"I Am Not a Fan of Default..."
Paul Kelly interviews Minister for Social Expenditure and deputy Labour Party leader Joan Burton on FÁS, the registration tax, political reform, the EU/IMF bailout and the possibility of default.
In the new Programme For Government, it is stated that you plan to abolish FÁS and replace it with a New National Employments and Entitlements Service. What changes do you think this will make? Most importantly, how is this going to help people find jobs?
At the moment, somebody who’s at work and seeking assistance might go to the Department of Social Protection and look for a payment like job seekers allowance and if they can’t get a payment they would then go to the community welfare officer and look for supplementary welfare assistance. Then, if separately they wanted to do something to actually try and get a job, they might visit FÁS, register as unemployed and go through the FÁS institutions.
But ultimately these are all paid for by the department for social protection. The idea is to bring the 3 different services together under one roof so eventually you have this thing called a one-stop-shop. It also means that if you go to the social welfare or community welfare office or FÁS you don’t have to tell them the same thing over and over again.
Do you have any plans to integrate third level institutions into this framework?
Only in relation to FÁS to the extent that their doing it already, in that some apprenticeship courses are located in the Institutes of Technology- so that has already happened. But the other issue around education is that we have a particular problem in Ireland of young men, more than young women, leaving school early, not doing a leaving cert and getting very discontented. During the boom, a lot of those young men were able to get jobs, they could start working at 16 or 17. But now that employment has dried up. For various reasons, those young men were often disenchanted with whatever their experience was with education. In some cases, maybe the problem was that they couldn’t really click on to reading or writing properly. If you have someone like that whose really had relatively little education after the age of 17, and if their experiencing a lot of unemployment, both for their own personal value, their community and their family I think it would be really good to provide a pathway for them to get back into education.
Social welfare should not be a lifetime career. It should be a social protection that is there to support you when you can’t find a job but also says: listen you’re a young person, or an older person, you want to do something valuable and society wants you to do something valuable and social protection is going to help you to do that.
What about those young men and women who have made it through their Leaving Cert. and are now being forced to drop-out of the third level institutions that they’ve registered in because the registration tax has gone up to €2000? What are you going to say to them this September?
My colleague, Rory Quinn, the Minister for Education, is going to deal with that and is going to address that. The Labour Party, when we were last in government, we introduced, and have always defended, undergraduate tuition in Ireland being free.
Are you saying that the registration tax will be dropped completely then?
No, no no, I’m not saying that. What I’m saying is that we’re in the middle of the biggest economic crisis that this country has ever faced and I’m saying, central to the values of the Labour Party, is access to education. We have inherited from the previous government this colossal economic situation where effectively we’re inheriting an economy, which, as various people have said, has incurred a number of enormous debts and we are going to work our way out of it but we are going to work our way out of it in a way that includes- and very consciously supports- education. We’re not going to be able to reverse everything that the previous government did until the country gets back to a level of economic health, but what we do propose to do is to defend education and access to education. That is a core value of the Labour Party.
What about means testing for fees? If your trying to get more people into education would that not be a fairer method of doing so?
Well one of the things in the program for government is to look at the issue of college grants and how the assessments work out. I would be very conscious from my experience in the Labour party that people who are PAYE workers often find it very difficult to get a grant, whereas somebody whose parents are self-employed, such as a self-employed taxi driver, or a self-employed chemist or
farmer. Because of the way the means testing system works it can be very difficult for people whose parents are PAYE workers to actually get the grant and we want to see the whole system of means testing re-examined so that it would be fair for everyone.
But do you have a date at least, for when this means testing reforms will be brought in? Students are looking at this registration tax, they’re looking at the minimum wage falling, especially in the case of mature students who entered into third level education after they became unemployed, what can you say to them now?
Everything like that is decided in the context of the budget. There are no decisions made except that my colleague, the minister for education, is looking at all of that and we want to make the fairest and the best use of all the resources which are available and we want to provide a system where students are absolutely encouraged to both go to college and stay in college. That’s absolutely critical.
With your background in finance as it is, how do you think we can best renegotiate the EU/IMF bailout? Realistically, do we have any ground to stand on? What about the fact that it was the ridiculously low EU interest rates that led to the property bubble in the first place- do you think that’ll give us some leverage?
