Social Justice Ireland's Analysis and Critique of Budget 2010 - FULL TEXT

The full text of Social Justice Ireland's Analysis and Critique of Budget 2010 is available here
Social Justice Ireland published a detailed set of proposals that would have enabled Government to get the required €4bn in adjustments in Budget 2010 without reducing welfare payments and without damaging vulnerable people.  The full text is available here.
A wide range of material relevant to Budget 2010 is available here.

Unfair, unjust Budget fails the vulnerable, damages the economy

The full text of Social Justice Ireland's Analysis and Critique of Budget 2010 is available here
The unfair and breathtakingly unjust decisions made in Budget 2010 will damage Ireland’s economic development and social development.
This Budget is anti-family, anti-poor and anti-children. Government chose to reduce the income going to large numbers of Ireland’s poorest people while wasting money on a useless scrappage scheme that will have no significant impact on emissions but will see most of the money going to overseas manufactures.
In what appears to be an ideologically fixated approach to Budget 2010 Government has placed its faith in the failed neo-liberal economic model which caused many if not most of the current economic problems not just in Ireland but across the world.

Unfair and unjust

• Poor people will take a bigger hit than those who are better off.
• Reducing the income of those who are very well off so that they now will just be well off is very different to reducing the income and services available to those already in poverty so that they will now be living in deeper poverty without the basics required to live life with dignity. Yet this is exactly what Government has done.
• People living in poverty (1 in seven of the total population, 18% of children) are being asked to endure greater deprivation. This is unjust and unfair.
• The Government’s arguments based on falling inflation are profoundly ill-informed. They fail to recognise the fact that costs for poorer people have risen in key areas of their expenditure during the past year.
• The failure to increase the tax-take significantly will mean that Ireland will continue to have one of the lowest total tax-takes in the EU.
• The failure to raise the total tax-take substantially towards the EU average is the main reason that Government does not have the income to protect the country’s social services or promote its economy.
• The introduction of a carbon tax is welcome but Government has failed to ensure that vulnerable people on low incomes or living in rural areas without access to public transport will not be big losers.
• Cuts in the budget for social housing and supports budget will make it more difficult for many people to keep a roof over their head.

Budget is bad for economic development

• The Budget totally fails to provide any credible employment package.
• The Budget contains no real economic stimulus package. While the retro-fitting programme is welcome, it is nowhere near the scale required to provide an effective stimulus.
• The car scrappage scheme will be of most benefit to foreign car manufacturers.
• A new unemployment trap has been created following changes on child benefit. Most low-income people will lose the welfare-related payment when they take up a job (as many do not access FIS).

Budget is bad for social development

• As a result of Budget 2010 services will be reduced at the very moment that demand is rising.
• Ireland’s social services infrastructure is being allowed to disintegrate just when it is needed most.
• Provision on the scale required was not made to develop the primary school infrastructure needed in the coming years for the huge increase in the young population.

Budget is anti-poor

• Those struggling to exist on an income lower than what is required to have a minimally adequate standard of living will now be further below that minimum and unable to afford the basics to live life with dignity.
• The failure to meet the target set for the ODA budget will damage the world’s poorest and most vulnerable people.

Budget is anti-family

• The Budget targeted households with children and reduced their income while leaving households with the same income but no children untouched by this income reduction.

Budget is anti-youth

• This Budget dramatically reduced the welfare rates for young people, failed to provide sufficient places in training and related programmes and then threatened them with even greater losses if they refused to take up an inappropriate programme.

Budget is anti-children

• Child benefit cuts reduce the already small allocation for children in Ireland.
• The Budget will increase the level of child poverty in Ireland - currently 18% - especially among the working poor.

Proposal to reform tax system welcome

• The Budget failed to eliminate many of the tax breaks available only to the better off as recommended by the Commission on Taxation. However, the commitment to reform the tax system in the coming year is very welcome.

