“Ireland’s Welfare State Among World’s Largest”

We’ve recently navigated a storm of political campaigning, involving a barrage of catchy phrases and concise characterisations of Ireland’s economy and society. One phrase that’s frequently bandied around labels Ireland as a “neoliberal” nation, steered by the principles of “neoliberalism”.

This doctrine promotes the principle of curtailing governmental control over the economy, shifting power to the private sector, restricting government involvement in economic pursuits, and bolstering this with decreased taxes, deregulation, privatisation and the endorsement of free markets. This places the emphasis on creating an environment where the wealthy can secure their wealth from taxation, and where public spending on social services is broadly reduced.

Some even liken Ireland to being the northern Atlantic’s equivalent of Florida, in light of this neoliberal perspective. This standpoint has roots in the academic theories commonly referenced in the context of economics as the Austrian school, led by Hayek and Von Mises. It gained considerable momentum in the late 20th century, championed by prominent figures such as Reagan and Thatcher during the so-called “end of history”.

However, labelling Ireland as neoliberal, while catchy, is largely incorrect.

Contrary to the laissez-faire implications of neoliberalism, the Irish economy and society are heavily based on an extensive network of social transfers, safety nets, and subsidies, enforced by higher tax rates for higher-income individuals to support those with lower incomes. When viewed globally and in comparison with many other European nations, the Irish tax system is notably progressive. This complex mesh of taxation and support characterises what could be termed a modern welfare state, in direct contrast to neoliberal principles.

Interestingly, it’s often the parties typically scorned as right-wing that have extended and upheld this highly progressive tax and transfer system.

Confused? I am too.

Consider this: A recent analysis by the Parliamentary Budget Office, that saw widespread attention, indicates a substantial redistribution of wealth from the affluent towards the less fortunate. The lowest 73% of income earners contribute a mere 15% to the overall income tax, while the top 20% of earners who are above the average wage contribute 30%. The top 7.7% of earners bear over half of the total tax burden – 54% to be precise. This certainly contradicts the principles of neoliberalism. In fact, Tasc, a left-leaning policy institute, supported this interpretation and stated: “Ireland already ranks high in terms of income redistribution through its welfare system – there is significant state involvement.”

Exploring further, it is evident that a large proportion of the population benefits from the welfare state, something that staunch neoliberals would not appreciate.

According to the latest annual data from the Department of Social Protection, over 3.3 million individuals, roughly 65% of the population, receive social protection benefits. This covers a spectrum of age groups, from the young to the old, along with various other age groups. Moreover, over 2 million out of a total population of less than 5 million are directly receiving welfare payments. On top of these 2 million, a further 1.3 million children are in receipt of child benefit.

In the preceding year, the country invested €24.6 billion in social protection, accounting for roughly 23 per cent of all government spending, approximately 5 per cent of the GDP, or 9 per cent of the possibly more accurate modified gross national income (GNI). A significant part of this expenditure, €9.4 billion, was allocated to pensions, with a whopping 70 per cent directed towards the 484,541 contributors of State pension. Financial aid for individuals of working age was valued at €3.8 billion, with €1.6 billion delegated for Jobseeker’s Allowances, plus an additional €485 million contributed towards the Jobseeker’s Benefit for a total of 264,439 recipients. Despite a decrease of over €3.7 billion compared to the previous year due to the phasing out of Covid payments, €1.5 billion was devoted to employment support for the working age in 2022. Additionally, €5.3 billion went towards benefits for illness, disability, and caregivers, assisting 585,834 recipients. The country also distributed supplemental payments worth €1.1 billion, comprising of €300 million for household expenses (telephone, gas, electricity, TV allowances) and €576 million for heating allowances.

This considerable expenditure outlines a vast web of assistance.

Naysayers often deride us for lacking a welfare state akin to European standards. Therefore, it may stun you to learn that, according to a 2020 Eurostat report, Ireland has a remarkably lower proportion of citizens (9 per cent) not receiving any sort of social transfers in comparison to the majority of European countries, including France (16 per cent), Germany (21 per cent), Italy (26 per cent), Netherlands (14 per cent). To be succinct, a higher percentage of Irish residents are benefitting from some form of government transfer than almost any other EU nation. Virtually every local is bestowed with some aid, thereby benefiting a majority of households. The Economic and Social Research Institute (ESRI) remarked in a 2020 report that “no other tax system in Europe does more to reduce household income inequality than Ireland’s”. This approach doesn’t resonate with neoliberalism in my perception.

Often, the term neoliberal is vehemently attached to the multinational sector, particularly in the context of Ireland. This country is often portrayed as accommodating the demands of American capital to an extreme degree. However, from January 2024, we witnessed an increase in our baseline corporate tax rate from 12% to 15% for large organisations. This revision affected approximately 1,600 international firms. Hence, raising taxes in correlation with OECD standards on corporates hardly reflects neoliberal tendencies, which typically advocate for reduced taxes on capital, not the opposite.

For the current year, it is anticipated that corporate tax income will amount to €24.5 billion. So where could this hefty sum be channelled? It will be utilised to fund social handouts to the less fortunate, thereby supporting the vast web of interconnected allowances and support systems, all directed by the government. Thus, the concept that tax revenue only benefits the rich while neglecting those with lesser means seems not only illusory but downright erroneous.

Nonetheless, Ireland does display significant inequality in one area: housing and the wealth accumulation tied to a stagnant asset, such as property. Our country needs more affordable homes in the right locations for an increased number of people. Naturally, achieving this demands more construction. So, what blocks this course?

Construction professionals often point fingers at regulatory restrictions, bureaucratic planning obstacles, and levies, notably VAT, that elevate the price of materials. However, numerous other elements on closer inspection suggest that it is unlikely that a lack of government action hinders house construction, therefore supporting the allegation of neoliberalism. It could, in fact, be the exact opposite.

The success factor in constructing more homes revolves around motivating construction and discouraging land speculation. This strategy entails levying a tax to mobilise land or to discourage leaving land unused or abandoned. This approach would promote an equitable and efficient tax, encouraging urbanisation.

A boosted tax on assets such as land and property would conflict with neoliberal ideologies and should be robustly backed by those asserting Ireland as a neoliberal stronghold. Yet on inspection of political party stances on property tax, we find that the most vocal detractors of neoliberalism are paradoxically the staunchest opponents of a wealth tax applied to land and property.

Take, for example, Dún Laoghaire, my local area. Here, left-wing political entities Labour, Sinn Féin and People Before Profit, alongside Fianna Fáil and Fine Gael, are all proponents of reduced property taxes. Only the Greens and Social Democrats are in favour of preserving property taxes.

Regarding wealth in its most disproportionate representation, property values, many who vocally decry neoliberalism epitomise the ideal themselves. Still, society as a whole leans more to a welfare state model than almost any other globally, sustained by a system of graduated tax and substantial funds redistribution. To suggest it is solely neoliberalism is sheer folly!

Written by Ireland.la Staff

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