Burton fires first volley in battle over budget

Tue, Aug 7, 2012, 01:00

INTERVIEW:Minister for Social Protection says social welfare cuts could slow economic recovery

THE ANNOUNCEMENT of the 2013 Budget is still four months away in December but already very strong markers are being laid down.

The first volley in what promises to be a bruising internecine campaign between Fine Gael and Labour members of the Cabinet has been fired by Joan Burton, the Minister for Social Protection.

In an interview with The Irish Times, she has used a counterintuitive argument: cut social welfare rates and you cut into a largely unseen artery of economic growth. In other words, cutting social welfare rates in the December budget might hinder rather than help the State’s economic recovery.

Burton has said high unemployment figures and flat growth rates were “key pressures” in the run-up to the budget, in which €3.5 billion in adjustments will be required. The Department of Social Protection is the highest spending of all 15 Government departments, responsible for one-third of all State expenditure.

Burton, also the Labour Party deputy leader, questioned the benefit of cutting rates and suggested it might exacerbate the problem.

The Minister based her argument on a number of studies, including one from Social Justice Ireland, which showed social transfers (State pensions and social welfare payments) were the biggest reducers of poverty levels in Ireland. She said they also provided the kind of stimulus to the economy first identified by the British economist John Maynard Keynes.

“The key finding of all the Survey of Income and Living Conditions reports in recent years is that social transfers have added a high measure of fairer distribution to incomes in Ireland than any other vehicle.

“It gives an enormous traditional Keynesian stimulus and the income that is paid out goes out to every region of Ireland. It allows people buy their milk in the corner shop.

Referring to the troika of the European Union, European Central Bank and International Monetary Fund, she said: “I think that the troika has come to recognise the importance of social transfers. [US-based economist] Joseph Stiglitz has also specifically referenced the impact of social transfers.”

Burton said she has already commenced preparatory work for the budget.

“I’m doing what I did last year, going through every heading and looking at lists of expenditure,” she said.

In so doing she has sent out a strong early signal that she intends to defend stoutly her department’s budget from bearing the brunt of the harsh cuts that will be imposed in the next budget.

Her position will strike a dissonant note with Fine Gael TDs who have argued social welfare rates are too high and need to be reduced to levels closer to those of the UK.

“The process of what the troika is doing is inexorable. There’s no point in saying that it’s not. I hope that there’s a growing appreciation on their part of the need for retaining demand in the economy. I will approach those discussions very robustly. I have a very wide programme of reform,” she said.

She indicated an area on which she would be focusing for cuts is where double payments might not be justified in the current circumstances. She also said the department was determined to target fraud and abuse. Burton said a critical issue for her was to get people back to work. Besides the societal benefit, she said, high unemployment led to an excessive burden on the system.

She said that while the JobBridge intern scheme had been very successful, it was relatively small. The overall numbers had been increased to 6,000 and lone parents could now qualify.

However, she said a more ambitious scheme was needed that would give longer training periods and would be directed at middle- and lower-income groups who needed to move away from sectors that have taken a big hit in the recession, including construction and trades.

Describing it as the “new apprenticeship”, Burton said: “There are a lot of employers who say to me continuously that six or nine months [the maximum period for a JobBridge internship] is not enough.

“In pharmaceuticals, for example, health and safety training is critical and that induction training takes time.

“There are a lot of middle- and lower-earning groups who could do with training structures, something that would allow them into a new apprenticeship. What I envisage would be a mixture of education and on-the-job training that could meet a demand. It would allow people change their field [and] go through a number of programmes,” she said.

“It might help people like construction engineers, CAD specialists and architects who are converting to areas like pharma, high-tech medical devices and IT.

“I have talked to [Minister for Education] Ruairí Quinn about it and we are looking at a whole series of options . . . If people are going back to education then the expectation is that they should get certification and awards that show what they have achieved so that they can present that to an employer.”

Burton said it was too early to say how many people would be offered the participation in the new scheme, but said she would be ambitious in her targets.