Facing Up to Reality II: The Methodological Flaw in An Bord Snip Nua

This post follows on from a previous contribution.

Michael Taft: In the previous post, we saw how billions of fiscal contraction has led to little deficit reduction. After that post was written the IMF published their latest projections. They estimate the deficit this year to be -10.8 percent this year. Between 2009 and 2011, we have experienced a fiscal contraction of €10 billion - or over 6 percent of GDP. Nominal GDP will fall by €4 billion. The deficit is expected to fall by less than 1 percent. Does the Government get this connection?

In this post we will examine why the notion that cuts equals savings is one of the more pernicious that has come to dominate the debate; why there is a fundamental flaw at the heart of the methodology employed by the Special Group report. With Government ministers threatening more cuts, this is certainly topical.

The Special Group Report used the word ‘saving’ or ‘savings’ 1,096 times. It neatly equated ‘savings’ and ‘spending cuts’ when no such relationship necessarily exists. Fortunately, we have a simulation of the effects of one of the ‘savings’ that the Special Group highlighted: cutting public sector employment.

Flawed Methodology: The ESRI Stress Test

The Special Group recommended that public sector employment be cut by 17,000. According the ESRI model, reducing public sector employment by 17,000 would mean a reduction of €1 billion in public spending – or 0.6 percent of GDP. What would happen?

• GDP would fall by 0.8 percent. So, for every €1 billion cut, the GDP falls by nearly €1.3 billion.
• More worryingly, GNP would fall by 1 percent. That represents an even more deflationary impact.
• Consumer demand would fall 0.5 percent in the first year, rising to 1 percent in the second year. That’s nearly €1 billion cut from consumer spending – putting considerable pressure on domestic businesses.
• Employment would fall by 1.1 percent. In 2009, that would mean a loss of over 20,000 jobs. Unemployment would rise by almost the same amount.

These are all the factors that must be included before we can assess the ‘savings’ to the Exchequer. So what did the ESRI conclude?

• The deficit would fall by 0.2 percent in the first year and 0.1 percent in the second year.

According to the ESRI, the ‘net saving’ to the Exchequer would be 25 percent of the cut, falling to less than 15 percent in the second year. This is because when you factor in the:

• Loss of tax revenue from reduced spending
• Increase in public sector spending arising from unemployment costs
• Decline in GDP/GNP

The gain to the Exchequer diminishes greatly. This simulation – along with measurements for other spending cuts and tax increases – was available to the Special Group report. It was, and remains, the best estimate of the impact of cutting public sector employment. They didn’t utilise it or even refer to it.

The Special Group could have commissioned, through the Department of Finance, other stress-tests regarding social transfers (nearly 40 percent of the ‘savings’ in the Report was due cuts in direct and in-kind social transfers) and Government purchases of private goods and services, which make up approximately a third of spending on public services They didn’t. They have yet to explain why. But that it would have undermined their basic premise – that cuts equals savings – is fairly certain. For its methodology adopted a crude ‘arithmetic’ approach to spending cuts, not an economic one.

When Government ministers proclaim progress on public sector employment reduction, they are, without realising, actually proclaiming very little progress on deficit reduction but significant progress on deflating the economy, driving up unemployment and cutting domestic demand.

But when this realisation hits home – falling growth, continued high deficits – these same Ministers demand more of the same, again not realising that more of the same is likely to produce the same results which produces more demands for cuts until the economy gives out.

It is a vicious circle, legitimated by the false methodology at the heart of the Special Group report. Cuts do not equal savings. But common sense should tell us this – without resort to models and projections. During a jobs crisis, does it make sense to cut employment levels from the largest employer? Why should we be surprised when the result is so dismal?

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We are facing into another round of cuts. Employees are now being threatened - with job losses and pay cuts; in the public and private sector. Why? Because past Government ministers either could not or would not subject their policies to economic stress-tests (any comparison with the banking crisis is not co-incidental). They assumed propositions that had little empirical justification. They suffered from ‘escalation of commitment’ – having committed to a particular strategy, they could not extricate themselves when it became clear the strategy was failing.

It is still not too late for this Government to take a step back from the brink. There is still good will towards it. They could adopt a set of transparent and public measurements whereby fiscal options are assessed on the best data available. And on the basis of such informed analysis, adopt the policies that flow from that.

The last thing the Government should do is merely continue failed Fianna Fail policies with only the most cursory of makeovers. If they do, then people will have the right to ask – what was the election for?

Facing up to reality: Austerity is an obstacle to deficit reduction

This is the first part of a two-part post.

