Budget adjustment must not be achieved by cuts alone

Social Justice Ireland has challenged the Minister for Finance, Brian Lenihan, to reject the proposal being attributed to him and his Department in recent days that all adjustments in Budget 2011 are to be met by cutting expenditure for services and infrastructure. Such an approach would condemn Ireland to a long period in recession with high unemployment and poor service provision according to this organisation which is a Social Partner in the Community and Voluntary Pillar of Social Partnership.
Social Justice Ireland fears that we are seeing a repetition of what happened last year. During 2009 the Government’s original publicly-stated commitment was to make adjustments in the Budget through a combination of tax increases and cuts in expenditure. Government went on in Budget 2010 to make all its €4bn adjustments through cuts alone. Continuing with such an approach in the coming year would be bad for the economy and bad for social services that are required in areas such as education, care of the elderly and disability services.
Social Justice Ireland believes that:  

• Cuts in public expenditure are important but only part of the solution.
• As Ireland’s total tax-take is one of the lowest in the EU then Ireland’s total tax-take should be raised in a fair and equitable manner while keeping Ireland a low-tax economy (i.e. below 35% of GDP which is the cut-off level provided by Eurostat for a low-tax economy).
• Public sector reform and getting value for money remain critically important to resolving Ireland’s current series of crises.
• The exposure of the tax-payer to the losses incurred by banks and the consequent expenditure of tax-payers’ money on rescuing these institutions should be minimised.

Social Justice Ireland's analysis of Ireland's taxation situation (level, base. proposals for change) can be accessed here.
Social Justice Ireland's analysis of how Ireland came to be in its present mess and how it should be addressed can be accessed here.
 

Leading independent analysis find’s UK Budget deeply unfair

Britain's leading analysts of the UK Budget, the Institute for Fiscal Studies, has concluded that the measures contained in the recent UK Budget  would hit the poor harder than the rich. They reject the Government’s claim that the budget was “tough but fair”. This was before the British Chancellor admitted that he was looking for extra cuts in the social welfare budget. There are lessons here for the Irish Government as it prepares its Budget for 2011. More than rhetoric is required to deliver a fair and progressive Budget.

UK Budget June 22, 2010 - key features and full details

New "universal social contribution" must not hit the poor

A proposal by the Minister for Finance, Brian Lenihan TD, to introduce a "new universal social contrtibution to be paid at a low rate on a wide base" provides major challenges to policy designers to ensure it is not a change that will benefit the better off while penalising those on low pay or on social welfare. The Minister has stated that the new social contribution will replace employee PRSI, the Health Levy and the Income Levy. Such a contribution would be more streamlined and has the potential to be fairer. However, it seems to be developed principally to increase the total tax-take and to target the "nearly half of all income earners" who will pay no income tax in 2010. So there is a real danger that the net outcome of this new payment would be some (or, perhaps, no) gains in take-home income for high earners but substantial reductions in the take-home income of medium to low earners.

The Minister for Finance outlined his proposals in a presentation to the Irish Taxation Institute. His presentation can be accessed here   In this presentation the Minister stated there would be adjustments of €3bn in Budget 2011. This would be made up of

• €1bn adjustment in capital spending already provided for, and
• €2bn adjustment through reducing the cost of public services and reform of how we tax income.

It is under this latter item that the Minister ouitlined his proposal for a universal social contribution.

Social Justice Ireland supports Act Now on 2010 campaign

Sociakl Justice Ireland supports Act Now on 2010 campaign

The 'Poor Can't Pay' campaign launches 'Time to Make a Commitment' initiative

The 'Poor Can't Pay' campaign launches 'Time to Make a Commitment' initiative

UK Budget June 22, 2010 - key features and full details

All details of the UK Budget announced on June 22, 2010 are available here

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

Budget 2009 #2 CORI Justice Analysis and Critique

Budget lacks vision as banks escape and children are targeted

Download Pdf
This Budget lacks a guiding vision.  This in turn gives rise to some very serious problems. The Budget allows many of those who created the present series of crises, particularly the banks, to escape.  At the same time the vulnerable, particularly children, are targeted to pay for the misbehaviour and fraud of others. 

Government made a sensible decision to change its borrowing parameters.  However, it showed a profound lack of understanding of the social crisis that Ireland is currently facing. 

Social Crisis
In its description of the social crisis Government identified only the issue of unemployment. While this is a critically important issue there are major problems also concerning children, older people, people with disabilities or those who are ill - all of whom have seen their services reduced over the past year. 

Failure to acknowledge this fact in the Budget statement when it outlined the social crisis is of serious concern. It suggests a Government that does not appreciate the serious nature of recent developments in these areas.

In defining the social crisis in terms of unemployment only it fails to appreciate the huge negative impact that cuts in services are having and the impact that the failure to address the social infrastructure deficits today will have in years to come.

The banks

The banks will see their toxic debt being removed and they will be free to continue as before.  On the other hand the taxpayer will underpin a new National Asset Management Agency which will take on assets potentially as high as  €90bn but which will be “transferred at an appropriate discount” which has not been decided.

The first principle of action to tackle toxic debt should be that the exposure of the taxpayer is minimised. Substantial changes would be required before this proposal could be accepted as a fair way of addressing Ireland’s banking crisis. (cf. p 3)

Children

In  stark contrast to the way banks are dealt with in the Budget children are targeted. The Early Childcare Supplement is being halved now and will be abolished at the end of the year. It is proposed that Child Benefit is to be taxed or means-tested in Budget 2010. 

An Early Childhood Care and Education scheme is to be introduced but with a much lower expenditure level than what will be saved by ending the Early Childhood Supplement.

Ireland has high levels of child poverty and low levels of support for childcare.  While the ECCE scheme is welcome the combined impact of these proposals will see supports for children reduced at the very time when families’ incomes are under serious threat. (cf. p.3)

Taxation

Building a fairer tax system and increasing the tax-take are critically important if Ireland’s public  policy is to be able to address the challenges of the years ahead. 

In this Budget Government has taken a number of positive steps to do both. It has also signalled that it will continue this process in the coming years.  These are very welcome developments and we trust that Government will take advantage of the many potential reforms which need to be introduced in the coming years.

We welcome the fact that Government did not reduce the income levy exemption threshold to zero. However we note that more than 30% of households at risk of poverty are headed by a person with a job. Consequently, we urge Government that as resources become available it should restore the policy of keeping the  minimum wage outside the tax net. (cf. p. 7)

It is crucial that Budgets in the years immediately ahead focus  on achieving the common good in action as well as rhetorically.

Distribution impact of this Budget

In this Analysis and Critique we provide details of the distribution impact of this Budget and the cumulative impact of the series of initiatives Government has taken since last October (cf. pp 10-11).

The impact of the tax changes in this Budget are progressive. Those who have more will pay more while those who have less will pay less.

This is also the situation when we analyse the cumulative impact of all Government initiatives in this area for 2009.

In this analysis we also show the different impacts of Government initiatives on employees in the public and private sectors.  The changes introduced in the public sector’s Pension Related Deduction are progressive and welcome.

Lack of Transparency

The Government’s lack of transparency in the Budget documentation is a serious cause for concern.  Without the full details of expenditure on issues such as social housing it is not possible to fully evaluate the impact of a Budget.

Borrowing Parameter

The Government’s decision to change its borrowing parameter for the Budget was welcome and its new borrowing requirement of 10.75% is about right.

ODA

The reduction in Overseas Development Aid to 0.48% of GNP is an attack on the world’s poorest people. As such it is totally unacceptable and should be reversed.

Social Housing

We have noted the lack of transparency in the Budget documentation.   In the social housing area it appears from the very limited data information provided that there will be a substantial reduction in capital expenditure.  This would be a very retrograde step.  The importance of the social housing budget cannot be over-estimated. The number of households on waiting lists has been growing. Investment in social housing at this time would be good for these households.  It would also be good for the economy as it is employment-intensive. Finally, at this time it is also possible to get very good value for money in this area.  We ask Government to ensure that information on this and similar issues is included in the Budget documentation in future.

Conclusion

Ireland is at a crossroads.  It is facing a wide range of challenges. The roots of the current economic crisis lie in policy decisions taken in previous years. It is crucial that similar mistakes are not made again.

Budgets are not just about economics. They are also about values and vision - the values and the vision that Ireland’s people wish to see guiding their future.

In his Budget speech the Minister for Finance, Brian Lenihan, TD, made several references to the common good. The Budget, however, does not measure up to the rhetoric. 

It is crucial that Budgets in the years immediately ahead focus on achieving the common good in action as well as rhetorically. In this way it would  be possible to build a country of which we could all be proud.

Banks Escape

There are serious questions that have not been answered in the proposals Government has made to tackle the toxic debt held by Ireland’s banks.  These proposals envisage the establishment of the National Asset Management Agency (NAMA) under the governance of the National Treasury Management Agency.

The Budget documentation states that this agency would potentially have €80bn to €90bn in assets based on the current book value of these toxic debts held by banks and financial institutions. However Government envisages that these debts would be transferred to NAMA at an appropriate discount.

Any profits made by NAMA will accrue to the State.  If there is a shortfall “the Government intends that a levy will be applied to recoup it”.

There are a number of problems with this proposal:

• The loans will be transferred at an ‘appropriate discount’. But there is no clarity on how NAMA will ensure it is not paying more than the assets are worth.
• It does not say who will pay this levy – the banks or the taxpayer.
• It suggests that the banks that created this crisis will remain intact and have all their toxic debts removed. Yet the taxpayer may well end up paying for the disgraceful actions of bankers who walk away with their positions intact.

The first principle of action to tackle toxic debt should be that the exposure of the taxpayer is minimised . The second principle should be that those in the banking world who created this  crisis should not be left in place under the illusion that they can rescue the situation or reform the system that they managed and which got us into this difficulty.

Substantial changes would be required before this proposal could be accepted as a fair way of addressing the banking crisis Ireland currently faces.

Children Pay

While banks are likely to escape as a result of the decisions contained in the second Budget for 2009, children have been targeted in a variety of ways.

• Budget 2009 halved the Early Childcare Supplement that was paid for children under five and a half years of age to €41.50 per child from May 1, 2009.
• This Supplement will be abolished completely from the end of 2009.
• Child Benefit will either  be means-tested or taxed in Budget 2010.

On the positive side:

• The Early Childcare Supplement will be replaced in January 2010 with a pre-school Early Childhood and Education scheme (ECCE) for all children between the ages of 3 years and 3 months and 4 years and 6 months. A capitation grant will be payable to service provides who provide free pre-school services.

Serious Questions Arise

• While the provision of a free pre-school year in this new programme is welcome it has been done at the expense of a programme that provided support to a far larger number of children.
• The proposal to tax or means-test Child Benefit means this payment is fundamentally changed.  It has never been seen as part of the tax system and it was paid to the mother or principal carer. Now policy that has served the country well for is to be reversed. It is not a positive development in a country that has 19% of all its children living in poverty.
• Ireland provides very low levels of support for childcare when compared with other EU countries.
• This series of proposals is moving policy in the wrong direction at the very time when many families’ incomes are under serious threat.

Lack of Transparency

Government has not been transparent in its second Budget for 2009.  On a number of fronts it has not provided the information required to provide a comprehensive and detailed analysis of what it proposes to do in the coming months. 

