Calling for Cuts?

We are experiencing an unprecedented economic crisis. As of July 2009 government borrowing has risen to €14.7 billion. While €6 billion of this is being spent on shoring up the banks, the remainder is to cover day-to-day expenditure. There is no doubt that something must change if this deficit is to be addressed.

Unfortunately, much of the commentary to date has argued that, in order to reduce the deficit, cuts to social welfare payments and the minimum wage are required. This position has been given additional exposure by many of the recommendations contained in McCarthy (Bord Snip Nua) report launched in July of this year.

We are told that our social welfare system is too ‘generous’, that our minimum wage is undermining competitiveness, that the cost of living has dropped and that the country can no longer afford the bill. The implication of these arguments is that the poor should pay for the economic crisis. We don’t agree.

There have already been significant cuts to social welfare payments. Any cuts to basic social welfare payments or the minimum wage will increase poverty and hardship for hundreds and thousands of people.

Minimum Wage & Basic Social Welfare Payment

Having a job does not automatically take you out of poverty. 30% of all households at risk of poverty are headed by a person in employment. This means a weekly income of less than €228 for a single person, €304 for a one parent family with one child and €530 for a two parent family with two children. In 2006 there were at least 116,000 employed people at risk of poverty. The vast majority of these people would be earning the minimum wage - or less.

Any reduction in the minimum wage would have three effects. It would increase the poverty rate, increase the total number of employed people at risk of poverty and deepen the experience of poverty of those already at risk.

The claim that our social welfare payments are generous is simply untrue. The most current comparative figures produced by the OECD (2007) show that an Irish single claimant receives the third smallest payment in the EU15, while a family with two children receives just above the EU15 average.

Some commentators will argue that the falling cost of living would counter balance any reduction in the minimum wage or basic social welfare payments.

The cost of living in Ireland is significantly higher than in other EU countries. In 2007 price levels in Ireland were 11% higher than the EU average.  While the overall cost of living is falling, the cost of many items on which low income families spend a high level of their income is actually rising. Consumer Price Index figures for June 2009 show price rises including; Electricity (4.7%) Natural Gas (6.5%) Bus Fares (11%) Childcare (6.4%) Primary Education (7.6%) Secondary Education (7.1%) Doctor fees (2.2%) Dental fees (2.3%) Hospital services (9.1%).

Today most households on social welfare or the minimum wage do not have enough income to sustain a basic standard of living. Cutting their income further will increase poverty and hardship.

Christmas Payment

The decision to cut the Christmas ‘bonus’ was universally criticised as one of the most punitive measures in the April 2009 mini-budget. It represented a 2% cut in the annual income of households on social welfare.

The Christmas payment has formed part of the household budget for poor families for over 25 years. The loss of this critical part of family income at Christmas time will result in increasing levels of debt particularly from unscrupulous moneylenders.

Women and children in particular will suffer; women as primary carers and those with most responsibility for managing households and children for whom Christmas is such a special and important time. As the capacity of charities and the Community Welfare Service to provide emergency payments will be severely limited, the impact of the cut will be increasing poverty and long term debt.  The case for reinstating the Christmas bonus is incontrovertible.

Child Benefit

Child benefit is a universal payment that aims to fulfill a number of important policy objectives, including: supporting families; compensating women who stayed out of paid employment to care for their children; combating poverty; and supporting parents to pay for childcare.

Ireland’s support for children is low by international standards, levels of child poverty are high, 76,000 children live in consistent poverty while 200,000 live in relative poverty.

There is a need for reform of child income supports. However cutting child benefit will increase the number of children living in consistent poverty, and hit the poorest families hardest. A National Women’s Council of Ireland survey in February 2009 found that 45% of respondents said that any reduction in child benefit would be a ‘financial disaster’ while 66.6% of respondents described child benefit as a ‘critical part’ of their income.

The Poor Can’t Pay

Central Statistics Office analysis for 2007 demonstrates that without our social welfare system Ireland’s poverty rate would be 42%. Social welfare payments reduce poverty levels by 25%. Social transfers are critical tools in the fight against poverty. Equally the minimum wage ensures that individuals and families can work and earn an income above the relative poverty line. Imposing cuts on the weekly income of the lowest paid individuals and families in our society does not make social, economic or moral sense.

We, the undersigned organisations, do not accept those arguments that claim that the poor are in a position to pay for the economic crisis. Our minimum wage and basic social welfare payments are not generous. The cost of living for low income families does not provide scope to cut their incomes. Restoring our competitiveness, saving jobs and closing the fiscal deficit can be achieved in ways other than forcing society’s poorest families into deeper levels of poverty.

The poor did not create the economic crisis, they can not and must not be made to pay for the mistakes of others.