Spending

Getting it right on social spending

Business



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

The bulk of a reallocation of budget funds approved in parliament this week was for social spending, underscoring the crucial place of such spending in the country’s overall fiscal management, as well as the pressure on the government to get the numbers right.

Of a total transfer of $575 million to various heads, $531 million was allocated to the Department of Social Development and Family Services, the department that oversees the social support program, which includes pensions for the elderly.

According to figures given to the House of Representatives on Monday by Finance Minister Colm Imbert, payments to the elderly alone account for about $4 billion of total welfare spending, which he puts at $5 billion.

Around 100,000 people receive old age allowances, separate from other state-run subsidies and measures, which benefit thousands of people.

“It’s a number that increases every year,” Mr. Imbert said of the pensions. “Therefore, we at Finance are closely monitoring these expenses.”

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

Instead, in a sort of tightrope act, he carefully emphasized the need to suppress unnecessary claims. He also suggested that changes should be made to ensure the sustainability of pension payments, given the growing number of people at retirement age.

“It’s not a contributory scheme. Seniors are automatically entitled, when they reach the age of 65, to receive a retirement pension, provided they meet certain criteria in terms of income level, but they do not contribute in a specific way. , said Mr. Imbert. noted.

The Minister’s comments recall a long-standing proposal to raise the retirement age.

(It would be interesting to know whether the covid19 pandemic and the prospect of novel coronaviruses to come have affected long-term projections for life expectancy as well as growth in the elderly population.)

Whatever measures are theoretically contemplated while the government “watches” the money, long-term, non-partisan planning and policymaking must be clear.

How the rest of the social safety net is working (or not working) should also be examined (as indeed the food support program already is).

These reviews should not be limited to weeding out unnecessary or inappropriate claims, but should also consider whether these programs are doing enough.

And the point is, social security spending shouldn’t be just about pensions. Social spending is a key part of the overall economic picture and should be seen as a vital form of economic stimulus, not just spending.

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 necessary for an economy to function.

At the same time, if there is a will to cap social spending, the state must find other ways to strengthen the quality of life of citizens by increasing their chances of prospering.