Long-term jobless welfare may be reduced

A “PHASING OUT” of social welfare payments for the long-term unemployed as an incentive for them to return to work is being considered as part of Ireland’s EU/IMF bailout deal.

The European Commission mission chief to Ireland has confirmed discussions were held with Social Protection Minister Joan Burton on cutting welfare spending.

Istvan Szekely pointed out that in other countries welfare payments were gradually phased out as a way of preventing people falling into “inactivity traps”.

In an interview with the Irish Examiner, the EC director said: “What’s so special about the Irish unemployment support system is that it is one of least generous when you enter, but after one year it becomes, relative to other schemes in other countries, very generous because it stays unchanged.

“In other countries it’s gradually phased out. It’s an incentive for the person to move back because long-term unemployment is the most dangerous form of unemployment because people lose their capacity to return to the market to think up a new job.”

In December it was agreed with the EC, IMF and European Central Bank troika to make welfare savings of €750 million this year, including “sanction mechanisms” for the unemployed for not participating in job searching.

Mr Szekely said: “We’re looking into all these options… we had a meeting with Joan Burton on this and they explained to us where they are in the process.”

Any possible “phasing out” of welfare payments for certain unemployed people is likely to be addressed in the second or third quarterly review by the troika and the Government.

The minister’s spokesperson said last night: “The troika has drawn attention to disincentives that may exist in the social welfare system in Ireland for particular family types (mainly large families in receipt of additional benefits) and the minister is well aware of these issues and they are being examined.”

Troika bailout chiefs at a press conference said Ireland was meeting targets on the €85bn bailout deal.

They said challenges remained, including recapitalising the banks, selling state assets and addressing public spending.

But a revised memorandum of understanding with the troika has agreed on restoring the minimum wage to €8.65 an hour, lessening PRSI contributions for employers and the roll-out of a national jobs programme.

The full revised agreement will not be published until mid-May though.

It was stressed yesterday that Ireland’s economic crisis would continue until job numbers increased.

Plans to reduce prices in medical and lawyers’ costs are also being progressed but are unlikely to be tackled until the second half of the year. Mr Szekely said removing “shelters” in these sectors by opening up competition would “make the consumer the king”.

The first progress report on Ireland’s bailout deal suggests Ireland will return to the markets for borrowing by the end of 2012.

IMF European deputy director Ajai Chopra also stressed that the bailout deal had been a lifeline for Ireland. But he stressed the Government had put its own stamp on the deal, adding that it was an “Irish solution for an Irish problem”.

The EC, IMF, ECB team will return for a second quarterly review of Ireland’s progress in meeting spending reforms in mid-July, where the focus is expected to be on public service savings which the troika so far say the Government are prioritising.

Q & A

What are the real changes in the revised bailout deal?

Not too much detail was revealed. And it will not be until the revised memorandum is published in mid May. But the EC, IMF and ECB have backed some of the new government’s own plans including its jobs programme, reversing the minimum wage cut and lessening employers’ PRSI payments.

What are the priorities now for the Government after satisfying this first quarterly review of the €85bn deal?

Recapitalising the banks, creating jobs and creating ‘sound’ public finances. This will include selling off bank assets, incentivising people to work as well as reducing public sector spending.

What is the bailout mission’s assessment of Ireland overcoming its economic crisis and sticking to the terms of the bailout deal agreed in December?

We have been given the thumbs up but challenges still remain. The ‘troika’ have forecast growth of just 0.5% this year, which is nearly half what the Central Bank has predicted.

When will the bailout mission return to Ireland again for another review and what will be on the cards?

The next quarterly review will be carried out in mid July and there will be a strong focus on how savings in public sector spending, the sale of state assets and the ongoing fixing of the banks are progressing.

What will consumers gain from this bailout deal?

There are plans to free up competition in the legal and medical sectors.