Varadkar played politics when he could have been reforming welfare and supporting work

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By Cormac Lucey

Leo Varadkar’s rhetoric is most pleasing. He wants Fine Gael to be a party for people who get up early in the morning. As his policy ideas paper expanded further: “Fine Gael is the party for people who are ambitious for Ireland, for their family and community and for themselves personally.”

These calls led to a predictable political reaction. Labour Party senator Aodhán Ó Ríordáin criticised “a culture of blame, victimisation and the assumption that some people get up and work hard and some people do nothing and some people pay for everything and some people pay for nothing”.

One problem for Ó Ríordáin and his party is that it is a fact there are people who get up early and work hard and there are others who do nothing. For example, those who are working and have least time are most likely to cook for themselves. According to a 2016 survey by the Department of Health, unemployed people are more than five times more likely to rely on ready meals than those who are working.

Another problem for Ó Ríordáin and Labour is that some people do pay for everything (or nearly everything) in this state. Others effectively pay nothing.

Every year the Central Statistics Office compiles its survey on income and living conditions (SILC), which includes an analysis of how taxes and benefits are distributed by tenths of the population. Comparing transfers received from the state to direct taxes and social deductions paid, it emerges that only the top four income deciles — individuals earning roughly more than €440 weekly after tax — are paying more into the state than they are taking out.

The political left often counters that this form of analysis ignores the effect of indirect taxes, including VAT, which fall disproportionately on the poor. Micheál Collins, senior economist at the Nevin Economic Research Institute, compiled data to address this question in a 2014 paper titled “Modelling the distributive impact of indirect taxation changes in the Republic of Ireland”.

When one applies his findings to the raw SILC data, it modifies the finding that it is the top 40% of income earners who fund the state, but only just: instead it is the top 50% (individuals earning more than €380 weekly after tax) who pay more into the state than they take out. The facts show that some people (the top half) pay for everything and some people (the bottom half) make no net contribution. 

It is also the case, contrary to what Ó Ríordáin and others seem to think, that the top 10% of earners, individuals earning €40,000 or more a year after tax, make 49% of the total net contribution from all groups.

The Labour Party has its roots among workers and the trade unions, and its most recent augmentation was its merger with the Workers’ Party. But over the past century it has drifted away from workers’ concerns to those of the non-working poor and of various minorities.

One consequence of concern for the non-workers over workers has been the pillaging of the social insurance fund to provide benefits for those who haven’t made social insurance contributions. This is one of the reasons why those of us who do get up early and who do make social contributions risk severe disappointment when we look for our pensions in old age.

In his book, The Intellectual Life of the British Working Classes, Professor Jonathan Rose describes the working-class culture of a bygone era that featured mutual improvement societies, Sunday schools, adult schools, libraries, reading circles, drama societies, musical groups, friendly societies and trade unions.

What have we got today? Cultural anaesthesia through television, ready-made meals and welfare dependency based on a system that rewards inactivity and penalises industriousness through taxation. Set up to free the poor from material deprivation, Ireland’s social democratic state is instead trapping them in a state of dependency and the vain hope that politicians can fix all problems.

The UK welfare state was established after the 1942 Beveridge report, which warned that the state “should not stifle incentive, opportunity, responsibility; in establishing a national minimum, it should leave room and encouragement for voluntary action by each individual to provide more than that minimum for himself and his family”.

The challenge facing those who, like Varadkar, wish to change the current state of affairs is that the obstacles are immense. If half the population are net beneficiaries of the existing situation, how is a government that relies on popular support to reverse it?

The hard fact is that since last year’s general election, Varadkar has been ideally positioned to do something about these problems. As minister for social protection, he has had the opportunity to take action against the long-term welfare dependency culture. He has also had the opportunity to at least outline the broad contours of how we should address the structural insolvency of the social insurance fund. Can you recall him availing of either opportunity?

Instead, Varadkar has done what politicians do: he has played politics. Far from curtailing the scope of social insurance benefits in order to shore up the system, he announced plans to extend more social insurance benefits to those who are self-employed.

Having claimed in a 2011 letter to the public expenditure minister that Irish welfare rates were too high by European standards and should be cut by one-fifth, Varadkar presided over a €5 weekly increase in all rates of welfare payment in last year’s budget. That represented an average increase of 2.5% for those who don’t have to get up early in the morning at a time when the average earnings last year of those who do increased by only 1.4%.

I welcome Varadkar’s election as leader of Fine Gael. I welcome his pro-effort and anti-laziness rhetoric. It’s just that I haven’t seen any evidence of him implementing this approach. And, dependent as he is on the votes of Fianna Fail and various left-leaning independents to govern, I don’t see him getting the chance to do it in the near future either.

Published in The Sunday Times (Irish edition)

June 11th 2017