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April 21, 2019
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Despite Czech PM's allegations, actual welfare abuse is negligible

1.4.2019 9:21
Czech PM Andrej Babiš (PHOTO: Government of the Czech Republic)
Czech PM Andrej Babiš (PHOTO: Government of the Czech Republic)

When Czech PM Andrej Babiš (Association of Dissatisfied Citizens - ANO) explains how and where the state could save money and where its funds are, he has repeatedly returned to the thesis that "welfare benefits are abused here". By doing this, he is reaching out to a part of the public and subliminally telling them that he is the one who will "rout the inadaptables".

Data and facts document that in actuality, the abuse of welfare benefits in the Czech Republic is a marginal problem. It's just that a certain part of the public really pricks up their ears to this tune.

Public opinon surveys also confirm that appealing to the emotions of voters in this way is a safe bet. For example, the PPF Factum poll from last August demonstrated that most people here are convinced that those who apply for the welfare benefit of aid to those in material distress are not very well vetted.

"A total of 75 % of Czechs are convinced that benefits are given to those who more or less do not deserve them," the survey found. Almost all Czechs (93 %) believe welfare benefits are abused irrespective of what kind of benefit is at issue.

The poll found 60 % of the population is "decidedly" convinced welfare fraud is a problem. This situation means the concept of welfare abuse is downright made to order for being criticized and exaggerated in political rhetoric.

According to Daniel Münich, who is an economist at the Center for Economic Research and Graduate Education - Economics Institute (CERGE-EI), politicians are creating a virtual reality when it comes to this issue, off of which they then feed. Economist Miroslav Zámečník agrees with that analysis:  "Macroeconomically speaking, the abuse of welfare is insignificant, but psychologically speaking, it is rather a strong factor. That especially applies to people living in problematic areas. Politicians, however, are exaggerating it."

Why do you believe welfare is abused?

In his public appearances, the thesis that welfare is being abused is repeated above all by the PM, but it is also a long-term theme of populist politicians like Czech MP Tomio Okamura ("Freedom and Direct Democracy" - SPD) . "People on welfare are parasites and don't want to work, we haven't done anything about this, Ministry of Labor and Social Affairs," is the message the PM has been sending in different variations.

Our questions to him about his remarks, sent through an ANO party spokesperson, have not yet been answered. Last month Czech Labor and Social Affairs Minister Jana Maláčová (Czech Social Democratic Party -  ČSSD) presented her plan for adjusting how some benefits are disbursed.

When HlídacíPes.org asked her why her plan was primarily about an attempt to limit welfare abuse, she responded with a question of her own: "Why do you believe welfare is abused?" The answer is easy: Because Prime Minister Andrej Babiš repeatedly tells the media that it is.

His cabinet minister, of course, does not see things so dramatically. "This is certainly not a mass phenomenon. A large part of the people who apply for benefits are families with young children and senior citizens who are unable to afford high rents," she explains.

If there is a problem anywhere, it is in the area of so-called uninsured benefits. There are a total of 11 of those.

The second-biggest part of those is comprised of the parental benefit, which essentially cannot be abused. The Government wants to increase it as of 1 January 2020 by another CZK 80 000 [EUR 3 100] to a total of CZK 300 000 [EUR 11 621] disbursed as the parent requests over either six months or up to four years of parental "leave".

The largest part is the contribution for the care of the disabled. Here, too, it is difficult to cheat.

Altogether those both account for more than 90 % of all uninsured welfare benefits. The overall proportion of expenditure on uninsured benefits in relation to GDP is, moreover, steadily declining in the Czech Republic.

In 2018 a total of CZK 73 billion [EUR 2.8 billion] was disbursed for such benefits. That is decidedly no small amount of money.

Most of that, of course, went to the care contributions, i.e., aid to the disabled of CZK 26 billion [EUR 1 bilion] and for the parental contribution of 25 billion [EUR 968 million]. For these benefits, similar to the childbirth benefit or the funeral benefit, it is essentially impossible to cheat.

Similarly, at a time of de facto 100 % employment, there will also be just a minimum of cases of people working under the table while simultaneously drawing unemployment benefit. The third benefit in the mix, however, is the first potentially problematic one - the housing benefit.

Last year the state disbursed CZK 9.6 billion [EUR 372 million] for these benefits, comprised of the housing contribution of CZK 7.7 billion [EUR 300 million] and the housing subsidy of CZK 1.9 billion [EUR 73.6 million]. Here too, however, the trend is declining.

Over the last five years, the cost to the state for these benefits fell by a fifth. In 2014 they were CZK 12.1 billion [EUR 470 million], while last year they were CZK 2.5 billion [EUR 97 million] less.

"It is exactly the housing benefits that are most frequently discussed as abused. There are demands to cut them, to halt welfare abuse, and to stop trafficking in poverty," the Labor Minister admits.

Billions for traffickers in poverty

Trafficking in poverty is, however, primarily a problem of those who are making money from the system. An example of such a trafficker is Lubomír Volný, who until recently was an MP for the SPD party but who today is considered an apostate.

"Dozens of billions of crowns annually have disappeared into the pockets of the traffickers in poverty, these problems are growing, the municipalities are calling for help and the state is doing nothing," summarizes Czech MP Olga Richterová (Pirates), the vice-chair of the Committee on Social Policy in the lower house. According to the Labor Minister, housing benefits should in future just be applied to habitable apartment units and should only be paid to those who actually use the housing.

"We know that there are fake single mothers here, what happens is that parents lease an apartment to their own [adult] children for a fraudulently high rent so the children can claim housing benefits," the Labor Minister said. To explain, a low-income single mother, or one with absolutely no income, can claim higher social benefits than can a married woman (with a husband's income that is equivalent to roughly the average salary).