Conclusion
Social Justice Ireland is deeply concerned that Government has introduced such an unfair and unjust budget which is bad for Ireland’s economic and social development.
Budget 2010 lacks vision. It fails to provide the leadership that Ireland needs at this difficult time. It also raises serious questions concerning competence.
Adjustments of €4bn were required to stabilise Ireland’s fiscal situation. Social Justice Ireland published detailed, costed proposals showing how such adjustments could be achieved without reducing welfare rates or harming the vulnerable.
Decisions taken in Budget 2010 mean that Ireland’s poor and vulnerable people are being condemned to deeper poverty which may well persist for a lengthy period of time while those who created many of the county's current problems are either being rewarded or ignored.
This Budget provides no pathway towards a credible, desirable future that Irish people can strive to attain.
Government’s rhetoric about protecting the vulnerable and promoting the economy is not matched by its decisions in Budget 2010.
All in all a depressing, unfair and unjust Budget. Far better options were available that would have protected the vulnerable and promoted the economy. Government chose instead to favour those who are better off over the most vulnerable.
A society is measured on how it treats its vulnerable people. Using that yardstick this Budget has failed all of Ireland’s people.
 

If Government has nothing to hide, why not supply full Budget documentation

 
To accompany the Budget the Government normally publishes a detailed set of documents and tables explaining the Budget measures. Budget 2010 marked a significant departure from this tradition.
The published Budget book (i.e. the paper version) is the shortest in many years and does not contain much of the normal detail.

Bizarrely, the printed Budget book did not even provide readers with the detailed changes to effective income tax levels, examples of the public service salary reductions (even though the Minister cited this in his speech), the capital programme features and the changes to social welfare rates. Some of these figures have been made available on-line, but in limited format.  The spreadsheets, for example, that were normally available as soon as the Minister for Finance completed his Budget speech were not made available on Budget Day despite repeated requests.
Despite promises for a more transparent and clear Budget process, Budget 2010 represents a major step backwards. It should not be repeated.
The failure by the Department of Finance this year to supply the usual data and documentation elaborating on the Minister for Finance’s speech raises serious questions concerning issues as wideranging as competence and transparency.
If Government has nothing to hide, full information should be available promptly.
 

Government Budget documentation

The text of Government's Budget documentation is available here

Social Justice Ireland's proposals on Budget 2010 - Full text

The full text of the presentation on Budget Proposals presented at Social Justice Ireland's seminar on Budget 2010 is available here

Social Justice Ireland's Policy Briefing on Budget Choices - Full Text

The full text of Social Justice Ireland's Policy Briefing on Budget Choices can be accessed here

Large majority want fair Budget - would increase tax rather than cut welfare or services

A poll in the Sunday Business Post (November 22, 2009) shows that Irish people believe that fairness is vital in Budget 2010.
The Sunday Business Post Red C Poll found that:

• More than three quarters (76%) of respondents would probably implement tax increases if they were formulating the budget compared to 5% who would avoid such increases.
• 48% would avoid cuts in child benefits and pensions compared to 17% who would make cuts in these payments.
• 44% would avoid cuts in spending on health and education compared to 20% who would make such cuts.

Social Justice Ireland has published a detailed outline of the adjustments Government should make in Budget 2010 to achieve its target of stabilising exchequer borrowing as a percentage of GDP.  Full details of Social Justice Ireland's proposals are available here.
Social Justice Ireland's proposals on taxation were outlined in an article in the Irish Examiner on October 7, 2009. Full text of this article is available here.
Social Justice Ireland's Policy Briefing on Budget Choices, published in early October is also available here.

Government publishes Pre-Budget White Paper

Government's Pre-Budget White Paper was published on December 4, 2009.  The full text is available here.

Pre-Budget Outlook published November 12, 2009 - FULL TEXT

The full text of the Government's Pre-Budget Outlook, published on November 12th, 2009 is available here

Minister for Finance's statement on the Pre-Budget Outlook - FULL TEXT

The following statement was issued on November 12th, 2009 by the Minister for Finance, Mr. Brian Lenihan, TD as the Government’s Pre-Budget Outlook was launched.
The Department of Finance today published its Pre-Budget Outlook in which the Irish economy is projected to contract by 1½ per cent next year following a decline of 7½ per cent this year. The 2010 forecast is an improvement from the April forecast of just under a 3 per cent contraction.