A glaring example of this is in the area of social housing where almost no detail has been provided of what Government proposes to do. The documentation shows there will be a reduction of €200m in the allocation for social housing and water services infrastructure but provides no detail of how much comes from which Budget.

This is a growing tendency in Government publications which is completely unacceptable. It is particularly lamentable where Budget documentation is concerned.  Full details should be provided on Budget day.

Parameter Changes

The Government’s decision to change the parameters of its second Budget for 2009 is most welcome. Last week’s Exchequer Returns indicated that we were on path of a deficit of 12.75% this year without further corrective action.   

Following the changes announced by the Minister for Finance the budget deficit target for this year is now set to be 10.75%.  CORI Justice believes this is about right.

Having urged Government for some time to move away from the target it had set itself in January of this year we welcome this move.

Government’s decision to have no increases in social expenditure other than dictated by demographic or unemployment changes is storing up problems that will have to be addressed in the future.

Budget 2009 - Summary of the Key Numbers

To accompany the Budget speech the Department of Finance has published a series of documents detailing the changes announced in the Budget. Through this Analysis and Critique document we examine various aspects of these changes. The table below brings together the key figures from the published Budget documents. It presents the Department of Finance’s expectations of National Income (GDP and GNP) next year, and for the next three years. It outlines the projected exchequer budgetary position over that period. Expectations of future changes to employment, unemployment and inflation are detailed. The table also includes details on the taxation system following the implementation of the Budgetary changes. Finally, the table outlines the Department of Finance’s calculations regarding the full year cost of the tax and social welfare changes announced in the Budget.

Budget 2009 #2 in Context

The tables and charts on page 5 offer an insight into the rapid decline in the national finances that set the context for Budget 2009 #2.

The GDP graph illustrates the speed at which the economic turn-around occurred. As the construction industry collapsed the size of the Irish economy began to decline in 2007 (see also the housing table). This speeded up as the international banking crisis hit and the economy moved into recession. The Budget projects growth will return from 2011.

The central table illustrates the rapid decrease in tax revenues between those projected in October 2008 and those in the supplementary Budget. In six months, expected revenues for 2009 have declined by over €8 billion.

Finally, the outlook for inflation (CPI), unemployment, employment growth and the government borrowing requirement are illustrated. Unemployment is expected to peak in 2010 and a slow return to new employment creation will occur from 2012 onwards.

Source:

OECD Factbook 2008, CSO and Department of Finance Budgetary Document; figures for 2009 onwards are projections

Taxation Changes - Summary

CHANGES TO INCOME LEVY, HEALTH LEVY AND PRSI
Income Levy – from 1 May

The income levy rates will be doubled to 2%, 4% and 6%. The exemption threshold will be €15,028. The 4% rate will apply to income in excess of €75,036 and the 6% rate to income in excess of €174,980.

Health Levy – from 1 May

The health levy rates will double to 4% and 5%.  The entry point to the higher rate will be €75,036.

PRSI – from 1 May

The PRSI ceiling will be increased from €52,000 to €75,036.

INCOME TAX
Mortgage Interest Relief

Mortgage interest relief will be discontinued for any mortgage over 7 years from 1 May.

Restriction in Interest Relief Rented Residential Property

The level at which interest re-payments can be claimed against tax for residential rental properties is being reduced from the existing 100% to 75%.  This measure will apply to both new and existing mortgages. Commercial properties are not affected.

TAXATION ON SAVINGS
Deposit Interest Retention Tax and Taxes on Life Assurance Policies and Investment Funds

The rates of retention tax that apply to deposit interest, together with the rates of tax that apply to life assurance policies and investment funds, are being increased by 2% in each case and will now be 25% and 28% respectively. The increased rates will apply to payments, including deemed payments, made from midnight on 7 April 2009.

STAMP DUTY
Life Assurance Policies

A new levy on life assurance is being introduced at the rate of 1% on premiums. This new levy will apply to premiums received by an insurer on or after 1 June 2009.

Non-Life Insurance Policies - Change in Rate of Tax

The non-life insurance levy of 2% is being increased by 1%. The new rate of 3% will apply to renewals and offers of insurance issued by an insurer on and from midnight on 7 April 2009

Stamp Duty “Trade-in” scheme

Establishment of a Stamp Duty “trade-in” scheme, under which no stamp duty is payable by a person who accepts a traded-in property in exchange or part exchange for a new house/apartment.  Stamp Duty will apply when the person subsequently sells on the ‘swapped’/traded-in house.  Full details will appear in the Finance Bill.

CAPITAL GAINS TAX
Rate

The capital gains tax rate is being increased from 22% to 25% in respect of disposals made from midnight on 7 April 2009.

CAPITAL ACQUISITIONS TAX
Rate

The capital acquisitions tax rate is being increased from 22% to 25% in respect of gifts or inheritances made from midnight on 7 April 2009.

Threshold

The current thresholds of €542,544 (Group A: parents to child), €54,254 (Group B: between related persons), and €27,127 (Group C: between non-related persons) are being reduced by 20% to €434,000, €43,400 and €21,700 respectively. This reduction applies in respect of gifts or inheritances taken from midnight on 7 April 2009.

CAPITAL GAINS TAX, INCOME TAX AND CORPORATION TAX
Income and losses from dealing in residential development land

The special 20% rate applied to the trading profits from dealing in or developing residential development land is being abolished.  The income will be charged at the person’s relevant marginal rates of income tax or the 25% rate of corporation tax. This change will apply as regards Income Tax for the year of assessment 2009 and subsequent years and as regards Corporation Tax for accounting periods ending on or after 1 January 2009 (with accounting periods straddling that date being deemed for this purpose to be separate accounting periods).

Where trading losses have been incurred from dealing in or developing residential development land in circumstances where, if trading profits had been made, they would have been eligible to be taxed at 20%, and a claim to use those losses has not been made to and received by the Revenue Commissioners before 7 April 2009, the losses from today will generally only be relievable (on a value basis) up to a maximum of 20%.  Where any such loss is a terminal loss, the restriction will be implemented by “ring-fencing” the loss. 

CAPITAL ALLOWANCES

A new tax relief on capital expenditure incurred in the acquisition of Intellectual Property.

Termination of Capital Allowances Scheme for Private Hospitals and Nursing homes. Transitional arrangements will be put in place for projects that are at an advanced stage of development. The Finance Bill will contain further details on this measure.

EXCISES
Increase in Mineral Oil Tax on Auto-diesel

The mineral oil tax on auto-diesel will be increased by 5 cent per litre (including VAT) with effect from midnight on 7 April 2009.

Tobacco Excise

The Excise Duty on a packet of 20 cigarettes will be increased by 25 cent (including VAT) with a pro-rata increase on other tobacco products, with effect from midnight on 7 April 2009.

Introduction of VAT Margin Scheme for second-hand cars

A Margin Scheme is being introduced whereby, with effect from 1 July 2009, dealers will be taxed on their margin in regard to second-hand cars they acquire and resell after that date. 

Income Tax Changes

CORI Justice welcomes the fact that Government did not reduce the income levy exemption threshold to zero. This would be to have repeated the mistake of Budget 2009 #1 and would have involved collecting taxes off those living below the poverty line.

While there are likely to be some difficulties on the margins of the new threshold (and for some low income families) the fact that it is approximately €3,000 above the poverty line for a single adult recognises a need to protect the most vulnerable in society.  In the years to come, as resources return, we expect the Government to restore the policy of keeping the minimum wage outside the tax net.

Overall, we also acknowledge the fact that the new tax levies are progressive.

Some Tax Breaks Reformed

For some time CORI Justice has highlighted the necessity to address the area of tax expenditures/tax breaks. These schemes, covering areas from property to farming to health, are often unrecorded by the Revenue Commissioners or the Department of Finance. Few details on the costs and benefits of the schemes are available and in most cases the reliefs exist due to lobbying rather than legitimate economic or social reasons. Our submission to the Commission on Taxation has suggested a set of detailed reforms to the system of tax expenditures and we hope it recommends these when it reports in July 2009.

Budget 2009 #2 marks a welcome commencement to the reform of these schemes. The restriction or removal of  Mortgage Interest Relief, interest relief on rented properties and capital allowances for private hospitals and nursing homes is welcome.  The latter have, like the hotel investment scheme of a few years ago, proved to be an unacceptable waste of public funds.

It is unfortunate that these obvious and necessary reforms were not carried out a few years ago. There were many better uses for this money than funding tax breaks. We have called on the Commission on Taxation to recommend further reforms when they report and we hope that Budget 2010 (to be delivered in December 2009) will present a more significant reform of the number and structure of these tax reliefs.

Future Tax Reform

Building a fairer taxation system is an important part of building a fairer Ireland. The Budget documentation signals further needs for tax increases in 2010 and 2011 (see story on page 16) and CORI Justice believes that these future Budgets offer Government the potential to implement a number of changes to the taxation system which will make it fairer.

A year ago, in our submission to the Commission on Taxation, we outlined in detail a set of proposals to broaden the tax base.

The areas highlighted included:

• Standard rate discretionary tax expenditures
• Introduce a speculative tax on windfall gains from land rezoning
• Introduce the promised carbon and environmental taxes
• Increase the tax on wealth (e.g. through increasing DIRT tax)
• Introduce a land rent tax
• Continue to reform the sizeable number of tax breaks (i.e. tax expenditures), many of which serve minimal social or economic purpose.
• Increase capital gains tax

Budget 2009 #2 has made some welcome moves to address these issues. However, there is plenty of potential reforms remaining. CORI Justice believes that these reforms should be introduced in Budget 2010.

CORI Justice Submission to Commission on Taxation

CORI Justice  made a detailed, 81-page, submission to the Commission on Taxation. The document can be downloaded from our website: www.cori.ie/justice

Effective Tax Rates after Budget 2009 #2

Central to the ongoing debate on taxation in Ireland are effective tax rates. These rates as calculated by comparing the total amount of income tax a person pays with their pre-tax income. For example, a person earning €50,000 who pays €10,000 in taxation will have an effective tax rate of 20 per cent. Calculating the scale of income taxation in this way provides a more accurate reflection of the burden of income taxation faced by earners.

Following Budget 2009 and the supplementary Budget we have calculated effective tax rates for a single person, a single income couple and a couple both earners.  Table 8.1 below presents the results of this analysis. 

In most cases the supplementary budget increased the effective tax rate. For a single person with an income of €15,000 the effective tax rate will be 0%, rising to 10.3% of an income of €25,000 and 41.1% of an income of €120,000. A single income couple will have an effective tax rate of 0% at an income of €15,000, rising to 5.0% at an income of €25,000, 25.5% at an income of €60,000 and 38.0% at an income of €120,000.

In the case of a couple where both are earning and where their combined income is €40,000 their effective tax rate is 11.0%, rising to 22.4% at a combined income of €80,000 and 31.7 % for combined earnings of €120,000.

As chart 8.1 below shows these effective tax rates have decreased considerably over the 12 years for all earners. For example, in 1997 a couple with two earners on an income of €60,000 had an effective tax rate of 36.6%. This fell to 19.3% in 2002 and despite increasing after each of the 2009 budgets will be still lower at 17.4% after this budget.

