Attention all progressives: tired of listening to neo-liberal commentators prattle on about high taxes, that whenever something worthwhile is proposed its met with ‘oh, my, taxes, taxes’, sick to the teeth at right wing-drivel about how its better to ‘hug’ disadvantaged children than actually do something for them (because that would mean taxes)? Tired of all those ‘spending out of control’, ‘government is too big’, ‘swollen bureaucracies’ mantras? Well, relief is at hand: social insurance.
A daily dose of this will chase those right-wing blues away.
In a previous post we saw that while Ireland is a relatively low-tax and, consequently, low-spend economy, it is only in two tax categories where we fall behind our EU-15 partners: social insurance and local taxation. In fact, it gets weirder.
Take the five highest European spending economies: Sweden, Belgium, France, Finland and Norway. Together, these countries take nearly 46% of the total wealth in taxation - or nearly €1 in every €2 of wealth is ‘taken by the Government’. Ireland would have to raise over €13 billion to reach that average. We could raise the standard rate of tax to a whopping 40% and still fall short. But not all is what it seems to be. What happens when we exclude social insurance and local taxation?
Of course, that’s when we exclude social insurance and local taxation. Social insurance plays a major role in the delivery of social expenditure (social protection, income supports, health, housing). In Germany, for example, nearly 2/3 of all social expenditure comes through social insurance, not general taxation.
So how can the Left argue for higher ‘taxation’ without getting politically decapitated? By coming at the problem through ‘insurance’ rather that tax rates.
Social insurance (or, in Ireland, PRSI) is based upon a principle that radically distinguishes it from ordinary taxation, namely the contributory principle. There is a direct link between contributions paid and a range of benefits which are payable when particular life situations arise: old age, sickness, work injury, unemployment, widowhood, pregnancy, invalidity. The point is that, through social insurance, you know the benefits you will get for the money you pay through PRSI levies.
This is different from taxation: for most people, tax is just money that goes into some black-hole. We could argue 24/7 about how income taxes fund teachers and doctors and Guards and enterprise supports but most people don’t make the connection and, after being fed a steady diet of lazy and cynical journalism, (never mind years of governments who are hostile about tax and expenditure) are extremely mistrustful of ‘politicians’ promises’.
But health – now that’s a different matter. To offer a realistic prospect of a modern, no-tier health system that treats all patients equally regardless of income, providing free GP care and prescriptive medicine, removing the inefficiencies and perverse incentives that currently permeate our system: that might be something of interest to people.
Universal social health insurance could do just that. There are a number of caveats, of course, for much depends on which model is adopted (Maeve-Ann Wren provides a short summary, for instance, of the differences between past Labour and Fine Gael proposals).
For our current purpose we can take on board the proposals by The Adelaide Hospital Society which has published one of the most comprehensive analysis of how social insurance can literally cure the health system. It explores four different options – from the ‘Rolls Royce’ choice to less costly alternatives, basing them on the following principles:
- Insurance must be mandatory and would be paid into a Health Insurance Fund
- It must be levied on all income regardless of source
- All hospitals and providers are incorporated into the system (they may well opt-out but they would receive no public subsidies – either through the new insurance system or taxpayers’ funding).
The Health Insurance Fund would eventually become a major financing vehicle for the health system. Of course, there would still be Exchequer subsidies – into the Fund, capital investment, etc. But a significant amount of current general expenditure would be diverted away from health.
What would the Adelaide’s ‘Rolls Royce’ option buy? Essentially, it would buy for everyone the same treatment currently received by those paying private insurance. In addition, it would purchase free GP care, free prescription medicine and some long-term care. Everyone would pay into the Fund according to their means and everyone would receive treatment according to their need.
Initially, a universal health insurance levy of 6% could be introduced – to be paid on a tri-partite base of 2% each from employees/self-employed, employers and the State. In addition, the levy would be applied to all income – capital gains, inheritances, gifts, etc., while the state would pay the full amount for those on social welfare and low-pay. In effect, the Left would be arguing for a new 2% levy on taxpayers. It would amount to €1.86 a day for average income earners.
Yes, this would still be a hard sell. Yes, we would have to face down politicians in all right-wing parties who would go apoplectic over ‘more taxes’ (a bit rich coming from people who want to spend millions in tax subsidies for private hospitals). But it would be interesting to see political posters around the area:
‘For less than the price of a cup of coffee you can have a completely free and equal health service.’
Of course, social health insurance is not sufficient. We still need considerable investment in capacity and personnel. We are facing into, for instance, a considerable GP shortage. The HSE is turning into, well, a ‘swollen bureaucracy’ – unaccountable and ineffective. Social insurance cannot address all these issues but what it can do is rationalise the system to make further investment more effective. Social insurance is part, albeit an absolutely vital part, of much wider reforms.
And this is only a start. Pay-related social insurance benefits (unemployment, disability carers’, etc.), state earnings-related pensions, year-long Maternity Leave and new benefits – educational sabbatical leave, new family benefits, nursing home benefit: there are a number of programmes and benefits we could study from other countries to which are the most popular, efficient and social equitable.
It’s all there to play for. And because it’s social insurance, people wouldn’t be buying a pig-in-the-poke. It would be the ultimate contract between what people pay and what people get. That is how social market economies have built up a strong ‘public realm’ – by building into their systems a contractual relationship with the tax-paying public. Indeed, the Left could present itself as a ‘low-tax, well-insured’ modernising movement (and when we come to discussing local taxation, we could find people sympathetic if tax and spend were rooted closer to their community).
That’s how we can turn the tide on the conservative consensus. Now all we have to do is summon the imagination, the arguments and most of all the confidence to put this new programme to the people.
A hearty dose of social insurance may well be just what the doctor ordered.