I think in terms of the history of the Irish property bubble and crash, that the major responsibility has to be borne by Ireland, by the property developers, the bankers and the senior people in charge of regulation and central banking who allowed the bubble to build up. Also in the Dáil from 2003 to 2007, what was happening in tax rates, in the explosion of wealth, where some of the richest people paid almost no tax at all. All of that was wrong and it was unsustainable. Does that mean that the EU and that the Eurozone and the ECB have no responsibility? No. They have a responsibility and I would say that, on a historic basis, my view of their responsibility is this: the EU has worked as an organisation to promote economic development, political development and to prevent wars ever being again on European soil- in all that it has been successful. But I think that when historians look back and they see the very rapid expansion of Europe, and the development of the eurozone, the critical thing that was lacking there was that countries who were quite different and were in different stages of their economic activity all went in together. Clearly the structures were completely inadequate in terms of policing the different countries in the eurozone and we went into the Euro at one stage of our economic cycle and countries like Germany went in at a different stage of theirs. So there was that mismatch and the institutions didn’t live up to what was expected of them. Do the Europeans then have co-responsibility? In my view, absolutely. And I think that certainly whatever about at the very beginning, 3 or 4 years ago when it was very clear that there were major problems going on with the Irish banking system, they seemed to take a very hands-off attitude where everything that the Irish government did was OK. The bank guarantee was OK, as was Anglo Irish drifting to become the biggest bank bust in the world. I mean, it was the talk of London, it was the talk of New York and many different financial locations that here was this bank growing at 25% a year. In the laws of banking that’s not possible. You can’t keep growing at that rate. And, inevitably, when a bank grows at that rate, like a balloon when there’s a pin- bang it goes. And yes I think the EU has an enormous amount of responsibility but I think the major responsibility lies with the Irish institutions, the bank and the government who oversaw this for the past 14 years, particularly people like Charlie McCreevy and Bertie Ahern who promoted a culture around greed. You look at Anglo, Anglo was the developers bank, the developers were Fianna Fáils backers- it was the golden circle and, unfortunately, lots of people, lots of working class and middle class people, are paying with their jobs, with their life savings and with their pensions for what happened during Fianna Fáil’s reign. There was a culture of greed in the country and Fianna Fáil felt they had created a new economic model. You remember the famous quote by Bertie Ahern that people who criticise the economy ought to do away with themselves- that says it all.
So if you think the eurozone approach of having the same currency for countries who are at a completely different level of economic development was a mistake, would you advocate a two-tiered currency?
No I don’t. But what I do advocate is the development of instruments within the eurozone which really help countries which are in economic difficulty. The day will come in Ireland, like the boom, when economic difficulty will end. But the concept of the eurozone, and the heart of the whole European project, is to create a sense of solidarity in Europe and we have countries on the periphery, ourselves included, who need assistance and help. I think that the eurozone needs to rethink the packages of help and assistance it gives. The socialist group in Europe has advocated for many years about the development of European financial instruments, in particular ‘eurobonds’, which would use the overall strength of the total eurozone to assist countries who have borrowing difficulties in the markets to borrow at a reasonable rate and over longer periods of time. I hope, over time, that that is something the ECB will consider. I think the crisis over Greece was the first time that that had happened. The first structural program that Ireland has gone into is the first time that that has happened. We know now that Portugal’s in a lot of difficulties and is going to need an assistance program. I really hope that the eurozone structures, and in particular the ECB and the commission are learning from that because in the end Ireland will pay its debts back and re-float the economy and there’s a mutual interest there.
Well should we pay our debts back? What do you think about the Icelandic approach? Should we just default?
I’m personally not a fan of default. Probably because I worked in Africa in the 1980’s and I worked in the University of Dara Salam in Tanzania in East Africa when the IMF came into Tanzania and did a structural adjustment program like it’s doing in Ireland at the moment. The difficulty with default is when you default you become entirely dependent on the IMF. I’m sure you’ve seen in relation to Iceland that even if Iceland is out of the markets its financial relationship is entirely determined by its IMF relationship. I think if you can have renegotiation in relation to developing eurozone instruments like eurobonds that that’s a much better way to go then default. Also the experience of countries in the realm of default are of particular kinds of economies, not of a modern developed European country which is in a union like the EU and I think default would be bad for the European project. This is something which the countries in Europe which are currently doing well, like Germany, have to think about because when your in a union there has to be a give and take. And I think some of the people in Ireland talking about default have not thought about what it would actually mean. Traditionally, what happens in a default is the IMF takes complete control of your financial arrangements with the outside world- you have exchange control and generally it lasts for a long period. People often use the Argentinian example. But Argentina is very different to Ireland and also some of the other countries who have defaulted, like Russia, have a lot of primary products which they can continue to sell on the international markets. But were a trading nation. Foreign direct investment comes in and trades out from here. I think a default would have to be thought out very very carefully and I hope it is not something that happens to the country.
Following your appointment as Minister for Social Protection, there was great controversy (journalists, labour party colleagues and you yourself were “surprised and bewildered”) over being passed over for the department of Public Expenditure and Reform, especially after your 11 years of experience in finance. Are you disappointed over the decision?
