Portugal debates future of welfare state

by Peter Wise, The FT app  |  published on November 27, 2012

Armando Costa, 73, is waiting for an outpatient’s appointment in one of the seemingly endless corridors of Hospital Santa Maria, a huge 1950s building on the edge of Lisbon, teeming with medical staff, orderlies, the sick and their families.

The retired business manager could afford private care, but prefers crowded, noisy Santa Maria because of the quality of treatment on the national health service. As well as social security contributions, patients typically pay a small amount. “I’ll be charged a few euros today, but I’d be happy to pay more,” he said.

How much the Portuguese are prepared to pay for public health, education and welfare services has become the focus of national debate after warnings from Pedro Passos Coelho, the prime minister, that the country’s economic future depends on root-and-branch reform of what the state provides.

But redefining the state’s responsibilities is highly contentious for many Portuguese, who see universal health care and education, free or subsidised at the point of delivery, as fundamental achievements of the 1974 revolution that overthrew 48 years of dictatorship. The government’s opponents fear it wants to destroy the welfare state.

The country has to choose between higher taxes or fewer state services, Vítor Gaspar, finance minister, said. “There appears to be an enormous divergence between what the Portuguese believe the state should deliver and the amount of taxes they are prepared to pay,” he told parliament recently.

Taxes have already risen substantially. The 2013 budget, the toughest in living memory, includes income tax increases of about 30 per cent. Mr Gaspar described the tax rises as “enormous” . Designed to keep Lisbon on track with its €78bn bailout programme, they are the latest in a series of austerity measures that have pushed Portugal into its deepest recession in 40 years, with record unemployment reaching close to 16 per cent.

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