Chart 8.1 :  Effective Tax Rates in Ireland, 1997-2009 #2

Unacceptable attack on the world’s poorest

One of the major cuts in Budget 2009 #2 is that delivered to the Overseas Development Aid budget. It has been cut by €100 million, adding to a cut in January 2009 of €95 million.

In 2009, Ireland will give €696 million in overseas aid; an amount equivalent to 0.48% of GNP.

This is a shameful cut; one so embarrassing to the Government that the Minister did not mention it in his Budget speech. Indeed, the Budget  documentation, while mentioning the cut, failed to address it implications for the committed government target as published in the White Paper on ODA. The impact of this cut will be felt among the poorest people on this planet; those struggling to survive on less than $1 a day in the over 100 countries that Ireland assists. CORI Justice considers this cut a national shame, it should be reversed immediately.

Education budget - small changes

Capital expenditure in education has been reduced by €54m while capital expenditure has been reduced by €27m. 

Additional places

An additional 6,910 places will be created for unemployed people in the further and higher education sectors. 

These places consist of:

• 1500 in PLC courses;
• 3,500 full and part-time third level places;
• 930 places on third level transition courses;
• 280 places on accelerated certificate programmes; and
• 700 places in a new education programme for redundant apprentices.

Capital spending

Of the €54m reduction in capital spending:

• €30m is taken from school building plan leaving the school building and modernization programme now at €613.5m.
• €24m reduction in the capital budget is taken from higher education.

Current Spending

Of the €27m reduction in current spending:

• The School Transport Programme and the National Educational Psychological Service both lose €2m each.
• Higher education loses €16m
• €2m is taken from the research budget (down from €86.6m which had, in fact increased by 14% earlier in 2009.

Assessment
These changes are relatively minor and the additional places for unemployed people in further and higher education are welcome. However they are only a  small proportion of what is required if Ireland’s projected rise in unemployment to 15% is to be addressed effectively.

Social spending
The Budget stated that there is no provision for extra social spending, other than dictated by demography and unemployment.  This fails to acknowledge that there are major problems concerning children, older people, people with disabilities and those who are ill - all of whom have seen their services reduced over the past year. It also fails to recognise the importance of addressing the social infrastructure deficit that Ireland has been experiencing for many years.

In a time of recession the experience of countries that effectively dealt with serious recessions in the past e.g. Finland, is that increases in social expenditure are required to ensure that vulnerable people are well placed to benefit from economic recovery when it arrives.

Unemployment
A series of initiatives to address the rise in unemployment were included in the Budget.  These include reform of the Back to Work Enterprise Allowance (BTWEA) and back to Education allowance (BTEA). They also include a range of activation initiatives.

These are spread across among a number of different Departments.

While these are welcome they are not on the  scale required to address the dramatic rise in the numbers  on the live  register or the rise in the numbers of people who are unemployed.

CORI Justice urges Government to act immediately on the proposal from the National Economic and Social Council to convene a Jobs and Skills Summit.

Chart 10.1 : Income Distribution and Budget 2009 # 2

Chart 10.2 : Cumulative Impact on the Disposable Income of Private Sector Workers, Budget 2009 #1 &  Budget 2009 #2

Chart 10.3 : Cumulative Impact on the Disposable Income of Public Sector Workers, Budget 2009 #1,   Public sector pension levy and Budget 2009 #2

Notes for all tables: * Except in the case of the unemployed where there is no earner; Unemp = Unemployed; Couple with 2 earners are assumed to have equal shares of income.

Distribution and Budget 2009 #2
When assessing how much better or worse off people are going to be after any budget it is important that wage increases and tax changes be included as well as social welfare increases. Unemployed people, for example, gain nothing from wage increases or tax reductions while those with jobs may gain from both. In our calculations on this occasion we have not included any general wage increases under the T2016 national agreements as many employees will not benefit from these. We have included the impact of the Budget changes on social welfare and taxation. Chart 10.1 (page 10) sets out the impact of Budget 2009 #2 on the take home income of people.

Single people who are long-term unemployed will not be directly affected after this budget. Those on €25,000 a year will see a reduction of €4.79 a week (€250 a year) in their take home pay while those on €50,000 will be €28.75 a week (€1,500 a year ) worse off in the coming year and those on €75,000 a year will be €59.19 a week (€3,089 a year) worse off in the coming year.

Couples with one income on €25,000 a year will be €4.79 a week (€250 a year) better off while those on €50,000 will be €28.75 a week (€1,500 a year) better off in the coming year.

Couples with two incomes on €25,000 a year will be €4.79 a week (€250 a year) worse off while those on €50,000 will be €28.75 a week (€1,500 a year) worse off in the coming year.

The impact of Budget 2009 on the distribution of income in Ireland can be further assessed by examining the rich-poor gap. This measures the gap between the disposable income of a single person on long-term unemployment and a single person on €50,000 per annum. Budget 2009 #2 has reduced the rich-poor gap by €28.75 per week.

Cumulative Impact on Private Sector Take-home Income
The take-home income of people in the private sector has been affected by the taxation and social welfare changes in both the original 2009 budget and in this supplementary Budget.

Chart 10.2 (page 10) sets out this cumulative impact of both budgets on private sector take-home income.
No account has been taken of possible pay increases under the national agreements as many employess will not benefit from them.

Single people who are long-term unemployed are €6.50 a week  (€339 a year ) better off in 2009. Those on €25,000 a year will see a reduction of €9.58 a week (€500 a year) in their take home pay while those on €50,000 will be €38.33 a week (€1,790 a year ) worse off in the coming year and those on €75,000 a year will be €70.54 a week (€3,681 a year) worse off in the coming year.

Couples who are long-term unemployed are €10.80 a week (€564 a year) better off in 2009. Couples with one income on €25,000 a year will be €9.58 a week (€500 a year) worse off while those on €50,000 will be €34.30 a week (€1,790 a year) worse off in the coming year.

Couples with two incomes on €25,000 a year will be €9.58 a week (€500 a year) worse off while those on €50,000 will be €38.33 a week (€2,000 a year) worse off in the coming year.

Cumulative Impact on Public Sector Take-home Income
Workers in the public sector have had three factors impacting their take-home income in the current year: Budget 2009 #1, Budget 2009 #2 and the impact of the Public Service Pension Levy.

Chart 10.3 (page 10) sets out the cumulative impact of  these including the adjustments to the Pension Related Deduction in respect of the lower paid included in Budget 2009 #2.

Single people on €25,000 a year will see a reduction of €20.66 a week (€1,078 a year) in their take home pay while those on €50,000 will be €66.75 a week (€3,483 a year ) worse off in the coming year and those on €75,000 a year will be €114.26 a week (€5,962 a year) worse off in the coming year.

Couples with one income on €25,000 a year will be €23.54 a week (€1,228 a year) worse off while those on €50,000 will be €66.75 a week (€3,483 a year) worse off and those on €75,000 a year will be €114.26 a week (€5,962 a year) worse off  in the coming year.

Couples with two incomes on €25,000 a year will be €23.54 a week (€1,228 a year) worse off while those on €50,000 will be €83.86 a week (€4,376 a year) worse off  and those on €75,000 a year will be €124.83 a week (€6,513 a year worse off in the coming year.

Expenditure Changes - Summary
Budget 2009 #2 made expenditure cuts of €886 million in Gross Current expenditure (€1,215 million in a full year) and €576 million in Gross Capital expenditure relative to the pre-Budget position. We summarise the key expenditure cuts here:

SOCIAL WELFARE
The personal rate of Jobseeker’s Allowance and basic Supplementary Allowance will be reduced for new claimants under 20 years of age to €100 per week from the first week of May 2009. The Qualified Adult rate payable to a Jobseeker’s Allowance/ basic Supplementary Welfare Allowance claimant aged under 20 years will also be €100 per week. These reduced personal and Qualified Adult rates of payment will not apply where a claimant is entitled to an increase for a Qualified Child.

Removal of provision for a Christmas bonus payment in 2009.

Changes to rent supplement eligibility and payment regime.

FOREIGN AFFAIRS
Reduction in Overseas Development Aid of €100 million.

HEALTH & CHILDREN
Early Childcare Supplement monthly payment to be halved to €41.50 per child with effect from 1 May 2009 and abolished at end-2009.  It will be replaced in January 2010 with a pre-school Early Childcare and Education Scheme (ECCE) for all children between the ages of 3 years 3 months and 4 years 6 months. A capitation grant will be payable to service providers who provide free pre-school services. A total reduction of €61m in the provision for:

• the cost of pay awards;
• new developments provided for in the HSE Service Plan to address demographic pressures;  and
• the costs in 2009 of the Constitutional Referendum on Children’s Rights to take account of the later than expected timetable.

PAYROLL SAVINGS (€150m)
These estimated savings arise from the range of initiatives relating to public service numbers management announced recently and in the Supplementary Budget. They include early retirement schemes, leaves of absence and career breaks.

OTHER DEPARTMENTAL SAVINGS
Environment, Heritage & Local Government (€20m)
Principally savings on the Exchequer contribution to the Local Government Fund.
Limited detail on social housing spending.

Education & Science (€27m)
Savings include reductions in funding for the third-level sector; general efficiencies in the administration and operation of the school transport scheme from non-payment of a compensatory allowance to private contractors who were previously availing of the fuel rebate scheme; and savings on teachers’ pay from the suspension of awarding allowances for Posts of Responsibility in schools as vacancies arise, as part of the general moratorium applying in the public sector.

Agriculture, Food & Forestry (€45m)
Savings include reductions in the rate of payment under the REPS Scheme; abolition of the Fallen Animals Scheme; and estimating adjustments across a range of areas.

Community, Rural & Gaeltacht Affairs (€15m)
Savings across various areas, including supports for the Community and Voluntary sector and local and community development programmes.

Transport (€15m)
Reduction in national roads maintenance grants to the National Roads Authority; and reduction in Exchequer subvention payments to CIÉ for provision of public transport services.

Defence (€11m)
Savings include reduced costs of the Chad mission consequent on its changeover to a UN mission from March 2009, together with reduced fuel and other costs and other economies.

Communications, Energy & Natural Resources (€10m)
Savings include a €5m reduction in the allocation for RTÉ, An Post and the Broadcasting Fund, reflecting lower receipts from the broadcasting licence fee, and general reductions on other programmes.

CAPITAL EXPENDITURE
The cuts include:

• Transport – €300 million savings, including a reduction of €150 million or 8% in investment in roads.  In 2009, this reduction is applied mainly to regional and local roads.  Expenditure on national roads is substantially contractually committed to allow for the on-time and on-budget completion of the inter-urban motorway network by end 2010 as promised.  There will also be some deferrals and rescheduling of public transport projects.
• Environment, Heritage & Local Government – €200 million savings, principally arising in the areas of Social Housing and Water Services Infrastructure as well as other programmes.
• Education & Science – €54 million savings, mainly in the Primary and Post-Primary School Building Programmes (€30 million) and the Third Level Capital Programme (€24 million).
• Agriculture – a reallocation of €23 million from Current to Capital towards provision for the Farm Waste Management Scheme;  a cut in the provision for afforestation requiring a reduction in the rate of forestry premium;
• Communications, Energy & Natural Resources – €15 million savings, including a reduction of €13 million in the allocation for Sustainable Energy and Energy research programmes.
• Other areas – capital savings of €55 million in other areas.

