Tuesday, 6 December 2011

Day 1 - Budget 2012

Sinéad Pentony: Yesterday’s budget was presented on the basis of three guiding principles: fairness, jobs and reform. Let’s put these principles to the test with some of the big ticket items announced yesterday.

Fairness aims to ensure that the burden of the cuts is shared fairly, but as we all know fairness, like beauty is in the eye of the beholder. Fairness is subjective and difficult to measure – equality, on the other hand, is objective and it can be measured by quantifying the gap between the highest and lowest earners. It is therefore a more robust principle than fairness because you can quantify the impact of budgetary changes on different income groups. See TASC’s initial study which quantified the effects of Budget 2011 on different income and household groups to see how this can be done.

The Department of Social Protection measures announced yesterday included maintaining primary social welfare rates and the rate of child benefit for the first and second child. Other measures to be welcomed include the reductions in the employers' rebate through the redundancy and insolvency scheme.

There are going to be cuts to the higher rates of child benefit for the third and subsequent children over two years. Having looked at Table D8 in the Department of Social Protection’s 2010 Statistical Information, you can estimate the number of children that will be affected by the changes to child benefit – 460,450 to be exact. 663,553 will not be affected directly by this change – but inflation will reduce the value of the payment indirectly.

According to SILC 2009, the at-risk-of-poverty rate for households containing two adults with three or more dependent children was 18 per cent. So the reductions to child benefit - 11.4 per cent for the third child and 9.6 per cent on the fourth child are likely to increase the risk of poverty for larger families.

The other big change relates to the introduction of restrictions to entitlement for One Parent Family Payments. This reform has been presented as “bringing Ireland’s support for lone parents more in line with that provided internationally”.

However, if this is to be real reform and not just about cutting supports to lone parents we need to see other international best practice applied here in Ireland – such as reducing the cost of childcare which is amongst the highest in the OECD by providing state subsidised high quality early year childcare and flexible afterschool care.

Activation policy also needs to be reformed to facilitate people to participate in education and training and access work experience for the purpose of upskilling and retraining. Yesterday’s budget speech included an announcement of €20 million for a Labour Market Activation Fund. This works out at approximately €65 extra for each person who is unemployed.

There are cuts to the back to education allowance, student supports and access initiatives under the Department of Education. These measures will make it more difficult for lone parents to access and participate in education and training initiatives. And where will the jobs come from?

Yesterday’s budget included announcements that public sector numbers will be reduced by 6,000 in 2012. The capital budget is also be cut by €750 million which makes up approximately one third of the overall reduction in public expenditure. Ireland is now the lowest spender in the EU when it comes to expenditure on gross fixed capital formation, and that’s even before this cut is implemented.

The economy has been starved of investment for the last number of years and we cannot begin the process of recovery in the absence of significant investment. TASC and others have made creative suggestions about how investment could be financed. The fiscal adjustment must be counter-balanced with an investment strategy aimed at embedding job creation and growth in the economy. In the absence of a twin-track approach to dealing with the crisis, we cannot create the conditions for recovery which is desperately needed.

In the areas of health and education, a number of measures to be welcomed included increased charges for the use of public beds by private patients. But this is double-edged sword because health insurers will pass on the costs to their customers, which will result in more people being a position of not to be able to afford private health cover. This will have a knock-on effect on the public system and put it under even greater pressure.

The introduction of free GP care for chronically ill patients and the ring fencing of €35m for mental health is also to be welcomed. However, the big issue for health is the staff reductions – thousands of whom have left in recent years, and many more are expected to leave in the months ahead. How can we hope to provide health services that are going to be subject to particular demographic pressures associated with an ageing population with declining staff numbers?

Finally, in the area of education, the good news is that the overall number of Special Needs Assistants (SNAs) and resource teachers will be maintained at current levels. There will be no increase in the general average of 28:1 for the allocation of classroom teachers at primary level. However, there will be phased increases in the pupil threshold for the allocation of classroom teachers in small primary schools. The pupil teacher ratio (PTR) in secondary schools is set to rise with a greater increase in the rate for private post-primary schools, which should be welcomed on the grounds of equity.

However, cuts to the capitation grants for schools will impact on subject choices and the general resourcing of schools. But schools that are able to subsidise reductions in their capitation grants with ‘voluntary contributions’ from parents will undoubtedly fair better. Cuts to school transport will add to the cost of sending children to school and this measure will have a disproportionate impact on families in rural areas where there is unlikely to be an adequate public transport system in place.

Other regressive measures include cuts to capitation grants across a range of further and adult education courses and allowances for participation in Youthreach, Community Training Centres and FAS courses. These measures are particularly bad news as they are likely to act as a barrier for many students wishing to participate in these types of training initiatives. The profile of participants in these courses tends to include many young people for whom the mainstream education system is not an option. Finally, cuts in student supports and access initiatives along with increases to the student registration fee will make it more difficult for low and middle families to support their children in Third level education.

We await Part Two of Budget 2012.


Anonymous said...

The pupil teacher ratio in secondary schools is set to rise with a greater increase in the rate for private post-primary schools, which should be welcomed on the grounds of equity.

What precisely is so equitable about undermining the educational experience of certain kids?

Ah yes, I see, its the whole leveling-down thing, right?

Force everyone to endure low-quality services, because that's just fair. Hold back anyone with notions of improving their lot or giving the best to their kids.

Of course undermining private education & health also vastly increases the rent-seeking opportunities for the providers of such low-quality public services, as long as they enjoy a state-sanctioned monopoly. Handy that.

Sinead Pentony said...

Thanks for your comment. The state subsidises private fee-paying schools which can only be accessed by a very small proportion of the population.

These schools will have greater scope to maintain their pupil teacher ratios through increases in fees charged to parents.

But the bigger issue is the fact that we have a two-tier education system which reinforces educational and income inequalities.

Education should be a key area of investment, even during this time of crisis. And this investment in pre-primary, primary and post-primary education, should benefit all children equally.

I think we should be aspiring to have an education system similar to that in Finland, where they have a single-tiered education system and it's illegal to charge fees for schools.

The Finns are also consistently amongst the highest performers in the PISA tests. Here's a link to an article in The Independent (UK) published earlier this year which provides a useful overview of the Finnish education system.