Tuesday, December 8, 2009

Welfare Fraud

"Prime Time" last night on RTE dealt with the issue of social welfare fraud.

The total Social Welfare bill in Ireland is currently running at over €20 bl. per annum with at least 10% of this relating to fraudulent claims. Thus at a time when stringent cuts in expenditure are required we have a massive case of over-spending that simply is not being properly addressed.

Unfortunately to a certain extent we have long had a mentality - no doubt relating to our colonial past - that leads to a lot of petty fraud. Many people while paying lip service to the system do not really respect it. So if telling a little white lie, or indeed a big major lie (and perhaps many such lies) helps people beat the system in some way they feel justified in doing so taking comfort from the assertion "Well! isn't everyone doing it?

In a recent survey for example it was found that up to 70% of people taking out car insurance in one county had lied in providing information. Many who are self employed or working unofficially in the "black economy" feel perfectly relaxed regarding undisclosed income. And as this programme demonstrated there is widespread abuse of the welfare system taking place.

Personally I believe that the the phenomenon of the Celtic Tiger has greatly contributed to a lessening generally of moral standards and to creating a culture of waste (which rapid economic growth only encouraged).

Thus there is a high tolerance of "ripping off" and in turn being "ripped-off" by the system in Ireland.

One of the reasons why there is now so much resistance to pay cuts despite the very high level of income per capita here (in official estimates) is that prices are unusually high for a wide range of goods and services. Though much of this does indeed reflect the higher level of costs generally prevailing, a considerable amount is due to a culture that dramatically escalated during the Celtic Tiger where over pricing e.g. in housing market, retail stores and restaurants was readily accepted (without much question).

Also it has become apparent that where the same company is selling goods - say in the UK and Ireland - that a premium is generally applied to the Irish price (unrelated to cost, tax or exchange rate considerations).

It is true for example that Ireland is still a very high wage economy. However the cost of living is also unduly high (which negates somewhat this advantage). It would be much better to have a lower wage economy with a corresponding lower cost of living.

As Ireland depends crucially on trade, success here (especially for indigenous firms) will require a much higher degree of cost competitiveness.

If for example wages fell over a period by 20% and the cost of living also fell by 20%, our livings standards would remain unchanged. However crucially, we would then be in much better position to successfully compete both in home and export markets.

Trade Unions especially would need to grasp this reality. Of course social justice requires that income be distributed more equally. However a fundamental fact remains that costs are too high in Ireland both in the private sector and in Government (as for example with social welfare).
There is no point in continuing to deny this reality. Common sense dictates that we now decisively deal with the issue.

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