ESPN Flash report 2015/50. Liechtenstein government verifies social benefit system

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1 ESPN Flash report 2015/50 Liechtenstein government verifies social benefit system Wilfried Marxer and Patricia Hornich August 2015

2 EUROPEAN COMMISSION Directorate-General for Employment, Social Affairs and Inclusion Directorate D Europe 2020: Social Policies Unit D.3 Social Protection and Activation Systems Contact: Valdis ZAGORSKIS Valdis.ZAGORSKIS@ec.europa.eu European Commission B-1049 Brussels

3 EUROPEAN COMMISSION EUROPEAN SOCIAL POLICY NETWORK (ESPN) LISER (LU) AND APPLICA (BE) IN COOPERATION WITH OSE - EUROPEAN SOCIAL OBSERVATORY (BE) ESPN Flash report 2015/50 Liechtenstein government verifies social benefit system Wilfried Marxer and Patricia Hornich 2015 Directorate-General for Employment, Social Affairs and Inclusion

4 Europe Direct is a service to help you find answers to your questions about the European Union. Freephone number (*): (*) The information given is free, as are most calls (though some operators, phone boxes or hotels may charge you). LEGAL NOTICE This document has been prepared for the European Commission however it reflects the views only of the authors, and the Commission cannot be held responsible for any use which may be made of the information contained therein. More information on the European Union is available on the Internet ( European Union, 2015

5 3 European Social Policy Network Theme: Title: Category: Abstract: Description: Flash Report Social benefits, Minimum income and Basic income Social Policies in Brief August 2015 Liechtenstein Liechtenstein government verifies social benefit system Political discussion / Government response In September 2013, a political debate was launched on the Liechtenstein social benefit system. An initial response came from the government in July The results show a positive effect on low-income households and on the prevention of child poverty. The government criticised the lack of a systematic link between the amount of benefits granted and the applicant s financial situation, and also the absence of a widespread administrative set-up. Social benefits are given as add-ons to persons residing/ working in the Principality of Liechtenstein. The basis for assessing social benefits varies depending on the type of social aid. The weakest element in the system is that the applicant s financial situation is not systematically taken into account, and that there are too many different administrative bodies doing the same work on similar topics (Office of Social Services, Office of Public Health, Office of Education, Office of Justice, Migration and Passport Office, Office of Economic Affairs, Office of Construction). In particular, the government found that improvements are needed for the following types of social benefits: Rent allowance: this can be granted to families with dependent children living in the same household and persons living in rental facilities who have had their residence in Liechtenstein for at least one year. The monthly amount of the rent allowance is calculated according to income, assets and expenditure of the entitled person. To optimise the present rent allowance system, the government proposed a harmonisation of the rules for evaluating land and property-related assets. Wrongful claims for social security benefits can be eliminated by a verification procedure based on the annual tax declaration of the entitled person. Child allowance: The amount of the monthly child allowance depends on the number and age of the children, and has no relation to household income or wealth. The current system is based on employers contributions, which also entitles persons who are working in Liechtenstein and living abroad to claim child allowance (if they receive a foreign child allowance from abroad, Liechtenstein grants them a compensation payment if the foreign child allowance is lower than the national equivalent). The government does not support the idea of cancelling the payment to persons living abroad, as any selective exclusion would not be in line with Regulation 883/04. Yet, the government acknowledged that this would release financial resources out of the child allowance budget which could be used to finance out-of-house childcare and to reduce the contributions made by employers to the social benefit system. Helplessness allowance (including care allowance): This is the main state aid regarding long-term care. It is granted irrespective of the applicant s economic circumstances and is financed from the general state budget. The government has suggested merging the helplessness allowance, the

6 4 allowance for the blind and the care allowance as all these benefits are paid to cover the same or similar additional expenditures. The highest amount of benefit of approx. 5,300 per month has been criticised, since there is no link made to the applicant s economic circumstances. By comparing the costs for a full day-care place in a nursing home (approx. 3,200 per month), the government came to the conclusion that reducing or cancelling the helplessness allowance for those above a certain amount of household income and wealth would reinforce the incentive for using professional nursing homes. Outlook & Commentary: Further reading: Rent allowance is seen by the government as an instrument to avoid child poverty, since in practice, single parent households on a low income receive a higher share than other groups of persons entitled to rent allowance. Thus, this type of social benefit was generally supported. The proposed harmonisation of the rules used to evaluate land and propertyrelated assets should be further investigated. Child allowance is also seen as an instrument to avoid child poverty, even if it does not vary in relation to household income and/ or wealth. For low-income households, child allowance forms part of the substantial financial benefits given to ensure that child s basic needs are met. Thus, this type of social aid/ subsidy has generally been left as it is without any dramatic changes. The helplessness allowance should be reviewed in connection with the allowance for the blind and the care allowance, which is currently administered separately. All these benefits should be combined into one type of social aid. Additionally, benefits should be related to the household s income or/ and wealth. For low-income households, financial support should not be reduced. It is not yet clear what impact this response from the government will have on Liechtenstein s social aid and subsidy system. We will have to await the reaction of Liechtenstein s parliament to see if any further steps have to be taken to optimise the current structure, to ensure that social benefits are granted to those who are in need of them, and that overpayments due to the absence of a link to household income/ wealth, can be eliminated. Questions raised in a political debate: Verification of social aid and subsidies to private individuals in Liechtenstein, proposed by the Progressive Citizens Party (FBP; a national conservative political party and one of the two major political parties in Liechtenstein), 1 October 2013: Government response to the questions regarding costly transfers to private individuals, 7 July 2015: Transferleistungen_an_Private_ pdf?t= Law on rent allowance for families: etbeitr%e4ge&showlgbl=true. By-law on rent allowance for families: etbeitr%e4ge&showlgbl=true.

7 5 Author: Law on family benefits: milienzulage&showlgbl=true. By-law on family benefits: milienzulage&showlgbl=true. Law on supplementary benefits to the old-age, widow s and disability insurance: etbeitr%e4ge&showlgbl=true. Wilfried Marxer (wilfried.marxer@liechtenstein-institut.li) and Patricia Hornich (patricia.hornich@liechtenstein-institut.li)

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