Michael Taft: On Sunday, Colm McCarthy wrote:

‘ . . .the programme for budgetary correction needs to be accelerated. There is one, and only one, policy instrument available to Government which will improve confidence quickly and that is the pace of deficit reduction.’

Couldn’t agree more (though equally important is to prevent private banking debt from being absorbed into Government debt). We need to reduce the deficit in a sustainable manner. Therefore, the first thing the new Government should do in its review of public spending is to consign the Report of the Special Group on Public Service Numbers and Expenditure Programmes (aka An Bord Snip Nua) to the rubbish heap. Not only is it so methodologically flawed that it tells us almost nothing about generating savings for Exchequer, the strategy which it promotes (austerity, deflation) has been a failure. Indeed, that strategy may actually be adding to the deficit and debt burden. It is time to junk the report and start a real deficit reduction programme.

Hasn’t Worked So Far

In 2009 the Special Group report called for €5.3 billion in public spending cuts, almost all current expenditure. But in the three budgets in 2009 the Government did a few billion better. They cut current spending by €6.3 billion. In addition they cut €1.5 billion from the capital budget while increasing taxation by €2.8 billion – an overall contraction of €10.6 billion.

What happened next was predictable and predicted. The Finance Minister called in the Opposition Finance spokespersons in the autumn of 2010 to tell them the deficit was still rising.

The last budget cut approximately €2.1 billion in current spending and €1.8 billion in capital; all this to try to get the deficit down to below -10 percent. What’s the prognosis? Not good.

According to newly released papers, the Department of Finance is already expecting the deficit to be higher than last budget’s projections. They were hoping for an Exchequer balance of €17.7 billion; now they project a balance of €17.9 billion – and that’s after only two months of Exchequer returns.

According to the Department:

‘Income tax will be a key determining factor in the achievement or otherwise of the overall tax revenue tax target for 2011’.

If this is the case, there should be cause for worry. The briefing paper stated income tax was down €45 million on the end-February target. The recently released March Exchequer statement showed income tax falling €125 million behind target. This ‘key’ category is weakening. So is VAT, which is down €179 on target.

But this shouldn’t be too surprising. The last Government estimated that for every 1 percent of GDP in fiscal contraction, economic growth falls by half that amount (though the IMF suggests the fall in GDP could be between twice and four times what the Government estimates). This results in falling tax revenue and rising unemployment costs, which in turn adds to the deficit burden.

Already, based on current growth projections, the deficit target has slipped by nearly ½ percent in the first three months. In other words, the Government is not likely to break the -10 percent deficit threshold. And according to the Sunday Business Post (link not available yet), the Government, along with the EU and IMF, are preparing to revise future growth downwards. This will lead to a deterioration of the deficit target.

So what have we got? The Special Group report called for €5.3 billion in spending cuts. The Government responded by cutting public spending by €11.7 billion – more than twice as much as the Report’s recommendations (and this doesn’t count the cuts in the 2009 budget). And yet the deficit still remains stubbornly high, only slight below the deficit level at the time the Report was published.

The pro-austerity camp has only one response to this running-in-quicksand scenario: more austerity. But it is austerity itself that is the obstacle to sustainable deficit reduction. How much deeper down the hole do we have to dig until we realise that it is the digging itself that is the problem?

When do we start facing reality?

Next post: why the methodological flaws in the An Bord Snip report require it to be junked.

Local Government Reform

Nat O'Connor: A lot of people have heard of 'bord snip nua' and the various recommendations it made for cutting or changing public services. However, the Report of the Local Government Efficiency Review Group, published in July, got a lot less attention. It sets out a range of areas where costs could be reduced, but it also reviews local government services  in more general terms.

For anyone stuck for summer reading, there's 209 pages of detail. But for quick reference, its 106 recommendations are listed from page 171 to page 180.

Interesting items include:

• Ending the situation where towns strike different commercial rates from their counties (Rec. 4), which businesses may welcome;
• Reducing the number of city/county managers from 34 to 24 (Rec. 8), which is in effect a merger of those local authorities at the top managerial level;
• Putting tolls on national roads (Rec. 56), which is madness;
• Full cost-recovery for planning to be sought, especially for major developments (Rec 68), which is logical but could deter higher density development;
• A €10 handling fee for non-online motor tax payments (Rec 75), which further punishes those who don't have Internet access, especially those who already pay the higher tax  rate charged quarterly.

In all, the recommendations are designed to raise €511 million a year.

