Speech by the Minister for Social Protection
Joan Burton TD
Society of St Vincent de Paul 200th Anniversary Conference
‘Participation, Contribution & Citizenship’
I wish to begin by thanking the Society of St Vincent de Paul for the invitation to address you here today.
The work of the Society has never been more important.
It is 200 years since your founder, Frederic Ozanam, was born in Milan.
Frederic Ozanam once wrote:
“The question which is agitating the world today is a social one. It is a struggle between those who have nothing and those who have too much. It is a violent clash of opulence and poverty which is shaking the ground under our feet.”
The world has changed an awful lot since Ozanam’s time.
But in some ways, it has not changed at all.
Two hundred years since his birth, the world is still a struggle between the haves and the have-nots – a struggle much more pronounced by the global recession.
St Vincent de Paul, and organisations like it, are a bulwark in the struggle against poverty.
Participation: A Vision of Full Employment
However the strongest protection against poverty is decent, secure and fairly paid work. This has been my abiding political conviction since I first entered politics and it has informed me throughout my career.
Sadly we live in a world where the availability of decent, secure and fairly paid work has contracted massively since the financial crisis.
In particular we face a generational crisis of youth unemployment. Across Europe right now, 5.5 million young people – one in five of those aged between 15 and 24 who are on the labour market – are without a job. In some individual member states, the situation is even worse.
In Spain and Greece, it’s one in every two young people on the labour market, with youth unemployment rates above 50 per cent. In Ireland, the rate is 32 per cent, which corresponds to about 61,000 young people.
We are all familiar with the notion of the scarring effect of unemployment – where periods of unemployment earlier in people’s working lives lead to lower earnings and less meaningful careers later on.
But there is an even more insidious aspect to unemployment, which is the bias and discrimination that those who are unfortunate enough to be unemployed face in re-entering the labour market.
My attention was recently drawn to US research which found that employers would rather call back someone with no relevant experience who’s been out of work for a few months than someone with lots of relevant experience who’s been out of work for longer than six months.
In other words, it doesn’t matter how much experience you have. It doesn’t matter why you lost your previous job — it could have been bad luck. If you’ve been out of work for more than six months, you face an enormous uphill struggle to return to employment.
This is particularly the case for young people who have never had a job or who have limited work experience.
This is why I have long advocated a formal guarantee that any young person will receive training, work experience or an apprenticeship within a short period of becoming unemployed.
I was therefore delighted to reach agreement on an EU wide Youth Guarantee at February’s EU Council meeting and look forward to making this guarantee a reality for young people in Ireland in the months and years ahead.
A new economic strategy: taxation, growth and full employment
However all our policy responses will be set at naught unless we can move to a position where the target of close to full employment becomes the overarching objective of economic policy.
And in order to do this, we need to make a very strong argument at EU level for a decisive shift away from what has now become the counter-productive policy of austerity.
One of the chief architects of the bailout programme Ashoka Mody, recently said the approach of austerity-only was wrong. In this he was merely confirming the IMF’s existing doubts about an austerity-only approach.
He also warned of the unending human pain it would create if Europe continued along this path, and the fraying of the economic and social fabric that would ensue.
However this re-examination of long held theories by the IMF has not, as of yet, been reflected at Eurogroup level, where there in the wake of the Cyprus bailout there still appears to be an inexplicable preference for loading the costs of banking crises squarely on the shoulders of ordinary people and small business.
While we suffer austerity fatigue, many German taxpayers are suffering bailout fatigue. Meanwhile we learn from recent media investigations that massive tax evasion and offshoring of wealth have become the norm for certain sections of the global elite.
The truth is that ordinary people everywhere have shouldered too much of the burden.
A shift to international tax justice is overdue and I am encouraged in this by David Cameron’s promise at Davos in January to table global tax evasion as an item for immediate action at this year’s G8 gathering in Fermanagh.
I do hope the bracing air of that glorious setting among Fermanagh’s lakes will inject some fresh thinking into this shocking scandal on the part of our distinguished visitors Barack, Angela, David , Francois and the others.
The evidence is now overwhelming on the extent to which wealthy individuals and major corporations systematically evade even the historically low levels of tax contributions they are asked to make.
Remember the famous remark of an American Chief Justice Oliver Wendell Holmes who said taxes are the price we pay for a civilised society. This comment should be on the desk of every Minister for Finance.