Unemployment increase - long-term implications
The Budget highlights the rapid turnaround of the Irish economy in recent months. It has lead to a sudden return to the phenomenon of wide-spread unemployment. Using data from the Live Register, Chart 1 shows how unemployment began to climb throughout 2008 and is projected to increase to a figure of 450,000 people by mid to late 2009. While the increase has, and will be, spread across people of all ages and sectors, table 13.1 highlights the very rapid increase on the Live Register of those aged less than 25 years. Previous experiences, in Ireland and elsewhere, has found that many of those under 25 and over 55 find it challenging to return to employment after a period of unemployment. This highlights the danger of major increases in long-term unemployment in the coming years and suggests a major commitment to retraining and re-skilling will be required. In the long-run Irish society can ill afford a return to the long-term unemployment problems of the 1980s. In the short-run the new-unemployed will add to the numbers living on low-income in Ireland and will impact on future poverty figures.

* Data for mid and late 2009 are projections

National Debt to Climb

An implication of Ireland’s budgetary position is that the country has been forced to borrow large sums of money to cover fiscal deficits in 2008, this year and for the next number of years. Table 13.2 reflects the scale of this increase and shows how the national debt will rise as a proportion of national income from 2009-2013.

The need to so rapidly increase our debt level is driven by two factors. The decline in the international economy, on which Ireland as a trading nation is highly dependent, and the realisation of a series of national policy failures mainly associated with the recent housing boom and the economically illogical trend of persistent and excessive tax cutting. While the former is likely to resolve itself as the international economy improves, the latter, referred to as Ireland’s structural deficit, requires a more coherent response. As CORI Justice has pointed out on many previous occasions a key element of this reform is the long overdue need to reform and refocus our tax base so that all contribute their fair share to Irish society. Elsewhere in this document (see page 7) we highlight the opportunities to broaden the tax base and build a fairer taxation system. As we continue our fiscal reforms these policies will become central to any credible attempt to solve the problem.

Judging the Budget - 8 Key Thrusts
In our Policy Briefing on ‘Budget Choices’, published in March 2009 CORI Justice argued that Government urgently needed to produce a clear, coherent, credible, integrated plan to address the range of crises Ireland is currently facing. We also urged Government to ensure that such a plan was fair and seen to be fair.  We believed such a plan would be effective at addressing the problems Ireland faced both at home and abroad. 

At home there has been an ongoing fury at what people perceive as unfair targeting of particular groups - a perception that has been strengthened when people could not see how the various parts of Government’s response are connected. 

Abroad there has been an ongoing problem with financial institutions who charge Ireland more for the money borrowed - caused, in part at least, on their perception that Ireland lacks a coherent, integrated plan to address the range of crises it faces in a credible manner. We argued that the Government’s plan should respect and follow eight key thrusts in developing its detailed initiatives. We now analyse this Budget and assess how Government has performed.

Judging the Budget - 8 Key Thrusts

Not a Mini Budget’: The Scale of Budget 2009 #2

Budget 2009 #2 may have been labelled a ‘mini budget’ but its scale suggests that it was far from being ‘mini’. In total the Minister for Finance announced changes totalling €3.3 billion during his speech.

The chart opposite attempts to put the mini budgets’ scale in some perspective. It compares to the €1.4 billion ‘adjustment’ announced in January via the public sector pension levy and the October 2008 budget which took €1.3 billion out of the economy.

The ‘mini’ budget’s €3.3 billion of adjustments divides as follows: 45% on expenditure cuts (€1.5 billion) and 55% on taxation increases (€1.8 billion). Collectively, the announcements contained in the ’mini’ budget reflect some of the largest fiscal policy changes ever announced for Ireland.

The Minister has also signalled the scale of future Budget changes. Both Budget 2010 and 2011 will each aim to make an additional €4 billion in adjustments.

The Budget documentation suggests that the 2010 adjustments will be spread across taxation (an additional €1.75 billion), current or day-to-day spending (minus €1.5 billion) and capital expenditure (minus €750 million). These figures suggest that to meet the Budgets’ economic projections, in particular those agreed with the EU, that future Budgets will continue to be very large.

CORI Justice asks Government to ensure that any changes proposed are fair and protect the vulnerable.

Other CORI Justice Publications

The following publications (and many more) may be downloaded for free from our website and are available for purchase from the CORI Justice Office:

• Policy Briefing on Budget Choices (March 2009)
• Policy Briefing on Poverty (February 2009)
• Analysis and Critique of Budget 2009 (October 2008)
• Policy Briefing on Taxation (November 2008)
• Planning For Progress and Fairness (2008)
• Making Choices - Choosing Future: Ireland at a Crossroads (2008)

Government publishes Second Finance Bill for 2009

The Irish Government has published the second Finance Bill for 2009 on May 7th, 2009.  This gives effect to the provisions contained in its second Budget for the year published on April 7th, 2009.  The full text of the Bill here.

An explanatory note together with other relevant information can be accessed at the Department of Finance’s website.

The CORI Justice Analysis and Critique of Budget 2009 can be accessed here in both pdf and html formats.

Government's Budget Documents - Second Budget for 2009 - April 7, 2009

• Financial Statement (Minister's speech) [html]
• Summary of Supplementary Budget Measures - Policy Changes [html]
  
• Macroeconomic and Fiscal Framework [pdf]
• Annexes to the Summary of Budget Measures
• Annex A: Details of Income Levy, Health Levy & PRSI changes in Supplementary Budget 2009 and their effects on different categories of income earners [PDF]
• Annex B: Examination of income related levies and other measures using the poverty impact assessment guidelines of the Department of Social and Family Affairs [PDF]
• Annex C: Mortgage Interest Relief [PDF]
• Annex D: Incentivised Scheme of early Retirement in the Public Service [PDF]
• Annex E: Special Civil Service Incentive Career Break Scheme and Shorter Working Year Scheme [PDF]
• Annex F: Supporting Those Who Lose Their Jobs [PDF]
• Annex G: Enterprise Stabilisation Fund [PDF]
• Annex H: NAMA Indicative Term sheet - Proposed Asset Management Company [PDF]
• Annex I: NAMA Frequently Asked Questions [PDF]
• Financial Resolutions [PDF]

Government's Pre-Budget Positions before Second Budget for 2009 announced on Tuesday April 7, 2009

Key Pre-Budget documents have been published by the Department of Finance.  These are:

• Pre-Budget Outlook Aggregate Figures Download Pdf
• Pre-Budget Gross Expenditure Position  Download Pdf
• Pre-Budget Net Expenditure Position Download Pdf

Government publishes first Finance Bill for 2009

Government published the Finance Bill on November 20th, 2008.  They also published an explanatory memo and list of the items contained in the bill.  All of these can be accessed from this site.

Finance Bill Download Pdf
Explanatory Memo, Finance Bill 2008 Download Pdf
Finance Bill - List of items Download Pdf

Social Welfare Bill

This Bill provides for increases in the rates of social insurance and social assistance payments and improvements in Family Income Supplement. It also provides for certain amendments to the social welfare code, as announced in Budget 2009, and includes amendments to PRSI. The Bill also provides for amendment to a number of other Acts, including the Pensions Acts 1990 to 2007, the Civil Registration.

Budget #1 2009 - CORI Justice Analysis and Critique

Working Poor and Children Lose Out in Budget 2009 

Download Pdf

Budget 2009 did not protect the vulnerable. The working poor and children lose out in Budget 2009. Other social welfare recipients will also be worse off in real terms in the coming year.

This happened despite the fact that the distribution of resources in Budget 2009 was very progressive with the only net beneficiaries being people in receipt of social welfare payments.

The Working Poor
30% of all households at risk of poverty in Ireland are headed by a person with a job. These are the ‘working poor’. Many of these paid no tax because their incomes were outside the tax net in 2008.

Following Budget 2009 they will pay a levy of 1% on every Euro they earn. In practice this means that a person (or couple) on €15,000 will be €150 a year worse off. A person (or couple) on €25,000 will be €250 worse off as a
result of Budget 2009.

The introduction of an income levy means that people  at or below the minimum wage who were outside the tax net in previous years now find themselves paying tax from their already very meagre income - an income that is below the poverty line in many cases. (cf. page 6).

Children
The failure to raise Child Benefit payments means that the value of this payment will fall by 2.5% per cent in real terms in 2009. This will have a negative impact on ‘working poor’  households. Even with the changes introduced in the Family Income Supplement many working poor households will see their standard of living fall in 2009.

As a result of the changes introduced in Budget 2009 there will be no reduction on Ireland’s extensive child poverty. In this context it would be crucial that if Government decides to tax Child Benefit in a future Budget then it should be done on a revenue neutral basis with all of the gain to the Exchequer being spent on reducing
child poverty.

The Budget honoured the commitment by Government to maintain the lowest social welfare payment for a single person at 30% of Gross Average Industrial Earnings (GAIE). An increase of €5.95 a week was required and the increase for most payments is €6.50.

This increase fails, however, to compensate for food price inflation which is well ahead of the standard rate of inflation. This hits poor people much more than others as they spend a large proportion of their income on food The allocation in the Budget to meet this additional cost is only 55 cents a week. A supplement of €3.95 a week was required to address this shortfall adequately. The failure to increase the lowest Social Welfare payment by
€9.90 (€5.95+3.95) is most regrettable.

Some Positive Initiatives But Not Enough to Protect the Vulnerable

Primary Care Teams
We welcome the commitment to develop 200 primary care teams in the next two years. It is crucial, however, that these are developed on the basis of local needs assessment and that first priority be given to areas of greatest need.

Social Housing
We welcome the allocation to social housing programmes. The reduction of 1.7% in the allocation will be a challenge for the organisations and authorities providing the new units. However the capacity for getting better value for money in the current market means that the target of 9,000 social housing starts in 2009 will be achieved.

Environment
We also welcome the environmental initiatives in Budget 2009 in areas such as motor taxation, water services and energy efficiency. We look forward to the development of a carbon tax and its accompanying initiatives to protect the vulnerable.

Conclusion
In its Policy Briefing on ‘Budget Choices’ CORI Justice asked Government to give priority to protecting the vulnerable in Budget 2009. Government distributed its resources in a manner that only those in receipt of social welfare gained. This was welcome.

However, Government took initiatives that worsened the situation of the vulnerable such as applying the new levy to all income. They also failed to take initiatives to protect the position of vulnerable groups such as children. Our overall conclusion is that Budget 2009 failed to protect the vulnerable in the manner or on the scale required.

Our overall conclusion is that Budget 2009 failed to protect
the vulnerable in the manner or on the scale required.

Primary Care Teams Essential for Effective Health System

I reland’s healthcare system has struggled to provide an effective and efficient response to the health needs of its population. Despite a huge increase in investment in recent years great problems persist. One key initiative that would make a substantial positive impact on reducing these problems would be the development of primary care teams across the country.

Primary care teams draw the health professionals in an area together into a team that provides a one-stop shop where people can go locally rather than heading directly to the accident and emergency unit in the nearest hospital.

Up to 80 per cent of those who go to accident and emergency units should not be there.

