Food for thought in report on State’s welfare spending

Spending on contributory State pensions surged 40% between 2011 and 2019

Leaving aside the extraordinary events of 2020, social welfare payments actually fell over the preceding nine years – from €21.1bn  in 2011 to €20.9bn  in 2019. Photograph: Eric Luke

Leaving aside the extraordinary events of 2020, social welfare payments actually fell over the preceding nine years – from €21.1bn in 2011 to €20.9bn in 2019. Photograph: Eric Luke

 

Pandemic support payments from the Department of Social Protection clearly skewed its figures last year. The department saw a 46 per cent jump overall in payments it issued to €30.6 billion, according to the latest Statistical Information on Social Welfare Services annual report. But that included €9.1 billion in supports related to the Covid-19 lockdown. Strip that out and the increase was a more modest 3.2 per cent.

The report is possibly of more interest for the picture it paints of the State and its people over the past decade. It also highlights why some long-cherished payments might need looking at.

Leaving aside the extraordinary events of 2020, social welfare payments actually fell over the preceding nine years – from €21.1 billion in 2011 to €20.9 billion in 2019.

Modest you might think in a growing economy. Yet over the same period spending on the contributory State pensions surged 40 per cent. Including the means tested non-contributory State pension, the bill for pensions jumped 34.8 per cent to €8.2 billion.

That makes it the single biggest drain on welfare funds – and the fastest growing. On its own in 2019 it accounted for three-quarters of all PRSI collected from employers and workers.

A large part of this increase was due to the greater number of recipients. In just nine years the number of people qualifying for the State pension jumped by a quarter – courtesy of the post-war demographic baby boom and the fact that we are all living longer.

This is the background against which we need to decide whether the State can, or indeed should, revert to paying out the State pension at 65, as has been under discussion by a special commission. Or should we, as previously mandated, gradually increase the State pension age to 68 later this decade and possibly to 70 down the line.

And while we’re talking about where welfare payments go, we can also look at child benefit, a payment that is made regardless of income or need.

It cost the exchequer €2.1 billion last year, or about 10 per cent of the total paid out in welfare. Stripping out the pandemic support payments it was second largest budget heading for the department just behind the contributory State pensions. Food for thought.

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