allAfrica.com: Mauritius: Pierre Dinan, Economist - "Lower Subsidies for Lower Middle Classes Would Be a Solution" (Page 1 of 1)

Mauritius: Pierre Dinan, Economist - "Lower Subsidies for Lower Middle Classes Would Be a Solution"

The economist Pierre Dinan gives his views on the burning debate of the moment. Targeting should be applied so that the welfare state can carry on with its job in a more efficient way, he says.

Does the implementation of the targeting system mean that the welfare state will come to an end in Mauritius?

It depends on what is meant by welfare state. For me, the welfare state is one, which carries on its duty of helping those who can't find their way in life. These people can be sick, unemployed, or with serious family problems, for instance. They need help, support and jobs and it is the duty of the welfare state to help them. Targeting is a way for the welfare state to carry out its job in a more efficient way by allocating funds to those most in need than by redistributing wealth to those who don't need that support.

Some international experts recently recommended the end of universal subsidies on domestic gas. What is your own opinion?

I agree that there should be an end to universal subsidies. Subsidies should be for people who can't pay for gas. As far as I remember, these experts were also saying that we were spending money on imported energy and I guess we don't have any other choice. But maybe some of the subsidies saved by giving only to the most vulnerable people could be used for research into local sources of energy.

The main difficulty appears to be the settling of a threshold to differentiate between the "poor" and the "non-poor". What is the best way of drawing the line, according to you?

We should use the recent figures we have on households according to their position of wealth and poverty. The Central Statistics Office recently said that 26,000 households were considered poor - which corresponds to those earning less than Rs 9,000 monthly. But I think we should also adapt to a method of tapering, which means that, instead of drawing a line between the poor and the others, we could grant lower subsidies for higher income families. That would soften the blow and be an answer to those who say that the middle-classes will suffer. But here again, it is important to know what is meant by middle-class and I think the most appropriate term would be the lower middle-classes with monthly incomes higher than Rs 9,000 up to a certain amount around Rs 20,000. This should in fact be subject to a serious study that would grant a lower amount of subsidies to this category of people as well.

"There is a limit to what the government can do with its budget. Maybe we are not aware enough of a need for solidarity with poor people in those difficult times."

You have already advised to go step by step to implement targeting. Why such caution?

I think it would be important to have a sort of pilot project on one of the commodities concerned to start with. Then we could apply what we have learnt to other commodities. This is important because I acknowledge that this is a difficult exercise. But it is not because something is difficult that we should not apply it.

Some state that those receiving Direct Income Support may not be able to manage the money and would use it for other purposes than those intended. Do you agree?

This is being critical of poor people. It is not because they are poor that they are silly. If some people make mistakes in managing their budget, why don't we acknowledge that people with higher income mismanage their budget. The more so as we know that some people use the subsidies on some commodities to feed dogs instead of humans. There should be no excuse for that.

Why does targeting arouse so much controversy - even within the government?

Nobody likes seeing a reduction in his income or benefits. We would like to get as much as we can from the state. This is an old habit and custom in Mauritius. But I am afraid that one must realise that the state budget has its limits. Taxes have been reduced and everybody was happy about it. Today, those earning higher incomes must be ready to pay for their standard of living. There is a limit to what the government can do with its budget. Maybe we are not aware enough of a need for solidarity with poor people in those difficult times.

Education and health are free in Mauritius. Do you think this will be sustainable in the long-term?

No, it will not. There again, I believe some steps should be taken but it should be done in a gradual way because they are important benefits for people. Some payment (not necessarily the full cost) should be phased in for health, for example. In hospitals, there are two services offered: the medical aspect and the hospitality. Medical service could remain free - except for foreigners and tourists who should pay - while hospitality service could be contracted out by the government. Therefore this would imply some payment except for those below the poverty line. It is exactly the same in the education sector where there could be some phasing in some cases. There seems to be some change going on at tertiary level and this is maybe where the phasing in could take place. But I insist that no one should be deprived of such services if they can't afford them.

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