The National Social Partnership Agreement Towards 2016 contains a commitment  to engage in ongoing investment to ensure integrated, accessible services for people within their own community with a target of 300 primary care teams by end-2008, 400 by 2009 and 500 by 2011. However, progress towards this target has been unacceptably slow. CORI Justice has constantly drawn attention to this particular commitment and its potential to have a very positive impact on Ireland’s healthcare services.

We welcome the commitment in Budget 2009 to initiate a programme for the development and construction by the private sector over the next two years of 200 primary care centres.

However, we strongly urge Government and the HSE to ensure that these centres are progressed on the basis of local needs assessment including fair coverage of both rural and urban areas.

We also urge Government and the HSE to take the necessary action to ensure that development of the 200 primary care teams for these centres is initiated as soon as possible.

Finally we urge all involved to ensure that the target of 500 teams is reached by the target date of end-2011.

Social Housing - Positive
The insufficient supply of social housing has been a major problem in Ireland for two decades. Despite the record levels of house building over the past decade there are still more than 40,000 households with about 120,000 people on waiting lists.

The Towards 2016 agreement contains a commitment to start 9,000 social housing units in 2009. This is part of a wider commitment that would see the social housing waiting lists eliminated by 2013.

CORI Justice welcomes the allocation for social housing in Budget 2009. Even though it marks a reduction of 1.7% it  should be possible to meet the target with these resources given the changing market situation and the better value that can be got for the available resources.

We also welcome the allocation of an additional €3m for homelessness and an additional €10m for the voluntary and cooperative housing sector.

Disability - Negative
People with disability are, for the most part, among the excluded in our society. People who are ill or have a disability are among the two categories at highest risk of poverty (40.6%). Some commitments made in Budget 2008 were not honoured and there is no evidence this situation has been corrected in Budget 2009.

This Budget includes a 1% reduction in the allocation to voluntary disability providers. There is no commitment to introduce a cost of disability payment. However, there is a decision to establish a Group to review the scope for greater rationalisation of, and increased economy/efficiency within, the non-statutory disability service providers. [Confining this to the non-statutory sector makes no sense.] CORI Justice considers that disability has not been given the priority it requires in Budget 2009.

Adult Literacy - Negative
Ireland has a serious literacy problem among both adults and children. The Government has a target of reducing the proportion of the adult population (aged 16-64) with restricted literacy (i.e. level 1 on the international literacy scale) to between 10-15% by 2016. CORI Justice has constantly pointed out that is this target is achieved there will be between 317,000 and 476,000 adults with serious literacy difficulties in 2016.

Government’s response in Budget 2009 is to reduce the allocation to special initiatives in adult education by 3%, to reduce the grants to adult education organisations by 2% and to reduce the grants to youth organisations by 10%.

These reductions will save Government a relatively small amount of money but the negative impact on the sector will be huge. Much adult literacy work in Ireland is done by volunteers who may now be discouraged. The cutbacks also fail to recognise the need to tackle causes of problems.

ODA - Positive
Ireland will spend €891m on Overseas Developent Assistance in 2009. This is down from €914m committed in 2008. However, given the fact that Ireland’s GNP has been falling and is scheduled to fall again in 2009 this allocation means that Ireland’s ODA budget will reach 0.56% of GNP in 2009.

Ireland has a committed to reach the United Nations target of 0.7% of GNP for ODA by 2012. It has set an interim target of 0.6% for 2010. CORI Justice believes these targets should both met.

Budget 2009 - Summary of the Key Numbers

To accompany the Budget speech the Department of Finance has published a series of documents detailing the changes announced in the Budget. Through this Analysis and Critique document we examine various aspects of these changes. The table below brings together the key figures from the published Budget documents.

It presents the Department of Finance’s expectations of National Income (GDP and GNP) next year, and for the next three years. It outlines the projected exchequer budgetary position over that period. Expectations of future changes to employment, unemployment and inflation are detailed. The table also includes details on the taxation system following the implementation of the Budgetary changes. Finally, the table outlines the Department of Finance’s calculations regarding the full year cost of the tax and social welfare changes announced in the Budget.

Budget 2009 in Context

The tables and charts on page 5 offer an insight into the rapid decline in the national finances that set the context for Budget 2009.

Table 3 compares the expected government taxation revenues outlined in Budget 2008 (December 2007) with those indicated by Minister Lenihan this year. It revels declines in all the major tax categories; resulting in an overall decline in taxation revenue of €6.4b. The biggest decreases were in VAT and Capital Taxes - items closely linked to the decline in the property market.

The recent excessive dependence of the exchequer on stamp duties and property transaction is highlighted by chart 2. As these revenues disappear the significant current budget surpluses of recent years (where tax income is greater than day-today spending) turn into large deficit. These deficits are projected to continue to at least 2011.

Chart 1 highlights the rapid increase in unemployment already experienced in 2008 and projected to further increase in 2009; reaching 7.3% .

The diagrams and tables below have been compiled using data from the Budget documentation published by the Department of Finance this year and in previous years.

Chart 1: Unemployed Rates, 2005-2001

Source: CSO QNHS and Budget 2009 Documents

Chart 2 : Current Budget Surpluses, 2005-2011

Source: Budget Documents various yrs, including projections from Budget 2009

Chart 3: Income Distribution and Budget 2009

Notes: *Except in case of the unemployed where there is no earner. # Unemp: Unemployed Couple with 2 earners assumed to have equal shares of income.

Chart 4: Effective Tax Rates in Ireland, 1997-2009

Distribution and the Budget

Each year CORI Justice examines the Budget from a number of perspectives, including its effect on the income distribution. In Chart 3 (on page 6) we have examined how the resources available to the Minister for Finance were used. The chart reports the combined effect of changes in welfare payments (to the unemployed) and changes in taxes and bands (to those earners who are employed and whose incomes are high enough to be liable for taxation).

We strongly welcome the fact that in this Budget the unemployed have gained more per week than have those in any other income group. A single person who is long-term unemployed gains €6.50 per week following the Budget while a single earner on €15,000 per year loses €2.87 per week, an earner on €25,000 per year loses €4.79 per week and an earner on €100,000 per year loses €16.14 per week.

In this Budget the unemployed have gained more per week than those in any other income group

An unemployed couple are €10.80 per week better off which contrasts with a couple with one earner on an income of €100,000 per year losing €16.14 per week, a difference of almost €27 per week CORI Justice welcomes this distributive approach.

However, it is of concern that working families on low incomes lose out in Budget 2009

Effective Tax Rates after Budget 2009

Central to the ongoing debate on taxation in Ireland are effective tax rates. These rates as calculated
by comparing the total amount of income tax a person pays with their pre-tax income. For example, a person earning €50,000 who pays €10,000 in taxation will have an effective tax rate of 20 per cent. Calculating the scale of income taxation in this way provides a more accurate reflection of the burden of income taxation faced by earners.

Following Budget 2009 we have calculated effective tax rates for a single person, a single income couple and a couple both earners. Table 4 (page 6) presents the results of this analysis and compares them to the 2008 rates. For a single person with an income of €15,000 the effective tax rate will be 1.0%, rising to 9.3% of an income of €25,000 and 36.5% of an income of €120,000. A single income couple will have an effective tax rate of 1.0% at an income of €15,000, rising to 3.9% at an income of €25,000, 20.5% at an income of €60,000 and 32.6% at an income of €120,000.

Effective tax rates provide a more accurate reflection of the burden of income taxation faced by earners.

In the case of a couple where both are earning where their combined income is €40,000 their effective tax rate is 4.6%, rising to 27.9% for combined earnings of €120,000.

Chart 4 (page 6) shows that while these effective tax rates will increase in 2009 they have decreased considerably over the 12 years for all earners. For example, in 1997 a couple with two earners on an income of €60,000 had an effective tax rate of 36.6%. This fell to 19.3% in 2002 and will be 13.2% after this budget.

How Much Better Off Will People Be In 2009?

When assessing how much better off people are going to be in 2009 it is important that wage increases and tax changes be included as well as social welfare increases. Unemployed people, for example, gain nothing from wage increases or tax reductions while those with jobs may gain from both. In our calculations we have included the general wage increase in various national agreements as well as the impact of Budget changes on social welfare
and taxation.

We have not included the impact of any future benchmarking increases for public servants, as they do not apply to everyone.

Single people who are long-term unemployed will be €6.50 a week (€339 a year) better off in 2009. Those on
€25,000 a year will be €1.67 a week (€87 a year) better off while those on €50,000 will be €17.63 a week (€920 a
year ) better off in the coming year.

Couples who are long-term unemployed will be €10.80 a week (€564 a year) better off. Couples with one income
on €25,000 a year will be €5.79 a week (€302 a year) better off while those on €50,000 will be €17.20 a
week (€ 897 a year) better off in the coming year.

Couples with two incomes on €25,000 a year will be € 5.79 a week (€302 a year) better off while those on
€50,000 will be €22.28 a week (€1,163 a year) better off in the coming year.

The impact of Budget 2009 on the distribution of income in Ireland can be further assessed by examining the
rich-poor gap. This measures the gap between the disposable income of a single person on long-term unemployment and a single person on €50,000 per annum. Budget 2009 has widened the rich-poor gap by €11.13 per week

Budget Delivers a Number of Overdue Reforms

Budget 2009 contained a number of overdue reforms which CORI Justice welcomes. These include:

Standard Rating of Discretionary Tax Benefits
As the dental treatment example in the table below shows, this overdue reform, which we have been calling for over many years, has address a significant unfairness in the taxation system. Following the Budget all taxpayers will receive tax reliefs on dental and medical expenses at the same (standard) rate.

However, we regret that the Minister did not take the opportunity to address the sizeable inequity that remains relating to pension contributions. These are particularly expensive reliefs and are structured just as unfairly as the medical and dental reliefs prior to Budget 2009. CORI Justice regrets that they were not reformed in this Budget.

Reform of Medical Cards for the over Seventies
The scheme to make medical cards available to all those over 70, irrespective of their means, proved to be an
expensive policy initiative and a questionable use of government resources.

CORI Justice welcomes the decision to abolish it. However, we note the continued low value of the medical card entitlement means test. At its current level the threshold excludes many low income people and families who cannot afford medical treatment or medical insurance. Future Budgets should increase this threshold.

Increase in Capital Gains Tax
We welcome the decision in Budget 2009s to increase Capital Gains Tax (CGT) from 20% to 22%. This is another
long overdue reform. We note that the Minister in his Budget speech signaled a further review of this tax.

CORI Justice welcomes this commitment and we believe that a further increase is merited.

Charge on Non-principal Private Residences
The Budget decision to levy a €200 per annum charge on all non-principal private residences (rented units, holiday homes etc) is also welcome. The structure of the scheme, to commence in 2009, will be administered by Local Authorities and will provide them with additional revenues. While the scheme is likely to be difficult to implement it is a welcome step in the direction of a broader tax base and towards a property tax. CORI Justice has called for a site value tax to be implemented and we hope this reform signals a step in its direction.

Parking Space Charge
CORI Justice welcomes this initiative as a small move towards a broader set of environmental taxes which will reward and encourage sustainable behavior. However, increases in urban and rural transport schemes are needed to  further complement this scheme and these should be delivered in the coming years.

Increasing Tax Credits would have been Better Option

The Budget’s decision to increase the standard rate tax band by €1,000 for a single person and €2,000 for a married two earner couple was not the most progressive way to use the available resources as they go only to those above the thresholds.

