Paying for public services is the issue
Public services will be a central issue in the next general election, and rightly so.
We need medium and long-term visions for our public services, which are essential for a well-functioning economy and society.
The great majority of citizens desire good quality healthcare, education, security, social welfare, childcare, care of the elderly, housing, parks and playgrounds, libraries, public transport, and physical infrastructure.
Of course, many of these services could be provided through the market, where one pays for what one receives, but many people would be unable to afford an appropriate level of these services.
Unfortunately, provision of public services on either a free or subsidised basis has to be financed from taxation. It is reasonable to say that the wider population and specific sectors are unsatisfied with the level and quality of public services and financial support from the exchequer. There are demands for large improvements, but with much less or no emphasis on who would pay for the additional public expenditure, and how.
Manifestations include: Universities require more money to cope with international competitiveness and quality; primary and secondary schools have to implement “voluntary” contributions to cover running costs; insufficient capacity in accident and emergency units to prevent long delays; long waiting periods for health problems; inadequate mental health services, especially in emergency situations; availability of latest drugs and medicines; increased resources for border area gardaí; insufficient home care packages; high levels of homelessness, and insufficient social and affordable housing.
The volume of demands is unsurprising, because it is reasonable to argue that improving the above list is inherently good and desirable. And if the recipient does not have to cover the full or part cost of the increased provision, it is logical to demand more. However desirable are increases in public services, account has to be taken of how we pay for them. Ideally, the discussion around increased provision of public services would include consideration of the limits that apply to the overall level of free and subsidised public services and of the implications for, and effects of, increased taxation.
One of the first issues in such a process is how Ireland compares internationally in the provision of public services. Are we way behind our EU partners or are we already comparable?
It may be that we have an above-average demand for certain public services because of age or poor health status. Our delivery systems may be less efficient than other countries. Identifying the appropriate level of public services, in terms of matching what other countries spend, is therefore an incomplete approach on its own but it is a starting point.
Public expenditure as a percent of GDP is a regularly -used but imperfect indicator of relative scale of the public sector and, hence, indirectly of public services.
For example, interest payments are included in public expenditure. We also know GDP overstates real Irish economic activity and income and alternative measures are more appropriate. The Eurostat data for EU countries shows that Ireland has the lowest Government expenditure-to-GDP percentage of all EU members. Ireland’s figure is very low at 25.4% compared to the EU average of 45.8%.
This indicates that Ireland spends relatively little of its resources on public expenditure. However, this conclusion is based on the GDP measure of total resources. A very different picture emerges when the GNI modified measure is used. In 2018, Irish GNI modified was nearly €197.5bn compared to GDP of just over €324bn. GNI modified was 60.9% of GDP. This results in a public expenditure-to-GNI modified percentage of 41.7%.
Public services provision will be a big issue in the general election. It should be an evidence-based debate which considers paying for the services, as well as providing them.
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