Different recommendations will no doubt strike different readers. But a couple of general points surface for me.

Firstly, the local government estimated spend in 2010 will be €8.5 billion, including €4.7 billion current. The total efficiency savings amount to 6 per cent of the total, or 10.9 per cent of current spending. I suspect that a lot of the savings are from initiatives that were planned by local authorities anyway (at least, by the more efficient ones), and some suggestions won't be taken up for various reasons. So, that leaves a relatively modest level of cost savings to be squeezed out, on top of the job losses that have gone on across the local government sector over the last few years. And the suggestions do not resolve the long-standing issue of fixing the broken system for funding local government.

Secondly, the report's terms of reference were linked to the state's tax revenue crisis. However, there is more sophisticated analysis that could have been done about the economic value of local government. Is there a difference in terms of business activity between towns of comparable size that do or do not have a town council? If so, is it good for business? There are reasons to imagine that having some kind of local, elected representation could be good for local businesses. This leads on to the question of why some major towns (like Swords) don't have a town council, whereas for historical reasons, very small towns do. If there is an economic value in having representation, the equal representation of all towns, above a set size, might be a more significant reform to consider. And it could have positive economic outcomes in using local government to foster and support enterprise locally.

The logic of living in a 'free' market economy

Slí Eile: An interesting feature of the Special Group’s deliberations is the extent to which it went beyond its strict remit and expectations. It said:

Against the background of the fiscal realities outlined in Chapter 1, the Group is strongly of the view that these budgetary consolidation targets should be seen as a minimum to be achieved, not as an upper ceiling, and that the scope for realising expenditure savings should be availed of to the fullest extent possible.

One would have thought that given the appetite and enthusiasm of the Special Group to roll back the role of the State that they would have attended to the significant direct and indirect costs of administrative relocation of central government staff, otherwise known as decentralization. Not a word except to acknowledge in passing that the Office of Public Works will require five fewer staff as ‘decentralisation’ proceeds more slowly. Clearly, some issues are just not touchable politically even now.

Would full implementation of the Report of the Special Group seriously dismantle public services? Let the Report speak for itself:

On this basis, the Group is putting forward proposals for initial reductions in public service numbers of over 17,300 (inclusive of reductions of around 6,000 in the Health sector under the Employment Control Framework introduced in 2008). Initial reductions on this scale are the minimum that must be achieved. These savings will require inter alia a commitment to the nonreplacement of staff and the down-sizing of the public service. Critically, while work efficiencies and redeployment should allow for broad continuity in the delivery of key public services, in other cases full savings will only be delivered where there is a political and public acceptance that the State can no longer afford to continue some services at previous levels, or at all.

One of the bizarre aspects of the Report is the way in which it proposes large reductions of investment in science and technology. It claims:
The Group considers that any further STI investment must yield clear economic returns. The evidence adduced to date for the impact of State STI investment on actual economic activity has not been compelling.

In the absence of a clear business need for the doubling of PhDs currently being funded, the Group is concerned that graduates will be underemployed or forced to emigrate.

No mention of education, research and learning serving anything other than measurable, economic, business returns. Sad.

Standing back from the detail and considering the larger picture. Bord Snip sits within a new and challenging context – internationally as well as nationally. It seems to me that if we think and operate entirely within ’given structures’ – in other words the constraints imposed by international and domestic capitalism and the whole range of assumptions and institutional givens that are not up for discussion then we are forced into the kind of policy response that we now see emerging. To put it plainly, if we live by the rules of free market capitalism then we are forced to rise and fall by its workings. When times turn very rough, as they have, we are constrained to go along with its deadly logic:

• Income cuts for the bottom two thirds of the population to restore profitability;
• Privitisation of services and assets previously provided by the State;

In short if we live by capitalism alone then we must live by its logic. Any progressive movement wishing to operate from within that logic – especially in the context of a small, open economy and member of the European Union its scope for policy discretion is severely limited.

Is public spending in Ireland too high?

Slí Eile: Simple question. But not so straight forward when it comes to it. Too high relative to ‘what we can afford?’, ‘too high relative to what we get out of it?’, ‘too high relative to taxes, borrowing and EU rules on borrowing?’, ‘too high relative to some ideal balance of public and private endeavour?’ It’s a loaded question especially in current-day Irish political economy. Discussion about ‘economics’ used to be kind of nerdy. Now, its not only hot but very political as well.
The OECD Review of the Irish Public Service published in 2008 found that the overall level of public sector employment and spending was modest in Ireland compared to other OECD countries.