I am absolutely immersed in the department of social protection and I see myself as been giving the responsibility in relation to the social protection brief and I see social protection as the glue which is holding this country together throughout this crisis. I think one of the things which has been missing in the whole debate around economics and finance is to bring the two sides of the argument together. First of all: how do you finance stuff? And second of all how do you actually ensure that the people who need the income support get it? I think that at this point in time, social protection, in a way is protecting Irish society and the people who rely on social protection for income support. It doesn’t mean we can reverse everything immediately, we can’t. But I think it has a really important role to play in keeping society together and in helping society get back to work.
So there’s no disappointment at all over being passed over?
No, I said what I said, I was surprised and a bit bemused, but in politics, what happens in coalitions is that party leaders make agreements and I was asked to be in the government and I accepted the job that I was asked to do. But I contribute in government very extensively to discussions around where the economy is at and I try to have a holistic view of the economy. The economy is not just an economy, it is all the people in it and one of the things I have really pressed my cabinet colleagues about is that in this Dáil we need an accountability process that might require a constitutional referendum where the bankers and the regulators and the politicians who were in power then come in and, through the medium of the Dáil, tell people what actually happened. Do we have to rely on a column by Willie O’Dea in the Sunday Independent, to hear that he was woken up from his sleep, told there was a guarantee and that he had absolutely no opportunity to discuss it? Why can’t he just come into the Dáil and tell people what actually happened? I think the Irish people need to know what happened that took so many people’s jobs and so many people’s businesses and I think that’s one of the things during the discussions in government that I am really anxious to see brought about.
You’ve been in Irish politics for over a decade now in one form or another and in your own words “you’ve seen it all.” Do you think the political culture in Ireland has changed over the years?
I was 20 years a volunteer in the labour party and I was kind of a late vocation to politics. I think that there was a ferocious disconnect between the last government and the people just feel battered and bewildered because of it. A new government has taken over in very difficult circumstances but I hear lots of people telling me that they feel a sense of hope, that they feel a sense of change and I think one of the big changes will be to really drive corruption out of Irish politics and to have more information available so that citizens can make up their mind over whether what the government is doing is right and wrong and so that we can have debate and discussion.
A lot of people were disappointed over the make-up of the cabinet as there are only two women within it and only two people under 50. What is your view on this?
I think that because of the economic disaster that the new government has inherited, that the Taoiseach and the Tánaiste, when selecting the cabinet, were looking for people with experience of previously being in government. It’s very exciting to be in government but it’s something that most people haven’t experienced before so there’s a mixture of very experienced people and there’s a mixture of younger people. On the women issue, I would just like a situation where we just had a minimum of 40% of cabinet being women and 40% being men.
Would you advocate gender quotas then?
I think gender quotas have a value, I know most young women don’t agree with that because they don’t want a sense that women are there because of counting and not in their own right. I agree with Ivana Bacik that, in fact, the better way to do it would be to penalise the political parties financially if they don’t put forward enough women. We have a system of PR which is quite complex and at the end of the day the voter makes the choice, but what you can do is financially encourage or penalize the political parties if they don’t have enough women available to the voters when they come to make their choice. After that it really is up to the voters.
Political analyst Elaine Byrne has cited that localism in Irish politics could be seen as corrupt. This can be seen in individual clubs in the Minister for Arts and Sports and the Minister for Finance’s constituencies, for example, receiving larger grants at over €70,000 compared with an average of €53,000 elsewhere. Would you see this as corruption?
I take a kind of a Zen approach to politics- it’s about balances. Politicians who were never in touch with people in relation to local issues, people’s personal issues and what effects a community, they would be very remote and after a while probably very arrogant. Equally, a politician who only spends his time on potholes and doesn’t contribute to the national debate would be just as bad. I think that it is absolutely essential that politicians stay in touch with citizens and the concerns of citizens. Otherwise the only people who could tell you about the world would be civil servants. But excessive localism can be very destructive and local corruption is very destructive.
The scrapping of the Seanad has been a highly controversial issue and during the election we were told there was going to be a referendum on it, can you tell me what your views on the issue are?
Well it’s going to be for the people to decide whether it’s abolished or not but I have to say that after the way the last Seanad was run, I have become in favour of it’s abolition and there’s to be a constitutional convention where it will be examined. But I don’t think as a country, given the state of the economy, we can afford to have both a Dáil and a Seanad and certainly not a Seanad that goes out playing golf when the country has a great financial crisis. I think the last Seanad, and
the way it was led and used and abused, particularly by Fianna Fáil made the case for it’s own abolition.
