Ireland has a bigger welfare state than almost anywhere in the world

We’ve just come through a blizzard of electioneering, with slogans and pithy descriptions of the Irish economy and society bandied about wholesale. One you will hear repeated often is that Ireland is a “neoliberal” country, governed by an ideology called “neoliberalism”.

This philosophy advocates wresting control of the economy from the government and giving it to the private sector, limiting government intervention in the economy, accompanied by lower taxes, free markets, deregulation and privatisation. Free markets are at the core of neoliberalism, where the rich keep their money, safe from taxation, and where public expenditure on social services is curtailed.

In this view of a neoliberal world, it is claimed that Ireland is the Florida of the north Atlantic. The ideology – originating in the academic teachings of what is known in economics as the Austrian school of Hayek and Von Mises – became particularly influential in the late 20th century, with the likes of Reagan and Thatcher, during those halcyon days of what was known as “the end of history”.

Neoliberalism is a good soundbite but in the case of Ireland it is almost wholly false.

In complete contrast to free market neoliberalism, the Irish economy and our society rests on a vast interlinked system of social transfers, safety nets and subsidies with explicitly higher taxation for those on higher incomes in order to finance those on lower incomes. The Irish tax system is remarkably progressive, not just in the global context but compared with many European countries. This interlinked web of taxes and supports is what we could describe as a modern welfare state, a complete anathema to neoliberalism.

What is most curious is that this highly progressive tax and transfer system has been expanded and maintained by parties which tend to be dismissed as right wing.

Perplexed? Me too.

Let’s look at the facts: A recent report from the Parliamentary Budget Office that received a lot of attention evidences the extent of redistribution from rich to poor. The bottom 73 per cent of earners contribute only 15 per cent of the total income tax. Those 20 per cent who earn above average incomes contribute 30 per cent, and the highest 7.7 per cent of earners pay over half the total tax levied – 54 per cent. This is hardly neoliberalism. Indeed, the progressive nature of the tax system was substantiated by the left-wing think tank Tasc report which declared: “Ireland’s welfare system is already among the most redistributive when it comes to income – the State already does a lot of heavy lifting.”

To get a sense of where this tax money goes, we have to dig a little deeper to access the interlinked supports and transfers and reveal just how many citizens in the country are benefiting from the welfare state – again something that real neoliberals would baulk at.

According to the latest annual statistics report from the Department of Social Protection, more than 3.3 million citizens are beneficiaries of social protection payments, or 65 per cent of the population, encompassing young, old and lots of people at all ages. More than 2 million people in a population of under 5 million are in direct receipt of welfare payments. On top of these 2 million citizens, 1.3 million children receive child benefit.

Last year, €24.6 billion was spent on social protection, about 23 per cent of general government expenditure, about 5 per cent of GDP or 9 per cent of the arguably more representative modified gross national income (GNI). Some €9.4 billion was spent on pensions, the vast majority of which – 70 per cent – went to the 484,541 recipients of the contributory State pension. Working Age Income Supports amounted to €3.8 billion, with €1.6 billion worth of Jobseeker’s Allowance and a further €485 million in Jobseeker’s Benefit channelled to a total of 264,439 beneficiaries. In 2022, €1.5 billion was spent on Working Age Employment Supports, a decrease of over €3.7 billion on the previous year as Covid payments dissipated. In addition, €5.3 billion was spent on Illness, Disability and Caring benefits across 585,834 beneficiaries. Meanwhile, supplementary payments worth €1.1 billion were transferred, including €300 million in household benefits (phone, gas, electricity, TV allowances) and €576 million in fuel allowances.

This spending amounts to an enormous network of supports.

We are often lampooned as not having a European-style welfare state. So it may come as a surprise to you that a 2020 Eurostat working paper pointed out that Ireland has a significantly lower share of residents not receiving any social transfers (9 per cent) than almost all other European countries – including the likes of France (16 per cent), Germany (21 per cent), Italy (26 per cent), Netherlands (14 per cent). In short, more Irish people are getting some form of State transfer than in almost any other EU country. Almost all of us are all getting something, which means most families. As a 2020 ESRI report notes: “no other tax system in Europe does more to reduce household income inequality than Ireland’s”.

This doesn’t smack of neoliberalism to me.

The area where the neoliberal label is most aggressively thrown about is the multinational sector. Ireland is seen as an outlier, bending over backwards to satisfy American capital. Yet, since January 2024, our minimum corporate tax rate has gone up from 12 to 15 per cent for large companies, impacting about 1,600 multinational corporations. Once more, raising taxes in line with OECD norms on corporates hardly smacks of neoliberalism which is always committed to lower, not higher taxes on capital.

This year, corporate tax revenue is projected to reach €24.5 billion, and where will this money go? It will be spent on social transfers to poorer people, financing that vast network of interrelated subsidies and helps, orchestrated by central government. Yet again, the idea that tax revenue is being restricted to the rich and not shared with those less well-off seems not just fanciful but completely inaccurate.

One area where Ireland feels highly unequal is in the area of housing and the wealth accumulation associated with an inert asset, property. We need to build more homes, in the right places, for more people and at affordable prices. This means more building. What is stopping this?

Many builders will tell you it is regulations, restrictions, planning bottlenecks and taxes, particularly VAT, which drive up the cost of materials. In reality, there are more factors at play but again, it’s hardly a lack of government intervention that is holding up house building, substantiating the neoliberal accusation. In fact, it may well be the opposite.

The key to building more homes is incentivising building and penalising land hoarding. This requires a tax to bring land into use or to penalise leaving land idle or derelict. Such a levy would be equitable and efficient as it would encourage development.

An increased tax on an asset like land and property would be the very opposite of neoliberalism and should be supported muscularly by those who claim that Ireland is a neoliberal fiefdom. Yet when we examine which parties support property tax, we see the biggest opponents of neoliberalism are also, inexplicably, the biggest opponents of a wealth tax on land and property.

For example, in my area of Dún Laoghaire, left-wing parties Labour, Sinn Féin and People Before Profit want to see property taxes fall, along with Fianna Fáil and Fine Gael. Only the Greens and Social Democrats support maintaining property taxes.

When it comes to the most inequitable form of wealth, asset values, some of the biggest critics of neoliberalism are the most neoliberal, yet the society itself is far more of a welfare state than almost anywhere in the world, underpinned by a progressive tax system and generous transfers.

Neoliberalism my eye!