IMF urges action on child benefit and medical cards

THE International Monetary Fund has suggested means-testing for child benefit payments and cutting the cost of medical cards as part of a “comprehensive targeting of spending”, which the agency says is needed to deliver immediate reductions in Government spending.

In its assessment of the Irish economy, the IMF said “maintaining expensive universal supports and subsidies is difficult to justify under present budgetary circumstances”.

The household benefits package and spending on non-means-tested pensions were also cited as potential targets that could “generate significant savings, while protecting the poor”.

The State pension paid to all retiring workers who have sufficient PRSI “stamps” paid over their working life is the main non-means-tested pension in the State, though there are other schemes, including accelerated pensions paid to politicians and judges, regardless of means.

“There are many options to help save budgetary resources while minimising the impact on the most vulnerable,” said Craig Beaumont, the IMF’s Ireland programme director, at a press conference yesterday concluding the fund’s consultation process – separate to last week’s bailout review by the EU-ECB-IMF troika.

“Child benefit has risen substantially in the last decade and there is no means-testing for it. We’re just laying out the option that you could target it at families who are less well off,” he said when pressed for further detail.

He also cited the possibility of cutting the cost of providing medical cards to those who were more than 70 years of age. “The population over 70 is going to rise over time so the cost of those cards is going to keep rising.”

The concluding statement also made reference to savings achieved under the Croke Park deal which, it said, had “facilitated personnel reductions and efficiency savings”.

However, continued monitoring of the pay and pension bill for the public service was also deemed necessary.

The fund also praised the Government’s decision to introduce the property tax, which it described as “a progressive measure”, adding the tax would “provide a progressive and stable source of revenue”.

But it counselled that “a suitably high level for this tax would maximise these benefits”.

Reform of social housing provisions was also highlighted, with the fund advocating the integration of the systems of social housing provision and rent supplement into a new, means-tested housing assistance payment.

Outside Ireland, the fund repeated its call for further support from Europe for Ireland as the country moves to re-enter the debt markets.

Speaking at the press conference, deputy director of the IMF’s European department Ajai Chopra described the euro group summit statement of June 29th, which committed to a reduction of Ireland’s debt burden, as “a welcome path forward”.

“What’s striking about the commitment was the point that similar cases will be treated equally as policy options are developed and applied in other possible country cases.

“So . . . we are working to formulate technical solutions that form a potentially coherent package with the following objectives. The first objective is that it’s going to be important to break the vicious circle between banks and the sovereign.

“The second objective is to improve debt sustainability and prospects to regain market access for the sovereign. The third is to strengthen the capacity of banks to lend and support the economy,” he said.

Asked how many billions of euro Ireland’s legacy bank debt would need to be reduced by to ensure economic growth and Ireland’s return to the sovereign debt markets, Mr Chopra said there was no “magic number” that could deliver the desired outcome without looking at “all the elements of that package”.

“That’s all I can say,” he added.