Budget 2023 was wide-ranging and seemed to be very well-thought-out. It gave almost-immediate help, in the form of lump sums, to those who’ll be most in need over the next few months. But whether the careful tax, welfare and other improvements in 2023 will suffice in the uncertain circumstances of next year remains to be seen.
The various lump sum payments to be made in the run-up to Christmas will help a lot of people, especially those on lower incomes and with families, to pay their bills this winter. The €600 in electricity credits, payable in three payments of €200, one before Christmas and two in the New Year, will be particularly helpful, especially to people in receipt of the Fuel Allowance, who will also get a lump sum of €400 before Christmas...
The double Child Benefit in November will be very helpful to a lot of families. The double week’s payment in October, to people on the State Pension and other social welfare payments, will also be helpful to a lot of people; as will the Christmas Bonus in early December and the extra support for which many pensioners and other social welfare recipients qualify, such as the Fuel Allowance, the Living Alone Allowance and the extra €10 p.w. that people over 80 receive if they are on the State Pension.
As we get into the New Year, the fact that basic social welfare rates will increase by (an unprecedented) €12 per week, and the tax and USC adjustments for people on low incomes, whether from earnings or from a combination of state and occupational or private pensions, will mean that most low-income people will be quite well protected. But their position, as the year wears on, is harder to predict. We’re living in very uncertain times and demands for “certainty” are unrealistic, to say the least.
The position of future pensioners is also a particular cause for concern, as pensions are such a long-term business. The government was probably wise to announce, a week or so before the Budget, that they were keeping the State Pension Age at 66, thus getting some of clamour of protest and outrage, much of it misguided, over with before Budget Day. The announcement that they’re enabling people to work beyond the State Pension Age of 66, with a view to improving their State Pension, was widely misrepresented, in some cases deliberately, as putting some sort of burden on younger people. In fact, people who work on beyond 66 will be continuing to contribute to the Exchequer, through tax, USC (and perhaps, in future, PRSI), not to mention the contribution to society (and probably their own well-being) that their work can make.
The fact that some of the pension changes this government is starting to make are long overdue should not detract from the importance of the start that’s being made. They say they’re introducing auto-enrolment sometime next year. That will get more people into occupational and personal pension schemes in the future – a much-needed step first recommended over 20 years ago and now implemented by many more countries than just New Zealand.
Also, as well as enabling people to work beyond 66 if they can/wish/need to do so, the government say they are looking closely at how to help people who have to retire earlier and don’t qualify for the full SP. In this context, they’ve made specific commitments in relation to carers and some other groups; and the move from ‘yearly averaging’ to a ‘total contributions’ approach to calculating pension entitlements will help. And looking at employment contracts that force people to retire at 65, thus often putting an extra burden on the state to provide income support for people in the ‘gap year’ until they get the SP, is something IBEC has already said they agree with and that employers should be acting on. The government should do more to ensure that this happens.
The Minister has also said that she is arranging for new costings and an actuarial review to be done asap. Last week, there were endless attempts, especially in the media, to trip her up and insist that she was introducing changes that hadn’t been fully costed. But it’s important that the new costings and valuations attempt, as best they can, to take account of all the consequences of the changes being made, including the savings to the Exchequer, as well as the increased contributions to the Exchequer, arising from people working longer and beyond the State Pension Age (SPA). They need to start looking at ‘the ageing workforce’ and not just the ‘ageing population’. And hopefully, when a true and more accurate picture of future pension costs is known, these costs will be met partly with the help of some longer-term funding and partly by increases in PRSI, as currently mooted – and not by responding to the repeated calls for raising the SPA, which is an entirely illusory ‘solution’.
The funding should involve the restoration of a pensions reserve fund, earmarked specifically for pensions, rather than just part of the Social Insurance Fund which of necessity operates on a pay-as-you-go basis, although subject to regular actuarial valuations. Such a fund could not only help to finance future pensions, but in the meantime make some much-needed social and sustainable investments in areas such as housing, health, forestry, etc.
At this stage, there’s probably no point ‘crying over spilt milk’ and continuing to bemoan the loss of the previous National Pensions Reserve Fund, set up in 2001 for the purpose of smoothing out the big bulge in pension costs that was predicted for the mid-2020s. Despite good legislation aiming to protect it for its intended use, it was raided in order to bail out the banks during the 2008-11 crisis. Things might have been different if most of the money had been lent rather than given... However, there is a point in learning from history and doing better the next time, rather than dismissing the idea because it didn’t work out the first time.
I hope I’m not grasping at straws, but I took some hope from Minister Paschal Donoghue’s insistence, towards the end of his Budget speech, that it was important for him not to spend all the available money immediately, and to put aside a few billion Euros as a ‘reserve fund’ that would be kept safe in order to help with the costs of “the ageing population” and other likely eventualities, as well as the unknown and unexpected ones.
This has been denounced by the ‘spend it all today’ lobby. But those who have been arguing for spending every last Euro that’s currently available, on additional payments for people who are most in need at present, must also think about those peoples’ future needs, rather than whipping up resentments about ‘older people’ being some kind of ‘burden’ on the young people of today. Today’s workers are tomorrow’s pensioners and hopefully, some long-overdue balance can and should be brought into current discussions about pensions. Some progress has been made on this, by introducing greater flexibility around the SPA and retirement ages generally, but more must be done in relation to financing and funding.
Rosheen Callender served as an Economist and Researcher with the ITGWU and then SIPTU from 1973 to 1995. She was later SIPTU’s Equality Officer, from 1998 until 2008, and represented ICTU on the Pensions Board for many years.