Providing intellectual disability services in a changed financial environment

Jim Power, Economist, speaks to Inclusion Ireland’s AGM

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Ireland’s policy makers are currently trying to work through what is arguably the most difficult set of economic and financial circumstances since Independence. National incomes as measured by Gross Domestic Product (GDP) contracted by 11.8 per cent between 2007 and 2010- Unemployment has soared from 4.4 per cent of the labour force at the beginning of 2007, to 14.7 per cent in the first quarter of 2011; employment has declined by 326,600 between the peak of the labour market in the third quarter of 2007 and the end of 2010; outward migration has re.commenced due to the lack of employment opportunity; and the General Government Debt (GGD) has increased from 44.3 per cent of GDP at the end of 2008 to 94.2 per cent at the end of 2010- In addition, the Irish banking system is currently not functioning as an intermediary that channels money from those who want to save to those who want to invest. In summary, the Irish economy is in a serious economic and financial crisis, and it is far from obvious how quickly the country will be able to work through its problems—and indeed it is far from clear that it will be able to do so based on current policies, in the absence of some significant initiative and help from our EU partners.

Most sectors of the Irish economy and Irish society have been adversely affected by the economic crisis, and the social and economic consequences are now being felt widely and very acutely. The problem for Ireland is that it is being asked to do three things—to implement an adjustment of €30 billion in the public finances through a combination of tax increases and cutbacks in government expenditure; to continue to service sovereign debt; and to pay back a significant portion of senior bank debt, due to a foolish decision to guarantee such debt back in 2008. In my view, it will prove extremely difficult to deliver on these commitments, while at the same time keeping Ireland’s economy afloat and its society intact. Ireland is similar to a company that is trying to trade with excessive and unsustainable debt levels. Ultimately I believe our EU partners will have to concede fundamental assistance to Ireland, Greece and Portugal, in order to preserve the Euro Zone in its current form. Unfortunately for Ireland, we currently do not have too many international friends, after a decade of political arrogance and gross economic and financial mismanagement. In many ways, Ireland’s future is now in the hands of outsiders.

Regardless of the crisis in the banking system, Ireland has a fundamentally unsustainable fiscal position—we spend too much money running the country, and we take in too little in taxation. In 2010, the country ran an Exchequer deficit of €18.7 billion, and in the first four months of 2011, the deficit stood at €9.9 billion. Such borrowing levels are not sustainable, as the more we borrow the bigger the debt that will build up and the bigger the annual interest rate bill. Ireland has no choice other than to get borrowing down as quickly as possible through a combination of tax increases and cuts in public expenditure.

On the expenditure side, no sector is likely to be immune to expenditure cuts, and there will be a huge focus on closely evaluating and controlling all areas of expenditure for the foreseeable future. Unfortunately, the area of intellectual disability will not be immune to such pressures. The facts in relation to intellectual disability are as follows—the HSE provides €1.6 billion to intellectual disability services, of which €1.2 billion is channelled through non-profit organisations; there are 281 such bodies in both community and residential settings; HSE funding supports over 53,000 persons; 25 of the organisations have budgets in excess of €10 million and 75 have budgets of between €1 and €10 million.

In the context of Ireland’s current financial crisis, total spending in this area is relatively small and is arguably considerably lower than would be desired. However, the reality is that increased funding is unlikely to be available given the scale of the fiscal crisis, and the amounts currently being spent will come under increased scrutiny, as indeed will spending in all other areas of the Irish economy.

If one accepts this reality, then the onus has to be on ensuring that the money is spent in such a manner as to deliver best value for money, and ultimately that it is spent in a manner that will benefit those with intellectual disability to the maximum extent possible. The money is not for the benefit of the organisations that receive it, but rather it is intended to benefit those who require it.

For the taxpayers of the country, who provide this funding, the least that can be expected is that the money is spent well, and in a very accountable and transparent manner. Unfortunately, such traits do not appear to be characteristics of such spending. According to the Comptroller and Auditor General, 42 nonprofit organisations in this area were examined between November 2004 and January 2005.

No audited financial statements had been provided by 12 of those (who, incidentally, had received €100 million in funding in 2003). Only 6 reconciliations of funding to reported income had been carried out; one organisation that had received €288 million between 2000 and 2004 had not provided financial statements for 4 years. There were no formalised review procedures in place, and there were serious deficiencies in documentary evidence. The foregoing is just a snapshot of the findings, and do not make for reassuring reading. In any environment, such procedures and practices are unacceptable, but in the current environment of fiscal crisis, the situation is totally unacceptable. A major review of the whole system is required to ensure that taxpayers get value for scarce resources and that those with intellectual disability get the best care and attention possible.

The aim should be to deliver more and better services for people with intellectual disability. Issues that must be considered and questions that should be addressed should include:
— Could services be provided in a less expensive way?
— Is a specialised service always necessary?
— Could greater use be made of primary care systems?
— Could inefficiencies in the system be eradicated through consolidation or merger of complementary services? In other words, are so many disparate organisations really necessary?
— Should service recipients be given greater freedom of choice and self-determination?
— Should the governance structure in all organisations be much tighter and should there be greater transparency and accountability?
— Should the HSE be free to monitor and evaluate the delivery of all services in terms of quality and quantity? Quality control should be a basic right.
— Is the cost of service provision exacerbated by a focus on too many ‘health professionals?
— Are there too many agencies involved and is there unnecessary and wasteful duplication?

Based on my examination and research of the sector, I can quite confidently conclude that the answer to these questions is in the affirmative. This is not good enough. A new model must be created to ensure that the needs of the patient are met to the fullest extent possible, and not the needs of service providers or social partnership addicts.

There are a few realities that should determine this debate and fundamental restructuring of the whole model. People with disabilities are now thankfully living longer; their expectations are changing for the better and they are becoming more demanding, so the pressure on spending in the area will inevitably grow. However, the sad fact of life is that the pressure on all forms of public spending will become more acute over the coming years. Consequently, the focus will have to be on efficiency and value for money, with the ultimate aim of providing the best possible quality and range of services to those who need it.

Some vested interest groups will inevitably be opposed to any reform of the model, but taxpayers deserve it and those with disability require it and more than deserve it. A quote from Milton Friedman sums up the expenditure issues very well—‘the most efficient way of spending money it to spend your own, and the least efficient way is to spend other people’s .’

Jim Power is a graduate of University College Dublin. He is an economic advisor to Friends First Group. He previously worked as Chief Economist at Bank of Ireland Group and Treasury Economist at AIB Group.He teaches business economics on the Executive and Full.Time MBA at the Michael Smurfit Graduate School of Business, University College Dublin. He writes a weekly column in the Irish Examiner and contributes to numerous other newspapers and magazines on an occasional basis. His first book Picking up the Pieces was published by Blackhall Publishing in November 2009.

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