When choices are being made at Budget time it is important that fairness is prioritised. Such a choice is obvious in the area of changes to tax credits and bands.We illustrate using the Budget change as an example:

The €200 million full year cost of the tax band change could have been used to either

(i) increase the 20 per cent tax band by €1,000 (full year cost €200m) or
(ii) increase personal tax credits by €92 a year (full-year cost €201.1m). While the
exchequer cost of these two alternatives is roughly the same, their impact is notably
different:

(i) Increasing the tax band by €1,000 will be of no benefit to anyone with incomes at or below the top of the current band (i.e. €35,400 for a single person) but would provide a benefit of €210 a year to a single person earning more than €36,400. Single people with incomes in the €35,400-36,400 range would benefit by a proportion of the €210.
(ii) Increasing the tax credit by €92 a year would mean that every earner with a tax bill in excess of €92 a year would benefit by that amount.

In terms of fairness, increasing tax credits is a fairer option than widening the standard rate tax band. This would have been a fairer choice in Budget 2009 and we regret that the Minister did not take it.

Unemployment Increase Poses Major Challenge

One of the major achievements of recent years has been the increase in employment and the reduction in unemployment, especially long-term unemployment. In 1991 there were 1,155,900 people employed in Ireland. That figure has increased by almost one million to reach 2,140,900 in 2007; during early 2006 the employment figure exceeded two million for the first time in the history of the state. Overall, the size of the Irish labour force has expanded significantly and today equals over 2.25 million people, almost nine hundred thousand more than in 1991.

However, as table 5 shows unemployment increased significantly in 2008 to an annualised rate of 5.8%. The Budget indicates that the rate will climb further during 2009 reaching 7.3%.

Based on a projection that the Irish Economy will exit recession in 2010, the Budget suggests that the rate will
begin to decline to 7% in 2010 and to 6.5% in 2011. Projections for longterm unemployment are not currently
available.

In responding to this situation the Government should:

• Resource the upskilling of those who are unemployed and at risk of becoming unemployed.
• Maintain a sufficient number of active labour market programme places available to those who are long-term unemployed.
• Actively manage the increasing number of unemployed to avoid large increases in long-term unemployment.
• Adopt policies to address the worrying trend of youth unemployment.In particular, these should include education initiatives and retraining schemes.
• Monitor groups at very high risk of unemployment.

The changes to schemes that support people of working age in Budget 2009 will in effect reduce the entitlements of job seekers, people who are ill or have a disability.

These changes raise questions concerning the future direction of government policy for these groups.

Welfare Increase

Fifty percent of all those at risk of poverty in Ireland live in households headed by a person outside the labour force. These are people who are elderly, ill, have a disability or are in caring roles. They depend completely on social welfare payments for their income.

Budget 2009 increased the basic social welfare payment for a single person by €6.50 per week; bringing it to €204.30 per week. For a couple the increase was €10.80; bringing the weekly payment to €339.90. The state pension was increased by €7 per week for a single person and €11.60 for a couple.

These increases are welcome as they continue to honour the benchmark for the minimum social welfare payment; set at 30% of Gross Average Industrial Earnings (GAIE). However, the Budget failed to address the impact of recent increases in food prices which have been substantially in excess of the standard CPI inflation rate. As the Vincentian Partnership Budgets Standards research studies show these products comprise a large percentage of the expenditure of low income households. In the context of these price increases CORI Justice, in our pre-Budget Submission, called on Government to recognise these pressures and deliver a further increase of €3.95; on top of the amount needed to maintain the benchmark (i.e. + €9.90). We regret that Budget 2009 failed to deliver this increase.

Fuel Poverty

A 2007 policy paper from the Institute for Public Health (IPH) entitled “Fuel Poverty and Health” highlighted
the sizeable direct and indirect effects on health of fuel poverty. Overall the IPH found that the levels of fuel poverty on the island of Ireland remain “unacceptably high” and that they are responsible for “among the highest levels of excess winter mortality in Europe, with an estimated 2,800 excess deaths on the island over the winter months”.

They also highlighted the strong links between low income, unemployment and fuel poverty with single person households and households headed by lone parents and pensioners found to be at highest risk. Similarly, the policy paper shows that older people are more likely to experience fuel poverty due to lower standards of housing coupled with lower incomes.

Budget 2009 increased the fuel allowance by €2 per week bringing it up to €20 per week and extended the allowance for two weeks; from 30 to 32 weeks. This is in effect an increase of 18.5% or €100 per annum.

CORI Justice welcomes this increase as it will assist many recipients who are currently experiencing fuel poverty.

However, we urge Government to continue this trend and implement the IPH’s call for the creation of a national fuel poverty strategy similar to the model currently in place in Northern Ireland.

Government’s Current Budget for 2009

Below we outline the government’s current budget for the forthcoming year. The current budget comprises the income (or receipts) and expenditure associated with the day-to-day running of the country. Income includes revenue from taxation and flows of funds to the government from other sources including the Central Bank and the National Lottery. Collectively these give a figure for the total income expected to be received by the government during the next year - total current receipts (labelled b below). Expenditure includes interest payments on the national debt, contributions to the EU and the costs associated with running on a day-to-day basis Ireland’s economic and social services. When transfers to the social insurance fund (PRSI) and unspent resources from previous years are excluded a figure for net current expenditure planned for next year is reached (labelled a below). The current budget balance (b minus a) indicates how much day-to-day income exceeds (if positive), or falls short (if negative), day-to-day spending.

Taxation

The Context
Ireland's tax-take has fallen dramatically in part at least because we have relied too much on stamp duties flowing from the over-production of housing a strategy that CORI Justice has consistently challenged as being unsustainable.

At the same time it is important to bear in mind that despite the present economic pressure Ireland has low  debt and low taxation. Because of this it is possible for Ireland to absorb higher borrowing and have a somewhat higher overall tax-take without becoming uncompetitive or creating major disincentive side-effects.

Ireland’s take from income tax is low and effective income tax rates are very low. This is a consequence of the way in which Ireland’s tax-take was distributed. A far larger proportion of Ireland's tax-take came from  stamp duties and VAT in recent years compared to previous years.

Ireland’s total tax-take will have to rise if Ireland is to have services and infrastructure at EU-average levels.

This should be done through  broadening the tax base. Ireland’s tax system must be made fairer. Among other things this should ensure the working poor benefit from the full value of their tax credits.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness Section 3.2 Pages 65-97

The Budget

INCOME TAX

• Standard Rate Tax band increased by €1,000 single, married (one income) and lone parent and €2,000 married (two incomes)
• New Income Levy 1% gross income to €100,100 and 2% income in excess of that
• Employee PRSI ceiling increased to €52,000
• Health expenses relief, with the exception of nursing homes, at standard rate only
• Mortgage interest relief for firsttime buyers increased to 25% in years 1 and 2 and to 22.5% years 3, 4 and 5
• Mortgage interest relief for nonfirst time buyers reduced to 15%
• Earnings limit for tax relieved pension contribution reduced to €150,000
• Levy of €200 on employees whose employer provides car parking facilities
• Provision of bicycles to employees who agree to cycle to work will be tax-exempt benefit-inkind
• Increase in Rate for Preferential Loans (other than home loans) from 13% to 15%
• Tax relief in respect of donations of heritage items and property limited to 80%

CAPITAL ALLOWANCES & TAX INCENTIVES

• Additional four categories available for capital allowances of 100% expenditure
• Time for disposal of newly constructed commercial buildings extended to 2 years
• Ring-fenced tax incentive to facilitate removal or relocation of Seveso-listed industrial facilities which hinder residential or commercial development

CORPORATION TAX

• Tax credit for research and development increased to 25%
• Payment of large companies' preliminary corporation tax split into two instalments
• New start-up companies with tax liability not exceeding €40,000 will be exempt from tax includingcapital gains tax in each of the first three years

VAT & EXCISES

• Standard rate of VAT increased to 21.5%
• Excise Duty on petrol increased by 8 cent per litre
• Excise Duty on 20 cigarettes increased by 50 cent
• Excise Duty on a standard bottle of wine increased by 50 cent
• Excise Duty on low alcohol beer and cider reduced by 50%
• Alcohol-related licensing fees including off-licences increased to €500
• Betting duty rate increased to 2%
• Air travel tax introduced at €2 per passenger for journeys under 300kms and €10 per passenger for all others

STAMP DUTY

• Top rate of stamp duty on nonresidential property reduced to 6%
• Stamp duty on ATM and debit cards reduced by 50%
• Stamp duty on cheques increased to 50 cent

OTHERS

• Rate of capital gains tax increased to 22%
• Rates of DIRT increased to 23% on life assurance policies and 26% on investment funds
• Motor tax increased by 4% for cars below 2.5 litres and CO2 bands A to D and 5% for cars above 2.5 litres and CO2 bands E to G
• Charge of €200 on all nonprincipal private residences to  be paid to Local Authorities

Social Welfare

Context

• 720,774 people (17% of the total population) have incomes below the standard poverty line recognised by the European Commission and the United Nations. In 2008 this line is equivalent to €11,400 for a single person and to €26,400 for a household of 4. The number of people with incomes below that level is 120,000 fewer than was the case in 2001 when 21.9% of the population was at risk of poverty.
• Almost 30% of all households at risk of poverty are headed by a person with a job. These are the 'working poor'.
• 50% of all households at risk of poverty  are headed by a person outside the labour force (i.e. they are elderly, have a disability, are ill or in caring roles that prevent them from taking up a job).
• More than 20% of all children in Ireland are at risk of poverty.
• Government has committed to maintain the lowest social welfare rate for a single person at 30% of Gross Average Industrial Earnings. This level was reached in Budget 2007. Maintaining it in 2009  would require an increase of €5.95a week.
• Poor people spend a higher proportion of their income on food and fuel both of which have seen their prices rise faster than inflation in the past year. Compensating for food inflation would require an additional €3.95 on social welfare making a total increase of €9.90 a week.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness Section 3.1 Pages: 22-56

The Budget

Provided Total Social Welfare improvements costing €515 million in 2009.

PERSONAL RATES (weekly increase )
State Pensions: €7 (contributory) €7(non-contributory).
Maximum - €6.50 - all other schemes.

QUALIFIED ADULT ALLOWANCES

€6.30 State Pension, 66 + (contributory)
€4.70 Pension (contributory) and Transition, < 66
€4.60 Non contributory Pension < 66
€4.60 Invalidity Pension, < 66
€4.30 for other QAA payments

OTHER WEEKLY INCREASES
No increase in Child Benefit rates- No Child Benefit Payments for over 18s from 2010. Half rate - for
those 18 in 2009.
€2 in the Qualified Child Payment- new rate € 26.00.
To compensate relevant social welfare and low income families affected by the change in the Child Benefit Scheme, - special increase in the Qualified Child Payment to €41 for children aged 18.
€10 per child in FIS income threshold.
€50 in the additional income disregard for Back to School Clothing and Footwear Allowance.
€2 in Free Fuel Allowance Scheme and 2 weeks in duration.
€8.50 in Maternity and Adoptive Benefit Payment.

CARERS
€7 - 66+ and €6.50 < 66.
€6.50 - Carer’s Benefit and Constant Attendance Allowance.