Unemployment is forecast to peak at an average of 13¾ per cent of the labour force in 2010. This forecast is lower than the 15½ per cent rate contained in the April Supplementary Budget. But the downward revision leaves no room for complacency. The creation and protection of jobs remains the overriding objective of government economic policy. The Government’s planned €4 billion adjustment to the public finances in the forthcoming Budget is forecast to result in the General Government Balance stabilising at -12 per cent of GDP next year.
Commenting on the projections, the Minister for Finance, Mr. Brian Lenihan, T.D., said:
“The last year or so has been exceptionally difficult for us all. And there are significant challenges ahead. But I am pleased to note that the outlook for the economy is now improving. The consensus now is that positive growth will return during 2010, although it will be 2011 before we experience positive growth for the year as a whole. My Department’s Pre-Budget Outlook outlines the emerging macroeconomic and fiscal outlook for the coming years.”
The Minister said the Pre-Budget Outlook sets out three preconditions for a return to sustainable economic growth:
(i)                  Restoring order to the public finances over the coming years;
(ii)                Regaining international competitiveness to copper-fasten a return to solid employment growth; and
(iii)               A properly functioning banking system.
“In all three areas the Government has taken decisive and effective action. And we will continue to take decisive action by taking the necessary and difficult decisions in the Budget next month. Our resolve as a Government to do the right thing has boosted international confidence in Ireland. Without international confidence, our economy will not recover. There is light at the end of the tunnel but any deviation from the path that we have now embarked upon will quench the emerging recovery. ”
The Minister stressed his determination to stabilise the budget deficit in order to limit the increase in public debt, restore confidence in our public finances and stop the drain on scarce resources by an ever-increasing interest burden.
“I welcome the broad support for the need to make an adjustment of €4 billion next year because taking decisive action now will bring immediate benefits to our economy.
Now is the time to stabilise the deficit: falling prices and lower interest rates are cushioning the impact of the necessary adjustments on families. The decline in prices this year and the prospect of a further – albeit more modest- decline next year is restoring our international cost competitiveness. Nominal income levels must be seen in the context of declining prices.
The Government is determined to build on the corrective measures we have already taken. Preparation for the budget is well advanced and let me say once more that the scope for further taxation increases is limited; the bulk of the required adjustment will come from expenditure savings. In taking action we are sending a clear positive message to households as well as to the wider international community that we’re determined to restore order to our public finances.
I look forward to the debate next week in Dáil Eireann on the Pre-Budget Outlook, which will be carefully considered by the Government in its budgetary decisions.”
Finally, in response to developments at the European level, the Minister said:
“I welcome the report published by EU Commission yesterday which concluded that Ireland has taken effective action to address the fiscal deterioration and its proposal for a one-year extension for the correction path in recognition of the deterioration in the public finances this year. At the December Ecofin Council, EU Finance Ministers will decide on this matter in the context of their consideration of the one-year extensions for certain other Member States.
This proposed extension, while easing somewhat the adjustments required in the later years, does not change the focus of our need to stabilise our very large deficit. If anything, it reinforces the need to continue to take effective action in 2010.”
 

Department of Finance publishes analysis of replacement rates for unemployed people

On December 4, 2009 the Department of Finance published an analysis of replacement rates for unemployed people. The full text is available here.

Budget Perspectives - ESRI/FFS - Full Text

The full text of the ESRI/FFS publication on Budget Perspectives 2010 is available here.

Bord Snip disproportionately targets those who are poor or sick or older or vulnerable

The cuts in expenditure proposed in the Bord Snip report are focused disproportionately on people who are poor or sick or older or vulnerable in some way. Cuts in welfare rates and in many services will mean that those who are vulnerable will bear the brunt of Government's attempts to balance its budget. 

Social Justice Ireland recognises full well that the country's finances are in bad shape and need to be rectified. However, Ireland is in this situation because of the activities of bankers, politicians, speculators, developers and many economists. Who should pay for the misdeeds of these people? The authors of the Bord Snip report provide a clear answer: from their perspective the vulnearable, the disadvantaged and those living in remote communities should be the hardest hit!  Social Justice Ireland rejects this conclusion totally.

