Fintan O’Toole: Poverty is an expensive luxury we can no longer afford

Poverty is a very expensive luxury. It costs the Irish public an awful lot of money to sustain a system in which, at any given time over the last decade, about one family in every seven has been living with deprivation.

Year after year, €4.5 billion of public money – €1 in every €20 collected by the State from taxes and social insurance – is used to deal with the many ways poverty damages lives.

It is a price we have been all too willing to pay. But as we begin to rethink public spending in the aftermath of the pandemic, we need to ask why it is more acceptable to fund the consequences of keeping people poor than it is to invest in the elimination of consistent poverty.

The way we think about State expenditure is changing radically. The pandemic has forced the pace of that change. But it was coming anyway.

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Ireland remains the only western European country without universal coverage for primary care

By the end of this year, the State will have spent somewhere around €28 billion on direct measures related to Covid-19. That’s a vast sum, but virtually no one thinks it should not be spent.

Why? Because the alternative is so obviously worse. Without extra spending on the health system, many more people would have died. Without massive supports for businesses and for those thrown out of work, both the economy and society would have suffered intolerable long-term damage.

Even in fiscal terms, the logic is obvious. The public finances can’t be healthy if the economy and society are sick.

That €28 billion is essentially preventive spending. Its purpose is to avoid deeper harms that would otherwise occur.

But in so-called normal times, preventive spending is way down the list of priorities. It doesn’t fit into the annual cycle of budgets. Often it doesn’t even fit into the lifetime of governments. So the system prefers not to think about it.

The most obvious example of this has been in healthcare. Everybody knows that in the long term it is far better value to spend money on preventing people getting sick and on helping them in their own communities than it is to let them get ill and then treat them in acute hospitals.

Yet Ireland remains the only western European country without universal coverage for primary care. The system is comfortable with spending money on consequences; it hates spending money on causes.

Every year, the average household in Ireland spends €2,600 to pay for the public services that keep other families at an acceptable level of povert

This mentality cannot survive. We are entering an era in which governments are going to be forced to make preventive spending a priority.

If a public health crisis had not forced this shift, climate change would have done the job. Because we have left it so late to respond to this existential emergency, the cost of decarbonising society and mitigating damage is going to be vast. But the cost of not doing these things is literally ruinous. So, we will get used to the idea of preventive expenditure.

This change of mind should apply to poverty as well. We need to accept the obvious truth that keeping people in poverty costs a fortune and that eliminating it is good for the public finances.

The most important costs of poverty are not fiscal. The big price is paid in the currency of individual and collective dignity: the life chances of the people who suffer it and the self-respect of the republic that tolerates it.

And the fiscal costs are dwarfed by the wider economic ones. There’s an enormous waste of talent and energy and productivity and creativity involved in the marginalisation of 15 per cent of the population.

But even in very narrow fiscal terms – the impact on the State’s annual budget – the costs of poverty are stark. Micheál Collins of University College Dublin did the sums last year in a report for the Society of St Vincent de Paul.

Every year, the average household in Ireland spends €2,600 to pay for the public services that keep other families at an acceptable level of poverty. On an individual basis, the cost of poverty to every man, woman and child in Ireland is €913 a year.

This is not about the mainstream welfare system, which of course costs a great deal more. It’s just the extra cost of public services for people living on less than 60 per cent of the mean income.

Child poverty is the biggest abuse of human rights in Ireland. But it is not just grossly unjust. It is horrendously expensive

The biggest extra cost is in physical and mental health care – the connection between poverty and ill health is intense. But poverty also generates huge expenditure on housing supports, in the education system, in child and family services, and in the justice system.

The strange thing is that this cost goes largely unquestioned. If I were to suggest that the State should spend an extra €50 billion over the next decade to eliminate consistent poverty, I would be laughed at. But we will spend at least that on the fiscal consequences of deprivation – and it barely merits a shrug of the shoulders.

This approach to social policy is a bit like having a climate strategy that says we will spend a fortune on cleaning up floods but nothing on reducing carbon emissions. It reacts to the bad things that happen but does little to stop them recurring again and again.

This passivity is also a silent choice about the future.

We know what happens in economic crises: poor people suffer most and poor children suffer most of all. During the great banking recession, deprivation among children doubled, from 16 per cent to 32 per cent.

There are reasons to fear that something similar (albeit on a lesser scale) may be happening this time: about a 20 per cent increase over the course of the pandemic. We already had more than 200,000 children at risk of poverty – for many, the pandemic will have turned that risk into reality.

Child poverty is the biggest abuse of human rights in Ireland. But it is not just grossly unjust. It is horrendously expensive.

Its effects last a lifetime. So, therefore, do its fiscal costs. It is all too easy to project forward from the child whose education and welfare have been disrupted and disturbed over the last 18 months to higher spending on mental health and criminal justice in 10, 20, 30, even 70 years from now.

We are passively committing ourselves to paying those costs for a generation to come. But you will look in vain for any mention of them in, say, the reports of the Irish Fiscal Advisory Council.

Never mind compassion or decency – pure monetary self-interest suggests that prevention is better than endless crisis management. This is every bit as true of social as it is of environmental conditions.

Poverty is waste – of human potential, of the promise of a republic of equals, but also of public money. On every level, we cannot afford it.