IMF Suggest Cuts to Welfare Benefits

The IMF has made some comments this week on the Irish economy in it’s  “Article 4 Consultation”

The IMF periodically has an in-depth discussion with each of its member countries about their economic policies. This exercise, known as an Article IV consultation, involves a detailed examination of fiscal, financial sector and other key policies from a medium-term perspective.

On Social Welfare Spending – the IMF said that maintaining expensive universal supports and subsidies is difficult to justify under the present budgetary circumstances.

They suggested that Ireland needs better targeting of  child benefit, medical card spending,  household benefits package and  expenditure on non-means tested pensions.  They said that these changes  could  generate significant savings whilst protecting the poor.

Fianna Fail tried to means test the medical card for over 70’s – and were met with protest meetings ad eventually backed down. Maybe Fine Gael and Labour will be able to see through changes to stop medical cards for well off pensioners?

The IMF also pointed out that the  flat rate  structure of unemployment payments results in replacement rates for the long-term unemployed that are high by international standards, contributing to low exit rates from the Live Register.
They also pointed out that those people getting rent allowance were even more likely to get trapped in a life of relying on welfare. They suggested that the systems of social housing provision and rent supplement for those with long-term housing needs need to be integrated  into a new means-tested Housing Assistance Payment.

We expect to see some of these changes mentioned  in Budget 2013 this coming December.