€700m cut for social protection

 

The Department of Social Protection will bear the brunt of cuts in next month’s budget, accounting for €700 million of the €2.2 billion reductions in expenditure.

Cuts in the department’s budget will account for a third of all expenditure adjustments. With the budget for capital projects being cut by €750 million, the upshot is that Social Protection will account for half the cuts in current departmental spending.

Minister for Social Protection Joan Burton was originally told she had to produce cuts of €822 million from her department.

However,  she succeeded in recent weeks in convincing Cabinet colleagues that with the increase in the number of unemployed to 447,000 and because Social Protection’s outgoings are largely demand-led, a cut of that magnitude was not feasible.

Speaking this morning, Ms Burton said the country “faces a very tough situation” and each department is going to have to trim spending.

Ms Burton said she is trying to reform social welfare because there has been a “very large build-up of spend in the last couple of years”.

She said that since she became Minister, she has been “astonished” by the number of schemes and conditions in social welfare. “We should be able to bring those down into a much more limited number of schemes,” she added.

Social protection is the Government’s biggest spending department, paying welfare, pension and benefits to 1.4 million people each month and with an annual budget of €21 billion.

Tthe bulk of its spending is on welfare. As the Government has committed itself not to cut the rates of primary social welfare payments, it will have to find alternative savings within the department.

“It is going to be very difficult. The talks are still ongoing. At least with the reduction in targeted cuts from €822 million to €700 million, there is less of a hill to climb,” said a well-placed Government source.

Department officials are understood to have focused on three areas to find the bulk of the savings: eliminating social welfare fraud; cutting the rent supplement bill; and “activation” measures for the unemployed to satisfy the conditions of the memorandum of understanding with the EU and the IMF.

Ms Burton launched an anti-fraud initiative in September in which she contended that new fraud control measures could achieve as much as €625 million in savings next year.

The department has also been in discussions with the Department of the Environment in relation to reducing the substantial cost of rent supplement which cost €516 million last year, and €376 million until the end of September this year. Some 95,800 families and individuals living in privately rented accommodation claim the supplement.

While social welfare rates will not be cut, the memorandum of understanding with the troika requires activation measures, which could mean that the long-term unemployed who do not take up training or job offers have their welfare tapered over time.

Savings may also be made by confining each social welfare recipient to only one primary payment that would be immune from cuts. However, that could be highly politically sensitive as those who receive more than one primary payment are mainly widows and carers.

The department has argued it is difficult to find cuts when its payments have increased as the dole queues have grown. In addition to an increase in the number of unemployed, there have been substantial increases in other benefits. These include the back-to-school clothing and footwear allowance. There were 160,000 applications in 2010 costing €77 million. The number of applications has increased to 193,000.

It is also expected that cuts in the Department of Health will amount to €400-€500 million, with the savings from the moratorium on public service recruitment from the Croke Park deal expected to yield a figure of several hundred million.

Separately, the Cabinet yesterday approved the capital projects that will be axed following the decision that their budget will fall by €750 million. The biggest casualty will be the Metro North project. Details of other axed projects will be announced tomorrow.

One of the flagship capital projects is the new national children’s hospital at the Mater Hospital campus in Dublin.

The Irish Times understands that Minister for Public Expenditure Brendan Howlin is exploring the possibility of requesting an up-front payment for the new National Lottery licence which falls due at the end of the year. That process could yield between €400 and €600 million, which could cover most of the capital costs of the project.