We believe that a just solution to the current situation requires a combination of:

1. An increase in the overall tax-take
2. Cuts in expenditure that do not cause long-term damage
3. Reform of the public sector to ensure Ireland gets value for money
4. Protection of the vulnerable
5. A fair resolution of the banking crisis

All of these should be done within the broader context of deciding where Irish people want to Ireland in the coming decadaes. 

We will outline our proposals (and the analysis that supports the proposals) on each of these issues in the coming weeks - well ahead of the Government decisions on Budget 2010.

A fair resolution of the banking crisis requires that the exposure of the taxpayer should be kept to an absolute minimum and that those who caused the banking crisis should be removed from their positions. Social Justice Ireland is not convinced that the policies currently in place meet either of these conditions

Government should take integrated approach to Budget 2010 as Ireland's total tax-take plummets towards record low

In its Policy Briefing on Budget Choices Social Justice Ireland has urged Government to take an integrated approach to addressing Budget 2010 as Ireland's total tax-take plummets towards a record low.  As Ireland faces a range of interrelated crises and Government prepares its Budget for 2010 it is important to realise that:
·        Ireland is not a poor country;
·        Ireland’s total tax-take is one of the lowest in the developed world and continues to fall as a percentage of GDP;
·        15.8% of people are at risk of poverty with incomes below €12,000 for a single person or €28,000 for a family of four;
·        31% of all the households at risk of poverty today are headed by a person with a job. 
·        A further 50% are headed by a person outside the labour force (i.e. older people and people who are ill, have a serious disability or are in caring roles) and are totally dependent on social welfare.
·        It is both essential and possible to protect the vulnerable in the choices Government makes;
·        An integrated approach to tackling the country’s current problems is essential if they are to be addressed successfully.

 An integrated approach requires Government to
1.      Increase the over-all tax take while keeping Ireland a low-tax country and without raising income tax rates;
2.      Secure better value for money in the delivery of our public services;
3.      Reform the public sector;
4.      Target expenditure cuts where required but ensure that vulnerable people are protected. A good starting point would be the elimination of waste identified in the Comptroller and Auditor General’s recent report;
5.      Focus expenditure on the common good to provide required infrastructure and public services.
 
On protecting the vulnerable
In practice giving priority to the vulnerable would mean:
·        No cuts in social welfare rates;
·        No cut in the minimum wage;
·        Compensating those on lowest incomes for any increases in living costs associated with initiatives such as the introduction of a carbon tax;
·        Giving priority in education to funding primary education;
·        Giving priority in health to primary care teams;
·        Giving priority in housing to social housing programmes;
·        Giving priority to the unemployed, especially the long-term unemployed.
·        Increasing the tax-take fairly.
 
In this Policy Briefing Social Justice Ireland elaborates on all of these proposals. 
 
On Taxation
Despite significant increases in the tax-take from the PAYE sector in the last two Budgets, the scale of collapse in Ireland’s tax revenues has been dramatic. National taxes (those announced in the Budget and collected centrally) have fallen by over €13b since 2007 with the largest fall in areas such as capital gains taxes, stamp duties, corporation taxes and VAT. Despite the new income levies, the total income tax take has fallen from €13.6b to €12.4b. Overall, Ireland’s tax take as a percentage of national income will decline to 27.41% of GDP in 2009. These figures represent the lowest tax take for Ireland since Eurostat commenced compiling this data.
While a proportion of the tax decline is related to the recession, a large part is structural and requires attention. Budget 2010 should start that process. Over the next few years policy should focus on increasing Ireland’s tax take to 34.9% of GDP, a figure defined by Eurostat as ‘low-tax’ but a level sufficient to ensure that Ireland delivers appropriate public services. While Ireland should remain a low-tax economy, Irish society cannot expect to have efficient European style public services unless we collect sufficient taxation.
Current crises require integrated response
Ireland is at a critical moment in its development and Government decisions in Budget 2010 will have a huge impact on the future. It is essential that the vulnerable are protected.
 