Let me answer the question first – no – public spending in Ireland is not too high. Human beings deserve five basic things in life:
1. Love
2. Health
3. Education
4. Work
5. A chance to contribute and participate to society, culture and politics

Now, ‘the State’ (not such a clear-cut concept) can’t do everything nor should it try. Neither can the ‘Market’ (not so clear-cut either). Where the balance lies is a matter of personal and societal choice, at least in democracies.

The Bord Snip/’Special Group’ Report is ideologically loaded. It starts from the simple idea that the State’s role should be kept to a minimum and proceeds on the assumption that much of existing state spending is inefficient and wasteful. Some folks on the left – I fear – have fallen for the argument that:

• Things are bad, very bad;
• We have to cut, we have to cut;
• Sure there is lots of wasteful public sector spending and employment arrangements;
• We should come across as the Nice, Respectable, Responsible and Realistic people that we are, and welcome the broad outline of the Report; and
• We will accept some cuts as necessary (and in any case tactically unavoidable) in exchange for some progressive concessions.

This is dangerous and false reasoning. In my view we should be

• defending the public services and public service workers line by line;
• defending the gains made by public sector workers in terms of employment, tenure, conditions (rather than play off one sector of society against another);
• promoting more public spending and not less in the current economic downturn in order to (i) further close the gap in terms of public services which remain very inadequate here compared to what should be considered right for a country at our level of economic development and (ii) stimulate domestic consumption and investment demand;
• reforming a public service that is inefficient, not well run in many cases, bureaucratically and centrally managed and overly politicised; and
• reducing spending in some areas only to divert it to other areas and increase the overall spending level.

The point is that public spending in Ireland is too low and not too high. We need a Bord Athbheo to:

• Revitalise public services through reform and reallocation of spending from areas and activities of waste to areas of need and new opportunity
• Completely change the existing way of organising work away from inflexible, top-down and bureaucratic work organisation practices.
At the same time, there is scope for an orderly increase in taxes on:
• Property including local-based taxes
• High-income earners via ending non-standard tax reliefs and other tax breaks not necessary for economic activity
• Carbon taxes.

An irony of the current restrictions on employment in the public sector is that a whole industry of control, sanctions and upward delegation of responsibility from lower to higher grades and from line Departments to Department of Finance is happening. This runs exactly counter to what the OECD Review team on the reform of the Irish public service recommended last year. We are going back not forward, in this regard

Download the report

Vol. I of the report of the Special Group on Public Service Numbers and Expenditure Programmes is available for download here, and Vol. II is available here.

Bord Snip Nua = Gearr siar agus dóigh

Slí Eile: Following a softening-up by planned leaks, the much-awaited ‘Bord Snip Nua’ report has finally been released. The reason why the Group was established late in 2008 was to prepare the ground for large-scale cuts in public expenditure allied to significant reductions in the public and civil service. It might have better been termed the Gearr siar agus Dóigh – the Slash and Burn group.

All of this forms part of a carefully orchestrated campaign founded on the premises of the ‘Dublin Consensus’. When a particular agenda is to be pursued the standard approach is to establish a Taskforce or an Advisory Group; invite the usual suspects, prepare the ground through selective leaks, time the process (mid-July to mid-September is not a bad time) and then distance yourself from the final report by saying that Government is giving careful consideration to its recommendations. In reality the game was set months ago. The a priori basis for the exercise was and continues to be:

• All banks must be saved no matter what the cost – this is in the national interest;
• Taxes are a burden and must be kept to a minimum
• Government is spending too much and the public sector is over-staffed
• Wages and social welfare must be cut as they are higher or highest internationally
• There is no other alternative.

The latter bullet point is very important. It is essential to box in discussion along the lines of ‘if you don’t like these proposed savings propose alternative savings – we must cut by €4-5 billion this year, and same again next year, and then again in 2011,

Media pundits, backbenchers and junior coalition parties, ‘expert’ academic advice etc must be kept on message.

And everything else must wait – once we have sorted out the banking crisis as well as the ‘disorder in the public finances’ and laid the ground for a competitive repositioning in global markets – we can discuss other things. Considerations of social equity, let alone whether the Slash and Burn strategy will actually deliver, are simply not on the table.