Our Response

• We acknowledge that the increase in the Social Welfare personal rates of €6.50 exceeds by 55 cents the government benchmark for the lowest social welfare payments at 30% of Gross Average Industrial earnings.
• However, an additional weekly payment of 55 cent falls far short of that required to meet the recent increases in the cost of basic food above the level of inflation.
• The weekly increase of €2 in the Fuel Allowance and the increase of two weeks in the duration of
• the scheme will not make a sufficient contribution to the elimination of fuel poverty.
• The failure to increase Child Benefit in the climate of sharp increases in the cost of food and services will lead to an increase in child poverty.
• The lack of increase in the Living Alone allowance will mean that many elderly people living alone, the majority of whom are women will continue to struggle on a grossly inadequate income.
• The limited increase in the Carer’s Allowance and the failure  to address the Respite Care Grant will increase the burden of many carers.
• The continued reluctance to address the meagre weekly allowance of Asylum Seekers in direct provision is lamentable.
• We regret the failure to introduce the cost of disability allowance.

Public Services

The Context

Ireland is identified as a country where public services are underdeveloped. Given the wealth of the economy over recent years this situation is far from acceptable. Poor people rely on public services more than those who are better off and are therefore more acutely affected by this shortage.

Public transport is a problematic area. Bottlenecks throughout the country are adding to the difficulty and cost experienced by everybody in conducting their lives. In particular support is required for public transport schemes in rural Ireland as these significantly enhance the quality of life of those living in remote rural areas.

Libraries play an important role in society. There are over 14 million visits to public libraries annually and 778,421 registered members. In the commitment to lifelong learning libraries are a unique resource and opportunity to provide information  and easy access to modern means of communication.

Sport. Given that investment in sport is primarily to produce health benefits that accompany physical activity, a far greater part of the sports budget should be focused on grassroots sport e.g. the funding of local sports partnerships.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness Section 3.4 Pages: 112-118

The Budget

JUSTICE, EQUALITY & LAW REFORM
Decreased allocation to equality by 30% to €23.9 million Decreased allocation to disability by 5% to €12.9 million
Decreased allocation to immigration and asylum by 4% to €133 million

LOCAL GOVERNMENT
Decreased allocation to Library service by 38% to €11.7 million
Decreased allocation to Community and Social Inclusion by 14%  to €6.5 million
Decreased allocation to disability services by 7% to €14m.

TRANSPORT
Increased allocation for operation of public transport services by 2% to €338 million
Decreased allocation for public transport investment by 7% to €916 million
Decreased allocation for road improvement/maintenance by 8% to €2,120 million
Provided €10 million capital for carbon reduction initiatives Provided €17.6m. for cross-border
transport initiatives

COMMUNICATIONS, ENERGY & NATURAL RESOURCES
Increased allocation to fund sustainable energy programmes by 10% to €53.6m.
Decreased allocation to information and communications technology by 25% to €40m.

ARTS, SPORT & TOURISM
Decreased Sports Council allocation by 8% to €53m
Decreased allocation to grants to support sport in disadvantaged  areas by 10% to €1.3 million
Horse and Greyhound Racing Fund reduced by €6.6million

Our Response

• We regret the decreased allocation to the library service and see this as a direct attack on the life-long learning facilities of many in disadvantaged areas
• We regret the decreased allocation to the information and communications technology programme. It is difficult to see how broadband will be made available to currently unserved rural areas within the stated
• timeframe.
• While we welcome the reduction in allocation to horse and greyhound racing we believe that this
• subsidy of €70 million could have been much better spent in the context of the overall budget to the benefit of more people.
• We regret the decreased allocation in the grants to support sport in disadvantaged areas.
• We regret the decreased allocations to equality, disability, immigration and asylum. Together with the decrease in the allocation  for community and social inclusion the overall effect will be an increase in exclusion of already marginalised people
• We welcome the allocations for carbon reduction initiatives and for sustainable energy programmes.
• We welcome the increased allocation, small as it is, to operate the public transport services but regret that the  allocation in the public transport programme has been decreased.
• We welcome the overall commitment to improving efficiency across the government departments.

Education/Education Disadvantage

The Context

• Despite the economic boom the education system continues to mediate the vicious cycle of disadvantage and social exclusion between generations.
• Early school leaving is a particularly serious manifestation of the wider inequality in education.
• The low level of literacy among a significant proportion of the adult population is of concern. Likewise a 2004 study which shows up to 30% of pupils in disadvantaged primary schools have literacy difficulties. The target set by Government is to reduce illiteracy among those aged 16-64, to between 10-15% by 2016. This suggests it is acceptable that between 317,000–476,000 people will have basic literacy problems in 2016. This will mean poor outcomes for the people themselves and is also bad for the economy.
• Ireland’s expenditure on education equalled 4.6% of GDP in 2005 according to the OECD. This compares to an EU average of 5.5% in that year. As the national income has increased the share allocated to education has fallen. In 1995 expenditure on education equalled 5.2% of GDP.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness Section 3.7 Pages: 151-161

The Budget

• Increased the Gross budget by €308 to €9,628m (€229m Current and €79m Capital)
  
• Allocated €369m to national schools and €212m to the second level schools building programme.
  
• Increased the capital investment in higher education to  €265m.
  
• Increased the allocation for non-teaching staff in national schools including special needs assistants, caretakers and clerical officers by 13% to €311m.
  
• Increased the allocation for non-teaching staff in second level schools by 17% to €52m.
  
• Increased the allocation to the National Educational Psychological service by 33% to €23.75m
  
• Increased the capitation funding for primary and postprimary schools by €20m
  
• Allocated an additional €10m for Special Education.
  
• Reduced the allocation to Special Initiatives in Adult Education by 3% to €43.7m.
  
• Reduced the grants to adult education organisations by 2% to €941,000.
  
• Reduced the grants to youth organisations by 10% to €39.4m
  
• Reduced the allocation to Schools Information and Communication Technologies Activities by 29% to €26m.
  
• Increase in the post-primary school transport charges to €300 annual fee.
  
• Third level funding allocations will allow for increases in the student services charge in 2009/10 of up to €1,500 in individual institutions.

Our Response

• We welcome the modest increase in the budget for education. The increase in the primary school building programme is particularly welcome.
• While recognising the additional allocation for Special Education we note that a ‘number of grants, mainly school related, are being abolished or scaled back to the value of €26.6m.’ Where these cuts will hit is a cause for concern.
• We are very concerned about the cuts to adult education. While the amount of money saved is very small the negative impact on this sector will be huge. Government has set a target to reduce the proportion of the population with literacy difficulties among those aged 16-64, to between 10-15% by 2016. This suggests that it is acceptable that there will be between 317,000 – 476,000 people with basic literacy problems in 2016. This will mean poor outcomes for the people themselves and it is also bad for the economy.
• Given the increase in unemployment and that many young people were enticed away from education in the ‘boom years’ we regret that no special initiative was targeted at this group of vulnerable people to help them further their education.
• It is a cause for serious concern that there is no provision for the educational needs of new immigrants to Ireland, particularly in the area of language acquisition and cultural immersion. The failure to address the extension of the two year framework for completion of the Leaving Cert Applied is also regrettable.
• We regret that no enhanced initiatives or additional provision was made for “early start” programmes and that no additional allocation for training and evaluation relating to pre school initiatives was provided.

Healthcare

The Context

• People should be assured that healthcare in their times of vulnerability is guaranteed.
• In 1977, 39% of the population were eligible for medical cards. By 2007 this figure had decreased to 29.5% and included people over 70 irrespective of their income.
• Because of costs people on low incomes defer seeking healthcare with long term negative outcomes for themselves, their families and the economy.
• Primary Care should be a cornerstone of the healthcare system.
• There is a commitment in the Towards 2016 Social Partnership Agreement that 300 primary care teams would be in place across the country by the end of 2008.  This was set to rise to 400 in 2009 and to 500 by 2011.  This commitment has not been honoured with fewer than 100 teams currently in place.
• There is a clear need for an increase in the percentage of the healthcare budget being allocated for primary care.
• Ireland spends 7.2% of GDP on health compared to an EU25 average of 8.6%.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness
Section 3.6 Pages: 137-150

The Budget

• Increased allocation to HSE to €14.791bn an increase of €580m
• Gross capital allocation for the DoHC & HSE is €540m a reduction of 25% on 2008
• HSE is to initiate a programme for the development and construction by the private sector over the next two years of 200 primary care centres.
• Allocation of €55m to implementation the Fair Deal scheme
• An allocation of €15m for the Cancer control programme
• An allocation of €10m therapy services for children of school going age
• 1% reduction in the allocations to voluntary disability providers
• Increase of 20% in private/semi private bed charges in public hospitals
• Increase from €66 to €100 in A&E charges
• Medical card for over 70’s will be means tested from the 1stJanuary 2009
• An annual cash grant of €400 will be paid to those aged 70 who do not qualify for a medical card /GP visit card, whose gross weekly income is below €650 for single person/€1300 for couple.
• An allocation of €1.75m for suicide prevention and to support greater service user involvement in mental health
• Increase in drug payment scheme from €90 to €100 a month

Our Response

• We acknowledge the increase in the HSE budget.
• A reduction in the capital allocation will impact negatively on the developmental side of services particularly in the community area.
• The development of 200 primary care centres over the next two years is welcomed but these must be progressed in relation to the local needs assessment including rural and urban areas.  First priority must be given to communities of greatest need.
• Even with this development the commitment in Towards 2016 has not been met as the agreed  targets are 400 - 2009 and 500 - 2011.
• The eligibility levels of medical cards has not been raised. This will have a negative impact on those who are on low income levels of all ages particularly as the HSE will be introducing  limits on the total expenditure under the discretionary medical card and hardship schemes.
• The reduction of allocation to the voluntary disability providers will have a negative impact on the extent of services that are provided to date.
• The allocation for  the development of the child & adolescent mental health services is welcome but it falls below what is needed to develop this service as committed to in Towards 2016.
• While welcoming the launch of the Fair Deal scheme we note that the allocation of €55 million is not adequate to cover the costs of this service.

Community & Rural Development

The Context

• Rural Ireland has high dependency levels, out-migration and many people living on low incomes. The number of farms is expected to decline by 23%, from 136,000 in 2002 to 105,000 in 2015.
• Only a minority of farmers generate an adequate income from farming. Off farm income is essential if rural poverty and social exclusion are to be addressed.
• Long-term strategies are needed urgently on infrastructure, the national spatial imbalance, public services, public transport and local involvement in core decision-making.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness Section 3.11 Pages: 194-204

The Budget

• Allocated €523.6m (- €22.7m on 2008) to Dept. of Community Rural & Gaeltacht Affairs
• Initiatives tackling Economic & Social Disadvantage ( + €8m)
• Increased funding of €50.4m ( + 48%)to Rural Social Scheme
• Allocated €159m for agricultural research and training
• REPS increased to €355m
• LEADER Programme increased from €16m to €27m
• Reduced Drugs Initiative/Young People’s Facilities & Services Fund ( -5%)
• Reduced Community Services Programme by 8% to €50.85m
• Reduced Supports for Community and Voluntary Sector -14%
• Reduced Support Local & Community Development Programmes ( -7%)

Our Response

• We welcome the increased allocations to Economic and Social Disadvantage Schemes, Rural Social Scheme, LEADER Programme while noting an overall decrease in the gross budget to the Department.
• The challenge to bring fundamental economic and social change to rural communities has not been adequately resourced and still remains a challenge, particularly in relation to the Drugs Initiative and  Community Services Programme.
• The reduction in Supports to Community and Voluntary Sector and to Local & Community Development may have a long term negative impact for those in rural areas.
• We regret the failure to address the national spatial imbalances and local involvement in core decision-making.

