Last night on Vincent Browne, Sen. Dan Boyle made an interesting comment which didn’t elicit much response from the other panellists due to the rather heated back and forth that was going on. The comment was about how we need to integrate more the means by which we provide social welfare to some people and tax credits (I think he referred to them as being refundable) to others as a means to make the entire system fairer.
This sounded suspiciously to me, just as the reference in the budget speech of Brian Lenihan did last year to reform of PRSI, like we might be headed for significantly greater changes in social welfare and taxation than many expect in the next budget. Budget 2011 could represent a massive big bang in social welfare provision and income tax collection.
All the focus at the moment in the media and public discourse is on the amounts to be saved or raised from spending or tax and next to nothing on on how they are spent or collected. I have a belief that the comment from Brian Lenihan last year was a signal that he intended major reform and restructuring to the system of income tax and social welfare income, and that it may seek to marry some elements of a flat tax (ensuring that everyone irrespective of income pays at least say 15%** of their earnings with a basic income scheme that would simplify social welfare payments (give people X amount of a direct payment to be recouped by tax). The massive cost saving would be in the Department of Social Welfare itself, we would in effect abolish the need for most of the work of this department as there would be no more applying for payments or means testing of most recipients. Instead the remainder of the department could be re-tasked to identify the skills people without work need and train them or match them to employment prospects or policing the black economy to ensure that people are paying the tax they should (which should be largely self financing). It would represent a massive reduction in current public sector spending with little if any effect on the public.
What was the Basic Income Scheme? The essential idea was that everyone would get a payment of social dividend from the state and then the state would leave you to get on with it. One form might be the following: imagine for a moment that society decided to give every adult who is able to work* €100** per week recouping it from those with other earnings by abolishing tax credits, we could then offer another €100 per week to people for 10 hours work in the community, coaching teams whatever form it may take. That would be available to everyone, be they employed or not. It would mean there would be no distinction between those on social welfare and those in employment while ensuring that a lot of necessary work that is currently neglected in the public sphere gets done. I’m not suggesting we’re going to have 20 year olds with no training looking after the elderly in their homes, but driving a meals on wheels service doesn’t require 4 years in college either. There has to be a halfway house that ensuring the skills match the job required.
There are a lot of tasks currently not being undertaken because the skills we supposedly require to do the job associated with the tasks are too expensive. But we could do the more straightforward tasks without involving the skilled workers who currently do them. And let the skills be focused where they are needed.
* with respect to those who are unable to work, I’d seek a modification of the scheme to take account of this.
** I’m using these numbers for the purpose of simple illustration and not as a suggested level or target.