What has emerged in the course of the last months is part of a wider picture. The important challenge now is to begin to construct a credible, costed, tested and agreed alternative programme of measures. Some positive ideas and proposals have emerged in the course of recent months from a number of political parties, trade unions and community and voluntary groups. Differences will arise on details but the broad thrust is clear:

• We cannot cut our way out of this crisis – this is where Bord Snip Nua is fundamentally wrong;
• Protecting and creating new employment is vital – we cannot afford to condemn a whole generation to prolonged unemployed and emigration;
• A selective, forensic and balanced stimulus package is essential to restore confidence and halt the loss of jobs, hope and confidence;
• Reforming banking, taxation, public spending, the public sector, corporate governance is urgent and unavoidable if a way forward is to be found;
• We must defend the weak, the vulnerable and the marginalised – it is precisely these groups that will suffer the most if the Bord Snip Nua proposals are followed through
A sketchy outline of an alternative political economy was given in a previous blog here.
Pope Benedict XVI, no socialist, has recently written in Caritas in Veritate:

….the market has prompted new forms of competition between States as they seek to attract foreign businesses to set up production centres, by means of a variety of instruments, including favourable fiscal regimes and deregulation of the labour market. These processes have led to a downsizing of social security systems as the price to be paid for seeking greater competitive advantage in the global market, with consequent grave danger for the rights of workers, for fundamental human rights and for the solidarity associated with the traditional forms of the social State. Systems of social security can lose the capacity to carry out their task, both in emerging countries and in those that were among the earliest to develop, as well as in poor countries. Here budgetary policies, with cuts in social spending often made under pressure from international financial institutions, can leave citizens powerless in the face of old and new risks; such powerlessness is increased by the lack of effective protection on the part of workers' associations. Through the combination of social and economic change, trade union organizations experience greater difficulty in carrying out their task of representing the interests of workers, partly because Governments, for reasons of economic utility, often limit the freedom or the negotiating capacity of labour unions.

He could have been talking about Bord Snip Nua and the current state of economic, political and social crisis in Ireland inc - not to mention social partnership.

I will look at more of the specifics in this report later.

Cuts and economic activity

Michael Taft: While we await the publication (or, at least, the drawn-out leaking) of the An Bord Snip Nua report, it is well to be reminded of the considerable limitations that public expenditure reductions will have on our fiscal deficit and, so, our borrowing requirement. The ESRI has worked through a number of policy proposals to assess their impact on economic activity. Let’s take three calculations. They assess the following three proposals:

• 5% reduction in public sector wages
• 10% cut in health and education employment
• €1 billion in public investment

Together, these would reduce public expenditure by €3 billion. This is more than the Government hopes to cut next year, and about 66 percent of Bord Snip’s total cuts, as reported in the media. No doubt these are the type and extent of cuts that many commentators have been calling for, claiming that it will considerably improve the Exchequer’s fiscal position. However, the ESRI’s conclusions suggest caution regarding the fiscal effect.

Taking these three policy initiatives together, we find that the domestic economy (GNP) would decline by -1.5 percent, consumption would fall by -1.3 percent, while unemployment would climb by 1 percent. Of course, this doesn’t take into account the impact on the quality– in the case of cutting employment – of our educational and health infrastructure.

So: further economic decline and higher unemployment resulting from these three measures. What would be the impact on the Exchequer fiscal position? Minimal. The ESRI calculates that, taken together, these measures would reduce the Exchequer borrowing requirement by 0.9 percent. To put this in perspective, the ESRI projects the borrowing requirement to be -15.6 per cent this year and -14.7 percent next year.

If taken together, the cumulative impact would be even more severe than their individual effect, as reduction of GNP is piled on reduction. The economy will be in a weaker position to confront ever higher debt. And, while accepting that the ESRI doesn’t do black humour, its warning that ‘if the external environment were to continue to be very difficult such a level of emigration might not materialise resulting in higher unemployment in the medium term’ suggests that the small reduction in the borrowing requirement might be limited even further, arising from higher social welfare costs.

Hopefully, more careful analysis of the economic impact of deflationary measures will enter the public debate. For it is becoming clearer (if it isn’t clear already) that deflating an economy through budget reductions is like running in quicksand. The more you cut, the more you sink – with little to show for in terms of controlling the fiscal deficit.

More Cutting Times (Rent Supplement)

Nat O'Connor: Today’s Irish Times suggests that rent supplement (along with child benefit) is being targeted for cuts by the Special Group on Public Service Numbers and Expenditure Programmes (aka 'An Bord Snip Nua').

Rent supplement is a reasonably large area of expenditure in the national budget. The 2009 Revised Estimates for Public Services give a total spend of nearly €11 billion for Social and Family Affairs, of which the package of supplementary welfare allowances make up €1.1 billion or around 10%. Rent supplement is estimated at €490 million; that is, 4.5% of welfare spending. This represents a steady increase in recent years; for example, it has increased from €151 million in 2000, when rent supplement represented 2.8% of a total social welfare expenditure of €5.3 billion.

