Getting it right on social spending

People line up outside the Ministry of Social Development office in San Fernando  to apply for relief grants on April 16, 2020. - File photo
People line up outside the Ministry of Social Development office in San Fernando to apply for relief grants on April 16, 2020. - File photo

The bulk of a re-appropriation of budget money approved in Parliament this week was for social spending, underlining the crucial place of such spending within the overall fiscal management of the country, as well as the pressure on the Government to get the figures right.

Of a total transfer of $575 million to various heads, $531 million was allocated to the Ministry of Social Development and Family Services, the ministry that oversees the social support programme, which includes senior citizens’ pensions.

According to figures given in the House of Representatives on Monday by Finance Minister Colm Imbert, payments to senior citizens alone account for about $4 billion of the total spending on social support, which he put at $5 billion.

About 100,000 people receive senior citizens' payments, separate and apart from the other grants and measures administered by the State, which benefit thousands.

“This is a number increasing each year,” Mr Imbert said in relation to pensions. “Therefore, we in Finance are keeping a close eye on this expenditure.”

The minister’s careful language was telling. He did not suggest outright a desire to cut funding. Nor did he explicitly express a view that the funding should be increased.

Rather, in something of a tightrope act, he carefully pointed out the need to remove wasteful claims. He also suggested changes would have to occur to ensure pension payments remain sustainable, given the increasing number of retirement-age people.

“This is not a contributory plan. Senior citizens are entitled as of right, when they get to the age of 65, to receive a senior citizens' pension, once they meet certain criteria in terms of their income levels, but they do not contribute in a specific way,” Mr Imbert said.

The minister’s comments bring to mind a longstanding proposal to raise the retirement age.

(It would be interesting to know whether the covid19 pandemic, and the prospect of more coronaviruses to come, has affected long-term projections with regard to life expectancy as well as the growth of the elderly population.)

Whatever the measures being theoretically contemplated while the Government “watches” the money, there should be clarity in planning and long-term, non-partisan policy-making.

How the rest of the social safety net is working (or not working) should also be subject to review (as indeed the food support programme already is).

Such reviews should not be limited to weeding out wasteful or inappropriate claims, but should also examine whether these programmes are doing enough.

And the fact is social safety spending should not just be about pensions. Social spending is a key part of the overall economic picture and should be regarded as a vital form of economic stimulus, not merely expenditure.

One ironic thing about covid19 is that it has reaffirmed the role played by the State – as opposed to private actors – in providing the social services needed for an economy to work.

At the same time, if there is a desire to put a cap on social spending the State has to find other ways to bolster the quality of life of citizens by making it more likely that they will be able to thrive.

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"Getting it right on social spending"

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