We all knew for decades how widespread organised tax evasion is here and elsewhere. The notorious Ansbacher accounts revealed at various Tribunals showed how common it was in Ireland.
Now we have compelling evidence that the international scale of this practice amounts not to billions of euros but to trillions. It is difficult for individual states to go it alone on this issue as there is always an army of lawyers and even accountants ready to move funds at a moment’s notice to an off shore haven.
International action by the G8 and the EU can achieve results that individual states cannot. In Dublin last week EU Finance Ministers took initial action on the sharing of banking records. Luxembourg is now on board for this and Switzerland has been co-operating with Germany at last in rooting out tax evasion.
If this international effort succeeds I know that every country will have access to funds previously untaxed and these can be mobilised to secure public investment in schools, roads, hospitals and housing – the kind of initiatives that helped Franklin Roosevelt overcome the 1930s depression.
However none of this will take place unless there is a fully- fledged commitment to growth and investment at EU level. Otherwise, we risk consigning Europe to a full decade of retrenchment without respite – austerity with no alleviation of the suffering people are going through.
So what would an EU growth strategy look like?
Longer term the ECB should, like the Fed in the US, pursue a dual strategy of price stability and growth. In particular it needs to have an employment target that is as close to full employment as possible.
In the short-term there is clearly room for core euro area countries to raise spending. This is because borrowing rates for countries like Germany are close to zero and the euro area as a whole has a debt ratio similar to areas such as the UK and the US, where central banks are actively willing to purchase sovereign debt.
So a eurobond-financed stimulus programme would be economically feasible and effective. The only obstacle is a political one. In other words, the reluctance to consider policy choices beyond austerity.
However I strongly believe that the debate has decisively shifted in Europe. The results of Italy’s election and the recent judgement of the Portugese Supreme Court point to an inescapable conclusion: that electorates in advanced societies have a limit beyond which they are not prepared to accept policies of austerity. I believe that we have reached the limits of austerity now.
It is my strong personal conviction that the time is right to put in place a new economic strategy based on sustainable growth, investment and full employment.
Contribution: A Vision for Social Protection
Another crucial bulwark against poverty is the welfare state.
The role of the welfare state is partly to redress the imbalances that bad luck can bring. The welfare state redistributes wealth from the fortunate to the less fortunate. It encourages solidarity between generations and groups of people facing different life challenges. When you are inactive – young, old, pregnant, ill or disabled – you are helped. But you are also encouraged to contribute during your working life.
There are those who would argue that, at this time of scarcity, we cannot afford welfare — at least not the type of welfare we have become used to. There are others who go further and say that welfare itself acts as an impediment to recovery, that it imposes an unnecessarily high floor on labour costs, that it distorts decision making and that it reduces the incentive to work.
- What this argument misses however is that welfare was borne out of austerity:
- The Bismarck concept of Social Insurance in 1870s Germany,
- The Roosevelt New Deal in Depression era America and
The Beveridge reforms in post war Britain
These were all responses to economic recession.
A recognition, even by conservative governments, that citizens and society itself need protection from the vagaries of the boom and bust economic cycle which we all know only too well is a systemic feature of free market capitalism.
Something for something: the contributory system
Last year was the 70th anniversary of the Beveridge report. William Beveridge is the founding father of the modern welfare state. His big idea was the creation of a system of benefits to provide social security so that people would be protected from the cradle to the grave.
Beveridge understood that his plan would be immeasurably strengthened by broad public support. So he shaped his proposals around the principle that “benefit in return for contributions, rather than free allowances from the State, is what the people of Britain desire”. Everyone would put something in, and everyone would get something out. Beveridge appealed both to altruism and self-interest.
And crucially this reciprocal system depended on there being close to full employment so that citizens would be in a position to contribute throughout their working lives.
This is often described as a welfare ‘contract’ or ‘bargain’. But that would be to misunderstand why the welfare state used to be so popular.
As the British filmmaker Ken Loach shows brilliantly in his recent film ‘The Spirit of ’45’, the welfare state was popular because it represented an emotional connection, a way of thinking about the type of society which Britain was after the war – a covenant between each to look after all.
How then do we reignite the Spirit of ’45?
The current negative attitude to welfare is partly down to people’s experiences of the system. The costs of childcare and social care are exorbitant, parents don’t have proper time with their young kids, retirement is often a struggle and redundancy can trigger losing a home or racking up debt. We act as if these are problems the welfare state could never cover.