The Comptroller and Auditor General conducted a value for money exercise about rent supplement, published in April 2006. Without going into the detail here, the report noted that the payment was not being used for its original, temporary purpose, but is relied on for long-term housing by many households. The long waiting time for social housing can partially explain this situation.

Now, it is generally acknowledged that rents are currently in decline, although there is a lack of available data. Frustratingly, the state body, the Private Residential Tenancies Board (PRTB) has a great deal of information in its database about the actual level of rent paid that could provide a detailed rental index. Likewise Revenue and the Department of Social and Family Affairs may have data on rent levels that could be used to construct a rental index. A limited picture of current rents is available through DAFT, but this data is limited to asking prices not actually paid rent, and only applies to properties currently to let through the DAFT website. Nevertheless, it is possible to use the DAFT report (Quarter 1, 2009) to show the limits of the current level of rent supplement.

DAFT gives an average monthly rent for every county in Ireland, with a breakdown of this information for the larger cities. Although Rent Supplement might be expected to be paid to properties at less than average rent levels in some cases, it is reasonable to assume that rent supplement will provide an equivalent level of support across the country.

This does not appear to be the case, as there is a wide range of difference in how much of average rent will be covered by rent supplement in different areas.

For example, maximum rent supplement for a single person or couple sharing a dwelling varies from €66 to €92 per week. Although this variation is meant to be in line with different rent levels across the country, the payment – plus the €24 weekly contribution the household makes – represents anything from 37% of the average rent level of South County Dublin or 46% in Galway City to 78% of average rent levels in Leitrim or 79% in Laois.

A single person on his/her own is paid a maximum of €85 to €122 per week, depending on the area. Adding the €24 weekly contribution, this equates to 47% to 103% of average rents, depending on where the person is living.

What this variation shows is that there is seemingly a poor alignment of rent supplement with local rent levels (despite the regional rent supplement maximums). This means that households in some areas are much less well supported than households in other areas. One basic anomaly is the fact that average rent levels vary considerably in the city versus the county in Cork, Galway, Limerick and Waterford, but rent supplement remains the same. Similarly, rent levels vary enormously across Dublin, yet there is only one level of rent supplement for the capital, which essentially means that people who rely on rent supplement are effectively excluded from living in large sections of the city.

In this context, it is worth reminding ourselves of the overall aim of Government’s housing policy, which is to “enable every household to have available an affordable dwelling of good quality, suited to its needs, in a good environment and as far as possible at the tenure of its choice”.

It is true that rent supplement levels for families with two or more children can be above the average market rent in some cases. However, caution must be exercised in interpreting this, as rent levels for larger houses are also going to be above average.

It is a very simplistic argument for the Government to make that rents have decreased across Ireland, hence it can universally reduce rent supplement. Cuts across the board will fail to address the fact that rent supplement is already distributed in an illogical and unfair manner. Not least, some of the most vulnerable people (especially single people) already do not receive sufficient assistance to pay for decent housing in many areas. Organisations such as Threshold and the Peter McVerry Trust have long pointed to the fact that many households are required to top-up their rent with additional payments, leaving them with very little to live on.

The Government may have some margin to reduce rent supplement in a few cases. The Comptroller and Auditor General’s value for money report noted that landlords have no incentive to ask for less than the maximum payable and it is possible that the maximum may now be above average in a small number of areas. But the Government can only reasonably proceed to lower rent supplement if its decision is based on good evidence of local rent levels. The current wide variations suggest that the levels of rent supplement are not evidence-based.

Given that the Government has access to data with which it could generate a much more sophisticated national rental index, why is it not using this data in order to more fundamentally revise the level of payments based on local rent levels?

If the Government simply introduces cuts across the board, this indicates to me that not only are they unfairly punishing some of Ireland’s most vulnerable households, but they are incapable of the basic competence required to operate the rent supplement system as it stands, never mind developing an alternative housing policy that would be more sustainable and give the taxpayer a tangible asset (like social housing) for the large amount of money currently paid out to private landlords.
Dr. Nat O'Connor is Policy Analyst with TASC

Cutting times?

Today's Sunday Tribune leads with leaked reports of the cuts likely to be proposed by 'An Bord Snip Nua'. Click here to read the story, and here to read Michael Taft's take on the likely consequences of such cuts, over at Notes on the Front.