities that are part of the European welfare model. In return, the church has never quite accepted that it is part of civil society. We have had the paradox of a State that behaves as if it is a charity and a church that behaves as if it is a government.”

Carey use of the word generous is an example of this understanding, which treats entitlements like alms given to the poor through the benevolent grace of government.  There is an irony here too in the wake of the Ryan Report which indicated that the government outsourced its provision for its ‘surplus’ poor – those citizens they claimed they could not afford to care for – to the ‘benevolence’ of the church, who then turned those children who were unworthy of being considered equals in society (because they were the wrong class) into slaves. The irony is the recently vilified organization representing the congregations, known as CORI, made a public statement in May condemning Carey’s claim (if not Carey herself – she is not carrying out the campaign to reduce social welfare payment single handed!).

“IT IS a “myth” to suggest that Ireland has one of the most generous welfare states in Europe, the Conference of Religious in Ireland (Cori) has said.”

From her own account she said she wanted to get facts from the Dept of Finance on the distribution of tax payments, which suggests that she wanted to prove a point about the number of lower paid workers who had been removed from the tax net and about the need to reverse this.

What she was given, she tells us in her column, was a document which was made up ‘mostly of hard numbers with some political arguments thrown in’. Let’s look at her original column then and see where the hard information that she attributes to the Dept appears.

“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.”

If you think you have heard this before you might well have: In his statement on the economy given to Dáil Éireann on Thursday 29th January 2009 Minister for Finance, Mr. Brian Lenihan T.D said:

“The most recent projected Revenue data covering approximately 2.4 million income earners on their records shows that 38% are estimated to be entirely exempt from Income Tax.”

Just before this Lenihan states “We need to broaden our tax base.” Clearly that is Carey’s argument too. That is the whole point of her piece.

Let’s look at some more facts from Carey’s original column:

“Yes, at the other end of the scale generous tax reliefs enabled the business classes to reduce their tax liabilities, but figures from the Department of Finance are indisputable – the top 20 per cent of income earners pay 77 per cent of all income tax.”

This appears almost word for word in the next bullet point below the one just quoted in Lenihan speech:

The top 20% of income earners pay 77% of all Income Tax.

This is a fact, but it is not immutable. If you look at it from the opposite perspective, as Colm Keena did in the Irish Times, you see that the majority of wealth in the country is held by a small minority:

“However, it is equally valid to flip the import of the available figures for who pays income tax, and see them as a reflection of a far from progressive phenomenon, namely, the unequal distribution of income across society.

The Revenue figures show that 28.2 per cent of all the income earned in 2008 was earned by just 6.36 per cent of the population.

Higher up the pyramid, the situation is even more pronounced. The figures show that 6 per cent of all income earned in 2008 was earned by just 0.22 per cent of the population.”

So you see what you want to see, and you agree with who you want to agree. Carey’s use of the facts is highly political – and politically conservative, one that avoids the real inequality in our society – just as Brian Lenihan’s is. But why is there such a close correspondence between an Irish Times columnist, (who is also the daughter of a well known Fine Gael councilor) and the Fianna Fail Minister for Finance?

The thing is, I know that Carey’s briefing document comes from previous speeches by Brian Lenihan because I’ve seen the briefing document. Carey passed it on to me after I had written my article suggesting that she was trying to hide the fact that she didn’t have reliable information to back up her claim. I had already taken that back to acknowledge that Carey wasn’t trying to hide anything.

However, although I have known since April that she had changed the wording in the Dept of Finance briefing document from ‘among the highest’ to ‘the most generous’ I did nothing about it. That is, until I read her most recent piece. It seemed like a good opportunity to ask the Dept of Finance a little more about the document, where it came from and on what it was based upon. However, before I contacted them we had already found out that at least two thirds of the document was based on speeches from the Minister of Finance – thanks to Google.

The bullet points I have quoted appear in the briefing document in exactly the same way as they do in the speech. The first section is called ‘Tax Base Broadening’. Most of the second section, ‘Taxation Issues and the position of those with low incomes’, comes from another speech from February of this year.

When I asked the Dept of Finance Press Office about the briefing document they said that it was probably based on speaking notes for the Minister. I asked if it was typical that a journalist would be sent speaking notes. They acknowledge that it happened all the time. Often a journalist, they said, following up from a press release would ask for more information. They would gather what they had from already prepared material, taking bits out of one document or speech and pasting them together. When I suggest that there were no official markings or formatting in the document they said that that was quite typical.

You have to understand, the Press Officer told me, before the April budget we had to emphasis the progressive nature of our taxation system, that it was essentially equitable and to let it be known how many people were in it.

In the second section of the briefing document this emphasis is the clear intent.

Ireland has the lowest tax wedge in the entire OECD for married one-income and married two-income couples on average earnings.

In fact, for the sixth consecutive year, when cash benefits from the State are taken into account, such families face a negative tax burden, receiving more money in cash transfers from the State than they pay out in income tax and social security contributions.

For a married one-income couple with two children on average earnings in Ireland continues to have the lowest average tax rate in the entire OECD.

This appeared in a February speech by Brian Lenihan as:

“Over the last ten years, when we could afford it, we progressively reduced the tax burden on the lower paid to the point where 40% of all income earners are now outside of the tax net.
According to the latest figures, a married one-income couple with two children on average earnings in Ireland continues to have the lowest tax wedge in the entire OECD. In fact, for the sixth consecutive year, when cash benefits from the State are taken into account, such families face a negative tax burden, receiving more money in cash transfers from the State than they pay out in income tax and social security contributions.”

However, the one part of the document which I couldn’t find any references to in speeches has to do with social welfare payments.

The section which says:

Almost all areas of our society have benefited from economic prosperity:

• Workers in Ireland pay the lowest tax wedge in the OECD;
• Public sector workers are among the best paid in the EU; and
• Although it may be little comfort for those living on social welfare, Irish Social Welfare rates are among the highest in the EU.

The public sector due its nature is shielded from the significant adjustments occurring in the private sector.

I asked the Press Officer where the stuff about social welfare payments came from. Apparently it was being said all over the place at the time but it’s not know where exactly it came from. Could it have been part of a speech which was never given, I asked. Could be, maybe, who knows?

So what does all this have to do with the price of bananas in Belgium? God knows.

I asked what the Dept of Finance Press Office thought of the implied suggestion made by Carey that maybe the Dept of Finance was spinning inaccurate information on the social welfare payments issue. ‘To be honest, we’re not even going there’, was the reply. ‘We have far more important things to worry about’.

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Donagh

Donagh is the editor of Irish Left Review. Contact Donagh through email: dublinopinionAtgmail.com

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