The issue of personal debt is one I have taken a particular interest in since becoming Minister and I was particularly pleased to fund and support your sister organisation the Vincentian Partnership for Social Justice in the pioneering work it has done on minimum income levels.
This work has been much in the news recently with the reasonable living expenses issued by the Insolvency Service. The Vincentians work will act as a critical bulwark and threshold of decency for families negotiating debt resolution arrangements with banks and I support them very strongly in this.
We could of course choose to do things differently. We could reorder the protections the welfare state offers us. At the moment, social welfare offers people too many benefits that are marginal in good times and can be insufficient in bad.
That is why I believe that we need to move decisively over the next decade to a contributory system for social protection. When the economy recovers, the most pressing change would be to progressively replace Jobseekers Benefit with a new system of Income Protection.
This would offer anyone who had made sufficient PRSI contributions but became unemployed up to 60 per cent of their previous earnings in non-means tested support for up to six months, capped at a minimum income level.
This would protect contributors from the dramatic drop in income they face on losing their job, which can often trigger a spiral of further problems, like losing their home, relationship breakdown or falling deeper into personal debt.
In short, Income Protection would offer much greater security to people when it is really needed, without imposing significant new net costs on the state. This would be the first step towards building an Irish version of the much vaunted Danish model of flexicurity into our social protection system and labour market.
Citizenship: A Vision of Mutual Obligations
The welfare state is under attack in many countries.
It’s under attack here too.
And I’d like to take deal with those attacks and dispel a few myths.
One such myth is that there are vast numbers of people on welfare who don’t want to work and who are cosseted by an over-generous benefits system.
Nothing could be further from the truth.
It is abundantly clear from any factual analysis of the Live Register that the great majority of people on it have a very significant financial incentive to work.
We have a particularly serious and worrying problem with long-term unemployment.
And there is a related problem: the number of jobless households that – incredibly – was allowed to increase by the previous government during the economic boom. These are households where adults have worked less than 20 per cent of their total work-time potential during the previous 12 months.
Hard as it is to believe, ESRI research shows that between 2004 and 2007, the percentage of jobless households actually rose to 15%.
By stark contrast, the average across the Eurozone in 2007 was below 10%.
Welfare must be a safety net and a springboard.
Continuing to passively pay benefits to such households is not the solution.
It is not the solution for the adults in the household who are out of work.
And, crucially, it is not the solution for the 25% of children who are growing up in these households, and who need to know something more than welfare dependency if they are to lead fulfilling lives.
The State can and must do more – but in a positive way that encourages and helps people to return to work.
However the obligations of the state must also be balanced by the responsibilities of citizens. Behind the startling numbers on jobless households lies a terrible tragedy of wasted potential, lost hope and the diminution of life opportunities.
Seeing people that are capable of working languish on welfare is not something the left should ever support.
The Labour Party should always be first and foremost about work.
Hence our name and my strong political bias towards work and the policies to promote it like a commitment to full employment, activation, investment and skills training that is required to ensure that working should be the default for all citizens of working age who have the capacity to do.
So there are mutual obligations between state and citizens: the state provides the framework and support system in which citizens are expected to work.
This government has ambition for those citizens who are unfortunate enough to be unemployed or living in jobless households. It views each and every individual on the live register or otherwise distant from the labour market as an untapped resource and a future employee who will participate in the rebuilding of this country and its economic recovery.
Conclusion
When Frederic Ozanam was born in 1813, Napoleon was at war with Europe.
Two hundred years later, it’s sometimes forgotten what a force for good the European Union has been.
But in the response to the current crisis, the EU as a whole – and individual governments – must give citizens hope.
It’s not enough to simply navigate our way out of the storm if we leave millions of people behind fending for themselves.
That is where the social protection system comes in.
I have spoken about the reforms I am implementing, and the kind of social protection system I want to build.
Strong. Robust. One that protects and supports, but also lifts people up to better things.
One to which all contribute, and from which all stand to gain.
Despite the economic crisis, it can be done.
Remember, Beveridge produced his report in the middle of World War II.
Ozanam once said:
“It is truth which will always rise up to judge political systems.”
This Government will be judged on our response to the crisis.
It is my firm intention that we will not be found wanting.
Thank you.