The social security system

In this Face2Face the social security system in the Netherlands is discussed by Celina Mlodzick and Paul Ulenbelt. Is it a solution to problems or is it still squandering taxpayers’ money?

In Favor: Celina Mlodzick, Master Finance student at Tilburg University

Social security system in the Netherlands: still squandering taxpayers’ money
The introduction of the Personalized Budget (Persoonsgebonden budget/PGB) has now led to more than two milliard being paid out yearly to PGB-holders. A lot of this, while originally intended for hiring professional help, disappears in the family’s moneybox or in the pockets of dishonest intermediaries and self-employed persons that rent themselves out to patients at high prices. Up until the first of May 2015, PGB holders will be reimbursed €30 an hour for help given.  This is the case even if the assistance is coming from the holders’ partner or child, simply put,  ‘unqualified’ workers. From the first of May onwards this will change to €20 an hour. To put this in context, the minimum wage in the Netherlands is €8.50 an hour. PGB’s of €30.000 up to more than €100.000 are being paid out to partners or children of the PGB holder. These amounts can only be dreamt by academics. To me it seems that so long as the partner is able to assist in the caring of their spouse, a PGB is unnecessary.

Furthermore, based on the Childcare Law (wet kinderopvang), amounts of €30.000 or more are being paid out to child-carers that frequently turn out to be grandfathers, grandmothers or dishonest organisations that are wrongly filling their pockets with taxpayers’ money. This wrongdoing is at the expense of official childcare organisations. Due to the dishonesty in the system, these organisations have to close their doors or have to lay off staff leading to further unemployment and thus a negative effect on the economy.  If, afterwards, it turns out that certain applications were turned in wrongly and the government has already paid them out, then reclamation is often not possible because these people do not have the money anymore or have already gone with the wind. A good solution would be to eliminate this law and include it fully under the primary education.

Another area where the social security system has gone out of control is the Care Allowance Law (zorgtoeslag). Based on this act tens of millions are being paid out unlawfully. Think of the Bulgarian fraud, where hundreds of Bulgarians came to the Netherlands and subscribed here to subsequently receive care as well as rent allowance without paying rent or health insurance. This was possible through a loophole in our social security system, where the organisations paying the allowance (the tax authorities) do not coordinate properly with the organisations that are assumed to receive the health insurance. This problem could be solved easily by nationalizing health care and allowing the tax authority to both collect this money and supply health care. This would also save lots of administration costs and advertisement costs of health insurance organisations. In this way the pumping around of money would be limited to a minimum, preventing some fraud opportunities.

Another way in which a lot of taxpayers’ money is being wasted is through the urge of chairmen of hospitals, healthcare facilities, schools etc. to become ever so larger and luxurious. Buildings of only forty years old are demolished under the pretext of not meeting the requirements of the present day. These buildings then are replaced with new, modern buildings, often on a lease base. In our surrounding countries (Germany and Belgium) these kinds of rules do not exist and as a result they offer cheaper health care. What would I want as a patient: decent, affordable health care, or staying in a luxurious environment with little money left?

Against: Paul Ulenbelt, SP Member of Parliament

Social security: A solution to problems
The welfare state is a historical compromise, the outcome of a struggle between the political mainstreams within our country. Liberals as well as socialists and confessional parties have built up the social security system. According to the liberal thought, income, health and welfare are a persons’ own responsibility in the first place. The government should help those who are left out, however should not take away their own responsibility. Socialists see it as a shared responsibility: social services allow people to keep control over their own lives. According to confessional parties, besides the government, there is a crucial role that can be played by social relationships, such as family, society and the church.

Again and again, the difficult situations experienced by people were a motive to find solutions. For example, shortly after the Second World War an emergency fund was set up to halt the extreme poverty amongst the elderly. Public services within professional groups were affected, and paid a portion of their salary in the event of illness or disability. Ecclesiastical institutions received financial resources to support those in poverty. Later, the emergency fund for the elderly (the AOW, as we know it today), the sectorial provisions for sickness (Ziektewet) and incapacitated people (WAO and WIA) were all put in place and welfare was introduced for the poor (bijstand). These are all facilities created as a solution to welfare problems.

Particularly in times of economic uncertainty, it is clear that social security is indispensable. What would have happened to the hundreds of thousands of workers who lost their jobs in recent years without the Unemployment Insurance Act (WW)? The lack of income would have led to the inability to pay (off) residence, the need to sell their car and the plummeting of consumer spending. Such a scenario would be a disaster for society as a whole and for the individuals it affects. Furthermore, it also disrupts economic recovery.

The current breakdown of social security is presented as a necessary modernization of the welfare state. Thereby less emphasis is placed on ‘social protection’ as people become unemployed, sick or old. Rather, it focuses on ‘social investment’, by providing citizens with better opportunities for education, creating more flexible labor markets and thus making people less dependent on social welfare payments.

Specifically nowadays, the need for proper social security is visible. We must build on these securities rather than tear them down. This stimulates the cohesion in society. It does not make sense to raise the retirement age, since the elderly even now cannot find work, and youth unemployment is rising. It is not a good idea to reduce the dismissal protection when people are being laid off en masse. It is uncivilized to fire people in social work when you know that they have nowhere else to go. Social security is not a problem; it is precisely a solution to problems.

This article is translated from Dutch to English by the Editorial Board of Asset | Accounting & Finance