Budget 2010 presents Government with stark choices

Given the huge fall in the Government’s tax-take and the substantial Budget deficit there are stark choices to be made if this situation is to be reversed in 2010. Much of the public discussion has focused on cuts in public expenditure with the options outlined in the McCarthy Report (Bord Snip Nua) being taken by many as the menu from which Government must choose. This of course misrepresents the situation as the overall tax-take is a key issue that also needs to be addressed. The Report of the Commission on Taxation provides an opportunity for Government to move towards developing a fairer tax system and thereby raising the overall tax take as a percentage of GDP.

 Budget 2010 is likely to be announced by the Minister for Finance on December 2^nd, 2009. Social Justice Ireland will published a detailed Budget Briefing in early October and will produce a detailed analysis and critique of Budget 2010 on the day following the Budget’s publication. Full details of these and other Budget-related analysis will be available on this website.

Revised Estimates 2010

Revised Estimates 2010 published February 18, 2010

First Quarter Exchequer figures - full texts - published April 2, 2010

Exchequer Statement for end of March 2010
Minister for Finance's comments on Exchequer returns for first quarter 2010
Analysis of tax receipts first quarter 2010
Analysis of voted expenditures End of March 2010.

Poor Can't Pay Campaign Budget Analysis shows poor hardest hit

The Poor Can't Pay Campaign has published an analysis of Budget 2010 entitled 'How the Poor Were Made to Pay' which shows that the cuts introduced by Government will impact hardest on the poorest in society and will push thousands of families into poverty in the coming months. The campaign, which is a coalition of charities, community organisations and trade unions, has called on the Taoisesach to give an immediate assurance that there will be no more cuts in social welfare payments and no cut in the minimum wage.

This analysis, which comes to similar conclusions as Social Justice Ireland came to in its analysis of Budget 2010 found that the cuts will have the worst impact on children, lone parents, unemloyed people, those entering the labour market for the first time and people with disabilities.
The Government claimed that Budget 2010 was balanced and fair. These analyses prove that claim is not true.
Members of The Poor Can't Pay Campaign include: Age Action, Barnardos, Social Justice Ireland, EAPN Ireland, Focus Ireland, Irish National Organisation of the Unemployed, Mandate, the National Women's Council of Ireland, SIPTU, Unite, Respond! and the Saint Vincent de Paul Society. More information about the campaign can be accessed here.

Text of Commission on Taxation Report

 The Report of the Commission on Taxation was published on September 7^th, 2009. The full text of the report may be read here.

Social Justice Ireland comments on Government's Pre-Budget Outlook

Government published its Pre-Budget Outlook on November 12, 2009.  According to the Minister for Finance, Brian Linehan TD, "The Government’s planned €4 billion adjustment to the public finances in the forthcoming Budget is forecast to result in the General Government Balance stabilising at -12 per cent of GDP next year."
Social Justice Ireland has published detailed Budget proposals  which show how the €4 billion in adjustments can be achieved while protecting the vulnerable and without reducing social welfare rates (details here)
Ireland now has one of the lowest total tax-takes in the EU and it has fallen by 4 percentage points of GDP in the 2007-2009 period. Social Justice Ireland believes that:

• It is not possible to develop a country with EU-average levels of social services (e.g. health, education, social welfare) and infrastructure (e.g. social housing, public transport) while having a total tax-take that is far below the EU-average.
• If we are going to have Romanian levels of taxation then we have to be prepared to accept Romanian levels of social services and infrastructure as well as Romanian levels of salaries. (Romania is simply used as an example here; the question could just as well be asked comparing Ireland to the other countries with which it shares the lowest total tx-take in the EU i.e. Slovakia, Latvia, Lithuania and Estonia.)
• Irish people do not want to settle for these low levels of services and infrastructure. 
• Government could raise Ireland's total tax-take to 34.9% of GDP and still be a low-tax economy according to Eurostat.
• Budget 2010 should be balanced with increases in taxation and reductions in current and capital expenditure.

A fair budget that protects the vulnerable and the economy is possible. However, this requires Government to commit to increasing Ireland’s total tax-take to a level closer to the EU average. This can be done while keeping Ireland a low-tax economy.
The full text of Social Justice Ireland's proposals for Budget 2010 are available here.
 