Similarly, those who pay a fictionally higher cost for their housing - for example, to their own relatives - are able to get more money from the state than those who pay less. "When revising the benefits we must not cause damage to those in need, who are mainly children, people living with disabilities, and senior citizens. We want to bring more justice to the welfare system. We see room for adaptations above all in the housing benefits," the Labor Minister says.

Isolated pensioners and single mothers

Accurate, complete data about how many people are abusing these benefits, how they are doing so and to what extent is lacking, however. At least some data is offered by the Labor Office of the Czech Republic.

In 2015, the Labor Office revealed it had found roughly 17 000 cases of benefits being drawn unjustifiably, amounting to more than CZK 100 million [EUR 3.8 million]. Even this, which may seem like a big amount of money, is just a drop in the ocean, though.

If the state wants to, it knows how to save exponentially more money on welfare. For example, 10 years ago the burial benefit alone accounted for more than CZK 500 million [EUR 19.3 million].

That was an across-the-board benefit - anybody burying a loved one could claim the one-time contribution of CZK 5 000 [EUR 200]. Recently, however, the state has disbursed just CZK 13 - 15 million [EUR 500 000 - 600,000] annually for burial benefits.

Just those who are arranging the funeral of a dependent child, or the parents of a dependent child, can now claim this burial benefit. That is a savings of almost half a billion crowns [EUR 19 million].

If there are any benefits that can actually be more markedly abused, they are exactly the ones for housing. There are two kinds: Housing contribution and housing subsidy.

Last year the housing contribution was awarded to 168 000 applicants. A significant part of those were single-person households (most of them pensioners), totalling more than 55 000 such households.

There were even more such beneficiaries who were families with dependent children - and 71 % of those were households with a single parent, customarily the mother, more than 56 000 of them. The housing contribution is designed for families who spend more than one-third of their income on adequate housing in a unit officially approved for habitation.

The average such housing contribution last year was CZK 3 478 [EUR 135] per month, a total of CZK 7.7 billion [EUR 300 million] from the state budget. Beneficiaries of the housing subsidy, however, totalled just over 40 000.

Those who can claim the subsidy are defined as "persons in material distress living in non-standard forms of housing such as non-residential spaces or residential hotels." If, therefore, the state wants to save money on the housing subsidies, it will be impacting the most impoverished.

The average amount of the subsidy per month last year was CZK 3 864 [EUR 150]. Housing subsidies last year totalled CZK 1.9 billion [EUR 73.6 million].

Cheating on those subsidies was not meant to be easy either, though. The subsidies are ones that the ministry itself labels as "administratively demanding".

In translation, that means bureaucrats are obligated, before awarding these benefits, to verify the actual household income; its social circumstances, assets, debts and entitlements; the actual number of persons living in the household; the opportunities for different housing available; the justification for the costs; and the prices customary in that location. If somebody cheats the system despite such auditing of the housing subsidy, then this is, to a significant degree, evidence that the auditing mechanism is failing - i.e., the state is failing.

Moreover, if somebody cheats when applying for welfare benefits, this is customarily considered a felony and criminal justice authorities are meant to take action against it, which they do regularly. It was, by the way, the currently governing ČSSD who, from opposition in 2010, greatly criticized the plan of the then-governing Civic Democratic Party (ODS) to introduce that felony in respect of welfare abuse, describing it as "irresponsible electioneering intimidation of inhabitants living with disabilities and the socially vulnerable."

Hundreds of millions wasted

Conceivably much more money has been expended altogether by the state on dysfunctional projects meant to limit welfare abuse than has ended up as welfare benefits in the pockets of dishonest people. Such spending also demonstrates that politicians have been looking for solutions that will rather be more pleasing (to the majority society) than they will be functional.

The idea to introduce vouchers across the board for people in material distress, a kind of social coupon for groceries, basic hygiene necessaries, clothing, school supplies and medicines, proved to be impractical and not very functional - it was difficult to find any shops that would accept them. Last year MPs had to soften the rules and narrow the circle of persons obliged to use the coupons.

Another famous project that began with great fanfare and then closed in infamy was the sKarta project. That was meant to be a special payment card to which the state would send all welfare benefits.

After two years the project was closed. The costs were calculated by the Ministry of Labor and Social Affairs at almost CZK 90 million [EUR 3.5 million] and the savings for sending the benefits electronically instead of through the post office were said to have been about CZK 40 million [EUR 1.6 million].

Other costs - reportedly up to CZK 300 million [EUR 11.6 million] - were incurred through the project by the Česká spořitelna savings and loan, which administered the sKarta program. The Government was glad the bank eventually backed down on its demand to be paid more than CZK 200 million [EUR 7.7 million] extra in fees for closing the project, which had been meant to run until 2024, ahead of time.

The Government would like to improve the targeting of welfare so that it goes where it is meant to go and is drawn by those who are actually entitled to it, and so that it fulfills its purpose. That is certainly in order.

However, this changes nothing about the fact that welfare abuse in the Czech Republic is just a popular, well-worn myth. In proportion to the benefits disbursed, to say nothing of the overall expenditures from the state budget, the sum of benefits "abused" (i.e., disbursed unjustifiably or artificially inflated) is absolutely marginal.

The amount is so low that even the state itself is unable to calculate it. That, however, does not prevent politicians from playing the game of who will be the best at stopping this "abuse".

This article was written for the Institute for Independent Journalism in the Czech Republic, an independent, nonprofit organization and registered institute involved in publishing information, journalism and news reporting. Its analyses, articles and data outputs are offered to all equally for use under certain conditions.

 

HlídacíPes.org, translated by Gwendolyn Albert
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Populism, Sociální dávky, Sociální dávky v poukázkách, Vláda



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