As I write, the issue of whether Ireland will hold another referendum on Europe has yet to be decided, with battle lines being drawn. Should one prove necessary, the context will be different to previous referenda. While there is suspicion across Europe that the new  fiscal compact treaty is merely yet another European half measure – this one designed primarily to bolster German Chancellor Merkel domestically – and that the Euro crisis will continue to run, one thing IS clear. The treaty will enter into force when ratified by a certain number of Euro area member states. Ireland will not have a veto. The domestic debate promises even more heat than usual.

Meanwhile the chronic condition of the Irish body politic and its quirky social and economic  norms have been  exposed in earnest in the last few weeks. First was the mini fiasco of the New Year’s Greetings sent to 150,000 people on pensions by the Revenue Commissioners , informing them that they probably owed  more tax and that extra deductions from pensions would start immediately.

Those targeted were  the minority of people on occupational pensions who have  not previously declared their state old age pension or some other state benefit,  payments which are taxable. Some of the letters were sent erroneously, prompting an apology from the Revenue chairman for the “confusion and distress” caused.

The issue posed the classic dilemma for the Irish politician, hence the embarrassed and rather self-righteous reaction from most. Of course  everyone should be tax compliant, but we’d better not upset or distress unnecessarily the  poor pensioners. Revenue, whose statutory duty is to collect tax that is due, were castigated for insensitivity in timing ( the New Year)  and further attacked for getting it wrong in a significant minority of cases.

Revenue are not paid to be nice – if they were, the only people paying tax would be the PAYE mugs who have no option.  It would appear that most retired persons have been tax compliant, but a minority have not, with, per the Chairperson of Revenue,  a significant amount of revenue involved. Revenue’s statutory obligation was to rectify this and pursue arrears if necessary. Whatever about the timing, it is not hard to imagine the reaction from everyone already paying their taxes in full to any softly  softly approach to tax dodgers. And the Revenue will repay, usually quite swiftly, tax over-deducted.

But there is more. These letters issued less than two months after the Government said that child benefit payments could not be taxed or means-tested because the Revenue Commissioners and the Department of Social Protection files were not shared, that their computers “did not talk to each other”. It now transpires that 560,000 social welfare records with pension details were sent to Revenue’s computer system. The Revenue Commissioners were able to match up these records and come up with 115,000 or so cases where it appeared social welfare pensions had not been declared either at all or in full by the pensioner or that the pensioner’s circumstances had otherwise changed.

So at least the computers can now communicate! This should remove one of the procedural obstacles cited for not tackling child benefit payments on a rational basis and hopefully lead to early reform to concentrate payments where they are most needed.

The need to do something significant about Ireland’s overgenerous welfare payments     (because we have to borrow to sustain them) was underlined some weeks later by the curious case of “Magda”. Magda, not her real name, is a member of Ireland’s largest national minority – the Poles – and came to Ireland in 2006. She settled in Donegal, working until 2009, after which jobs dried up and she went on the dole. She was one of several Poles living in Ireland interviewed some weeks ago by a Polish newspaper.

A poor translation of the interview was used in a newspaper story here to suggest that Magda was a dole sponger who was living off the system and who sneered at Donegal. Cue the predictable outrage and an offer by a Donegal Labour Senator to pay her fare home. Cue also a rapid reaction from, inter alia, the Polish Ambassador, as well as other Poles disputing the story.

The most cogent point put was that Poles who had come to Ireland, worked and paid taxes, often at jobs the Irish would not do, and then lost their jobs in the recession, were quite entitled to claim available welfare benefits here. Indeed. Before the week was out the record had been corrected, Magda’s good name more than restored and the Senator had apologized.

Not quite end of story. Many of the figures Magda had quoted were correct, together with the disincentives for those on benefit to return to work  which she identified. Magda receives almost $360 per week from the state, made up of unemployment assistance of $250, rent of $80, and in winter, $25 towards heating. She can, and does avail of free education and training courses and, when she sets up a business, which she is planning, will continue to receive benefits for a further two years.

Magda answered her own rhetorical question that it was not worth working for the minimum wage (which is back up to $11.50 per hour). The whole episode, made public only because Magda was not Irish, has shone fresh light on what is available to all under the sheer generosity of parts of Ireland’s unsustainable welfare system.

The Magda story was still in the news when it was topped by another revelation. This was the announcement that there would be a cut in the Exceptional Needs Payments provisions in respect of amounts paid towards the cost of holy communion and confirmation expenses (dresses and suits) for persons on social welfare. Last year 14,000 claimants received over $4.5 million for these expenses, at an average of $320 each. Payments are now to be vetted thoroughly and capped at under $150.

It has emerged that last year the total bill for Exceptional Needs Payments came to  $85 million, almost all paid to social welfare recipients or those working part time. In addition to payments for children’s buggies this figure included almost $12 million paid out to 7769 applicants (who received an average of $1500) to help towards furnishing their accommodation. Here also the system is to be tightened and eligibility narrowed.

These payments are in addition to rent supplements (running at almost $700 million), back to school clothing and footwear allowances and the winter fuel allowance available to Social Welfare recipients, most of whom also qualify for free medical treatment. The net effect has been to create over the years a fairly comprehensive safety net for the unemployed. The unforeseen effect has been to disincentivise those on benefits from seeking work, and to create poverty traps for many of those working on low incomes, who are excluded from many benefits ending up less well-off working than on the dole. With, in addition, the second highest minimum wage in Europe, is it any wonder that job creation is at a low ebb and unemployment remains so stubbornly high.

Angels would surely weep, if there were angels.


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