Social Justice Ireland challenges Ireland’s benchmarking of itself beside Romania, Slovakia, Latvia, Lithuania and Estonia

 
Producing a fair budget and working for a fairer future requires that Ireland stop benchmarking itself with Romania, Slovakia, Latvia, Lithuania and Estonia. Social Justice Ireland has pointed out that Ireland and these countries take the lowest proportion of national income in tax in the EU, have the lowest total-Government expenditure and have the lowest social expenditure in the EU. In fact Ireland’s total tax take has fallen as a proportion of GDP since the start of the present economic crisis – from 31.4% to 27.4% of GDP and is now among the lowest in the EU.

Social Justice Ireland also pointed out that:
o     It is not possible to develop a country with EU-average levels of social services (e.g. health, education, social welfare) and infrastructure (e.g. social housing, public transport) while having a total tax-take that is far below the EU-average.
o     If we are going to have Romanian levels of taxation then we have to be prepared to accept Romanian levels of social services and infrastructure as well as Romanian levels of salaries. (Romania is simply used as an example here; the question could just as well be asked with other countries listed above.)
o     Social Justice Ireland believes that Irish people do not want to settle for these low levels of services and infrastructure. 
 
Government could raise Ireland’s total tax-take to 34.9% of GDP and still be a low-tax economy according to Eurostat. Social Justice Ireland believes that this should be adopted as a target by Government to be achieved over a number of years by developing a fairer tax system.
 
In presenting an alternative Budget Social Justice Ireland proposed that in Budget 2010 Government should:
o     Increase taxation by €1,869m
o     Have a net reduction in current expenditure of €1,507m
o     Reduce capital expenditure by €750m.
 
The details of Social Justice Ireland’s proposals for Budget 2010 include:
 
On Taxation (details are provided in Table 8 of the main paper)

1. All the recommendations of the Commission on Taxation on tax expenditures should be implemented with the exception of its proposal to tax child benefit. 
2. The ceiling should be removed from employees’ PRSI.
3. A carbon tax should be introduced but care should be taken to provide the supports required to ensure people on low-income do not suffer as a result of the introduction of a carbon tax.
4. Excise duties on alcohol and tobacco should be increased because of factors such as health outcomes and public order issues.
5. A levy of 1% should be introduced on corporation profits. 
6. The capital gains tax rate should be raised to 40%.
7. The tax and welfare systems should be integrated. This cannot be done in 2010 but the detailed preparatory work and structural adjustments required should be put in place during the coming year.
8. A Site Value Tax should be introduced on non-agricultural land. Again, this cannot be done in 2010 but the preparatory structural, registration and related work should be completed within a year.

On Expenditure (details are provided in Tables 9 and 10 of the main paper)

1. Introduce a range of adjustments proposed in the McCarthy Report.
2. Increase charges for private facilities in public hospitals by 20%.
3. Introduce a new job support programme to place 60,000 people who are currently in receipt of unemployment payments (and other related payments) in supported employment.
4. Provide funding for 200 Primary Care Teams.
5. Increase the allocation for adult literacy programmes by €10m
6. Increase the allocation to Overseas Development Assistance (Third World Aid) by €100m.
7. Reduce the public Sector Pay Bill by €520m.
8. Make 1,000 employees of Anglo-Irish Bank redundant.
9. Suspend payments to the National Pension Reserve Fund until Ireland’s fiscal problems have been addressed successfully.

A fair budget that protects the vulnerable and the economy is possible. However, this requires Government to commit to increasing Ireland’s total tax-take to a level closer to the EU average. This can be done while keeping Ireland a low-tax economy.
 

Total tax-take needs to change - article in Irish Examiner by Director of Social Justice Ireland

 The Government can meet its budget expenditure cuts without reducing social welfare payments or the minimum wage.

While there are very difficult decisions to be taken in achieving each of these figures, the focus of debate and discussion on the budgetary process should be on these targets.

Bord Snip Nua Report - full text

The Bord Snip Nua report volume one can be accessed here.   Volume 2 of the report can be accessed here.

Exchequer Statement June 2009