Why the Smart Card had to go

Earlier this week, together with the GRTU small enterprises chamber, we gave a news conference for the occasion of the signing of a memorandum of understanding in connection with the students’ maintenance grants Smart Card. 

At face value, this MOU may be considered a non-event on account of the fact that the value of “compensation” and the number of retailers affected may not be an astronomically high figure, but the MOU speaks more than what it says for other reasons. 

But first the background .

The Smart Card was launched in year 2000. Students would be issued with a special purpose electronic card – often giving rise to justified complaints that this card did not reach the student before December, leaving the student unassisted financially in the months when most assistance was needed.

This card could be utilised only at those retail outlets which were enrolled in the scheme. The retailers would also have to purchase an EPOS-type of manual card reader costing circa €500 and which could only be utilised for this purpose. Besides, this card scheme was outsourced to a private company, which was remunerated for its services with a handling fee of 2%, payable by the government.

This contract was awarded to this private company after a call for offers, but was subsequently renewed for at least four subsequent three-year periods without a further call for offers. Indeed, not even a shred of paper was found as to how this contract’s renewal had been authorised.

So much for transparency and accountability!

The utilisation of the card was tied to a condition that it was to be strictly used for educational purposes. The intention of this condition may be considered laudable, but alas the road to hell is paved with good intentions. This condition was effectively impossible to police and it was an open secret that students and retailers colluded to devise all sorts of ingenious expedients to have altogether unrelated expenditure qualify as “educational”.

At Education Department level, the administration of the scheme also involved at least six full timers at departmental level. This has given rise to justified cries of foul by the National Audit Office in its periodic audits of the scheme and a number of abuses are in the course of being referred to the police for action where this is still possible. 

Hence, between outsourced costs and internal staff costs, over the last 14 years this system has cost at least €6 million to the government coffers merely to administer, and this without including NAO costs and loss of valuable police time in trying to book the offenders and recover improper expenditure. In the same way that any system of taxation must be efficient to collect, likewise any other control must not be a control which is inordinately expensive to have.

During our administration we have now overhauled the card scheme. This is a scheme which is available to circa 18,000 students in eight different financial institutions, public and private, with a financial outlay of circa €7 million per annum. The reform has been undertaken with a view to simplify the system and eliminate useless bureaucracy while at the same time strengthening the stipend system by making the students’ grant available immediately a student joins and is accepted at an educational institution.

It is available for utilisation at any retailer, local or foreign, making it also possible to utilise the financial assistance in internet purchases. The new scheme takes a wide view of how to assist students and their families and does not artificially restrict allowed expenditure. It is an exercise in itself in student responsibility because this card is available to young citizens who in the great majority are having a first experience in money management in their life. 

Inevitably, as in any reform, some collateral damage occurs. The GRTU, while fully conscious of the flaws in the previous system, brought to our attention that some retailers had been buying the single-purpose machine right up to last year, not suspecting the imminent termination of that system.

The government immediately recognised a legitimate point. This government would not want to work with its social partners on a formalistic level only; where we consider a legitimate expectation of any economic operator, retailers included, we recognise same and seek to reach a fair and equitable solution to the problem.

Hence the MOU with the GRTU establishes that, irrespective of the fact that there has been no contractual breach by the government, the government will compensate 60% of the cost of the machine for any machine bought in the course of year 2013 and 80% for any machine bought in 2014.

The Students Maintenance Grants Board will be advising all affected retailers of this possibility. The GRTU have offered to administer this arrangement, although these refunds will be available to any retailer, whether a GRTU member or not. Indeed, the significance of the MOU is not so much in the level of financial compensation being granted, but in the new style of dispute resolution that this government would like to take forward in its relations with its social partners, with the private sector, with its clients – in our case the students and the members of the teaching profession.