Free education, free water – but at a cost

It was a media circus. The year was 1966. The announcement was totally unexpected. The new Minister of Education’s announcement in September of free second level education and free school transport caught everyone by surprise.

Donogh O’Malley announced his government’s new policy at a seminar hosted by the National Union of Journalists, so he was pretty sure he’d get column inches.

Almost no one in his government had heard of this proposal before it was announced in the media. Certainly not the secretary general of the Department of Finance, Dr T K Whittaker, who wrote a stinging letter to then Taoiseach Seán Lemass warning:

“…if substantial commitments are to be announced by individual Ministers without the consent of the Department of Finance or the approval of the Government, we shall have a situation which is the negation of planning. It will become increasingly futile to be drawing up 5- or 7-year programmes, and even the financial and economic policy of the Government in the short term will be seen to bar no relation to what the country can afford”.

Whittaker, then and now Ireland’s most distinguished civil servant, quite rightly pointed out that O’Malley’s announcement of ‘free’ education was anything but. Whittaker wrote ‘The scheme really means that many parents at present paying moderate school fees voluntarily will have to pay an equal or greater amount compulsorily in the form of additional taxation’.

Many parents in Ireland at the time could and did afford, sometimes through personal sacrifice, the modest school fees charged by schools, which were already quite heavily subsidised by the state. While the trend in participation in second level was increasing anyway, the effect of making second level education free was to see an increase in students attending secondary school from 104,000 in 1964 to 144,000 in 1969, and taxes had to increase as a result.

O’Malley was kicked about the place from above and below for his decision to bounce his own government into free education at second level. He also started a trend. O’Malley’s idea was an unambiguously good one, because secondary education is the bedrock of a developed economy and society, and we all today reap the benefits of O’Malley’s bold decision 50 years ago.

The issue Dr Whittaker rightly took issue with, the issue O’Malley obviously didn’t grapple with, was: who should pay, when, and for how long? We can think of many times the government has made a good or service ‘free’ in the service of an idea, an ideology, or simply in the service of buying more votes or their proxies, column inches.

Every decade seems to see a large increase in the state provision of services. Free second level education in the 1960s, free household water in the 1970s, free third level education in the 1990s, free GP care and childcare places in the 2010s.

Some of these initiatives are clearly good ideas: the social benefits from universal education and healthcare, for example, often trump the social costs. Sometimes the government is the correct organ to provide these large services. Sometimes it isn’t.

It’s also important to think in terms of the effects of these policies over time. Donogh O’Malley made his commitment 50 years ago, the State has to honour that commitment today, and will have to honour it in 50 year’s time. Each and every year the money will have to be found from taxes coming in to pay for second level education. Somewhat ironically then, ‘current’ spending by the government is forever.

Each time the state expanded to universally fill a need met previously by private means, it worked by usually helping people along the way at the bottom end, and making those in the middle classes a bit worse off temporarily, but then swelling their ranks later on as the sons and daughters of the working classes became middle class themselves. This is what UCD’s Dr Kevin Denny and University of Sydney’s Prof Colm Harmon found when they looked at the effects of O’Malley’s announcement 40 years later.

Think about the 40,000 extra kids who went to second level education in the late 1960s, and let’s assume all of them came through second level because it was free. They went out into the workforce better qualified than they would have otherwise been, and assuming they didn’t emigrate, on average they would have earned more, paid more taxes, lived longer and healthier lives, and had healthier kids who went onto second and third level in ever greater numbers. That’s what economic development looks like.

It’s a very odd process that we have actually resisted each time it has happened at the bureaucratic and political levels as Whittaker did, but without any real sense of how much it would all cost.

It is quite easy to make a previously private charge a public one. The public are typically quite happy about it, as in the case of free second level education, and even if they are not, the dynamic effects are often not well understood. Even when Ireland has periodically bailed out its insurance companies and banks, effectively making a private charge a public one, the move was not well resisted by the public, may of whom of course benefitted from this nationalisation of private debt.

A general rule of political economy is: It is easy to make things ‘free’. It is very hard to make free things ‘not-free’.

The one big time the usual not-free to free process went in reverse was the re-introduction, in a sense, of water rates, which were made ‘free’ in 1977. The re-introduction came through Irish Water, and we all know how that’s working out.

We don’t have a good record of understanding the costs or benefits of different policies in Ireland. Other countries have budget offices set up to figure out rough estimates of these costs and benefits, and legislative processes to make vetting of these costs much more rigorous.

An OECD Review of Budget Oversight in Ireland from August of last year recommended a host of institutional enhancements of our budgeting process, including hearings on fiscal planning, pre-budget costings, introducing performance hearings to find out how well the money allocated last year has been spent, enhance the stability programme update process, produce new and open data on the economy, and crucially, establish an Irish Parliamentary Budget Office to actually cost new policies.

Absent structures like the IPBO, we have kite flying, which has not served the state well since O’Malley’s time. The state can be an amazing engine of economic development, but nothing is free, and everything has its cost.