Work/Unemployment/Job Creation

The Context

• Unemployment has risen by over 58,000 since the beginning of the year. It is now 6.3% of the labour force. The rise in long term unemployment and youth unemployment are of particular concern. Low employment among people with a disability is also of concern (only 37% of people with a disability are employed and a quarter of these were part-time).
• 30% of all households at risk of poverty are headed by a person with a job. Many are outside the tax net. They neither benefit from budget changes nor get the full value of their tax credits.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness Section 3.3 Pages: 98-111

The Budget

• Decreased Dept. of Enterprise, Trade & Employment gross budget ( -€11m)
• Increased FÁS Employment Programme 2%
• Increased FÁS Training for employment 5%
• Decreased FÁS Training & Integration Supports (-5%)
• Reduced Skillnets Training Network Programme (–6%)
• Changes for new claimant people of working age making it more difficult to access Jobseekers, Benefit.
• Maximum duration of Jobseekers Benefit 9 months,
• Duration of entitlement to Illness Benefit limit two years,
• Minimum age Disability Allowance entitlement 18 years,
• Maximum age Domicilary Care Allowance 18 years

Our Response

• We acknowledge the small increase in the FÁS training for employment but the overall budget decrease in the current climate is regrettable.
• Reductions in the many programmes which support the unemployed will have a negative impact on vulnerable people.
• The changes occurring for new claimants of working age in areas such as Jobseekers Benefit, Illness Benefit and Health & Safety Benefit will impact directly on those who are not long established in the workplace.
• We regard these changes as failures to support the long-term unemployed and youth unemployed.
• The changes in entitlement to Illness Benefit and Disability Allowance will affect the most vulnerable in society.

Housing and Accommodation

The Context

• There are over 43,000 households with over 108,000 people on waiting lists for social housing.
• The national partnership agreement, Towards 2016 committed to 27,000 units of social housing in the period 2007 to 2009. To meet this target there should be an additional 9,000 unit of social housing started in 2009.
• The private rented sector accounts for about 10% of households. Between 8 and 10% of rented properties are not registered with the Private Residences Tenancy Board.
• Affordable housing is also needed.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness Section 3.5 Pages: 119-136

The Budget

• Allocated €1.66 billion to Housing Programmes
• Voluntary and Co-operative Housing Sector – + €10 million
• Homeless accommodation – additional €3 million
• Affordable Housing provision – decrease of 30%
• Rental Accommodation Scheme – additional €39.5 million
• Funding for supports for older people and people with disabilities increased by 8%
• Traveller accommodation is unchanged from 2008 levels
• Social Housing provision and renewal - capital and current expenditure – down 1.7%
• New Home Choice Loan – a mortgage provided by a number of local authorities – available to 1st time buyers of new properties – maximum loan  € 285,000

Our Response

• We acknowledge the provision of the extra €10 million under the Capital Loans and Subsidies Scheme to the Voluntary and Co-operative Housing.
• The increased funding for the Rental Accommodation Scheme is welcome as are the  funding supports for older people and people with disabilities and the increased funding for homeless services
• The reduction of funding for Social Housing by 1.7% will be challenging in the light of the number of people on waiting lists.
• We regret the failure to address ongoing issues concerning accommodation for refugees and asylum seekers

Environment

The Context

• Our environment is a priceless asset. Its protection is of major importance not just to current times but also to the generations that will follow us. In 2005 trees removed 811 kilotonnes of CO2 from the Irish atmosphere while road vehicles created 12,454 tonnes. 98.3% of all inland freight was transported by road, 21.8% higher than the EU-27 average. Imported gas accounts for 73% of Ireland’s energy supply. In 2005, 40.6% of energy demands derived from transport, 23% from residential households, 20% from industry, 2.6% from agriculture and 13.9% from the service sector.

For more information see: CORI Justice Socio-Economic Review 2008 Planning for Progress and Fairness
Section 3.10 Pages: 176-193

The Budget

• Provided €71 million to sustainable energy and research;
• Home Energy Saving Scheme  - €15 million increase;
• Warmer Homes Scheme - €5 million.
• Capital Allowance Scheme extended for energy efficient equipment.
• €200 per annum employer car parking levy on employees.
• Motor tax rates increases: cf page 11 - Taxation
• Tax on petrol - 8 cent per litre
• Long haul flights air travel tax - €10 per passenger
• Water Services Investment Programme – 19% increase (€89m)
• Landfill Remediation programme - 63% reduced funding
• Natural Heritage funding reduced by 16%
• Irish Heritage Trust down 55%

Our Response

• We welcome the increased funding for sustainable energy and energy research, Home Energy Saving Scheme, Water Services Investment Programme and taxation focused on encouraging the use of vehicles with lower CO2 emissions and the €10 million capital expenditure for additional carbon reduction measures to target climate change initiatives in the transport sector
• We regret the 11% decrease in funding for EPA, the failure to introduce or consider ‘satellite’ national accounts which would acknowledge environmental damage and resource consumption as well as a range of uncounted items such as unpaid work.
• The reduction of €70 million in public transport capital expenditure is a regressive step.

SOCIAL WELFARE: Social Insurance increases January 2009

Change in Monthly Rates of Child Benefit from January 2009

SOCIAL WELFARE: Social Assistance increases January 2009

Increases in Maximum Weekly Rates of Health Allowances from January 2009

Budget Highlights Need for Tax Reform

A review of the Budget documentation published by the Minister to accompany Budget 2009 reveals details of the rapid and significant decline in the exchequer’s finances over the past year (see details on pages 4 & 5).
Despite the international economic slowdown, it is clear that the primary driver of this decline has been the collapse of house building and house sale transactions since early in the year.  Their decline highlights the recent excessive dependency of the Irish exchequer on one (unstable) area for a large proportion of its taxation revenues.  It is directly as a result of this decline that the Minister for Finance was forced to deliver the extensive set of tax increases and changes announced in the Budget. However, even in the context of these taxation increases, the Irish government will be forced to borrow €4.7b in 2009 and €2.5b in 2010 just to cover day-to day (current account) expenses.

There is a need for national taxation policy to be built
around a sufficient, sustainable and balanced tax base

CORI Justice has for some time called on successive Governments to broaden the tax base and ensure that national taxation policy is built around a sufficient, sustainable and balanced tax base. Our recent submission to the Commission on Taxation addressed this issue in detail (the document is available from our website www.cori.ie/justice). It is clear that such a sustainable tax base should include taxes such as a site value tax, environmental taxes e.g. carbon tax, fairer income taxes and reduced number of tax expenditures. As the Budget’s figures prove, the current structure of the taxation system is unsustainable and requires significant change.

Children & Budget 2009

Child poverty remains a major problem for Irish society. In its most recent EU-SILC survey the CSO found that just over one-fifth of children (20.3%) live in households whose income is below the poverty line; approximately 190,000 children. The policies adopted in Budget 2009 did not address this issue.

CORI Justice welcomes the announcements by the Minister to review universal payments such as child benefit and early childhood supplement over the next year. We believe that any changes identified should be made on a revenue neutral basis; with any available resources identified by the review targeted on families with the lowest incomes. Properly completed, such a reform could offer the potential to significantly reduce, if not eliminate, child poverty. We look forward to contributing to the review process during 2009.

Other CORI Justice Publications

The following publications (and many more) may be downloaded for free from our website and are available for purchase from the CORI Justice Office:

• Planning For Progress and Fairness (2008)
• Making Choices - Choosing Future: Ireland at a Crossroads (2008)
• Values, Catholic Social Thought and Public Policy (2007)
• Policy Briefing on Monitoring Social Partnership (2007)

Social Policy in Ireland - Principles, Practice and Problems published by Liffey Press in conjunction with CORI Justice, is also available at €27.95.

Government Budget Documents - First Budget 2009 - October 15, 2008

(Published October 14, 2008)

Government White Paper on Budget 2009 published.

On October 11, the Government published its White Paper in advance of Budget 2009.Without taking into account changes to be introduced on Budget Day it shows an expected Budget deficit of nearly €15bn in 2009, a reduction in capital spending of 6.3% and an expected fall in tax revenue of more than €1bn in 2009.  Initiatives to be announced on Budget Day will cause these numbers to change.  Download Pdf

Text of Review and Transitional Towards 2016 Agreement is published.

The text of the first formal review of the National Social Partnership Agreement, Towards 2016 has now been published.  This review started in February and concluded in September 2008. During that period there were dramatic changes in the economic and fiscal context in which the review was taking place. The Community and Voluntary Pillar of Social Partners (of which CORI Justice is a part) played an active role in this review – with a special focus on Part One of the agreement which constitutes 60 per cent of the agreement and covers allmatters other than pay and conditions.   Download Pdf

The current Social Partnership Agreement, Towards 2016, is a ten year strategic framework for economic and social development. This Review highlighted the progressmade during the first phase of Towards 2016 and the Government and Social Partners have restated their commitment to its shared high-level goals which are to be achieved by 2016.

This review has produced a ‘Transitional Agreement’ on pay and workplace issues which responds to the immediate challenges facing the economy. It has also agreed on the need to reprioritise public expenditure in order to adhere to the keymacroeconomic principles underlying Towards 2016 while recognising the priority of protecting the people who are most vulnerable.

ESRI Quarterly Economic Commentary, Autumn, 2008 (published October 7, 2009)

ESRI Quarterly Economic Commentary, Autumn, 2008 (published October 7, 2009)

ESRI Budget Perspectives 2009 Conference (October 7, 2008)

ESRI Budget Perspectives 2009 Conference (October 7, 2008)

CORI Justice publishes latest Policy Briefing

The latest Policy Briefing from CORI Justice argues that a fairer tax system would be good for the economy and good for the vulnerable.  The Briefing identifies many tax breaks that are of far greater benefit to the better off than to those on average incomes.  Reforming these would provide Government with the additional resources needed to protect the vulnerable at this difficult time when new resources are scarce.

The Briefing also identifies the choices Government should make if it is to protect the vulnerable.
Download Pdf

CORI Justice publishes its submission to Commission on Taxation

CORI Justice has made a detailed 81-page submission to the Government-appointed Commission on Taxation. In it we outline our proposals for tax reform in Ireland. The role of taxation, and the need to reform the current structures of the taxation system, have been central to the work of CORI Justice for many years. To date we have published numerous documents addressing taxation reforms1 and in 2004 we hosted a conference (and published a book) on the theme of A Fairer Tax System for a Fairer Ireland. All these publications have been guided by our core policy objective in this area:To collect sufficient taxes to ensure full participation in society for all, through a fair tax system in which those who have more, pay more, while those who have less, pay less. This core policy objective also guides the analysis, critique and proposals contained in this submission. All comments are welcome and should be sent to

justice@cori.ie

This e-mail address is being protected from spambots. You need JavaScript enabled to view it

Download Pdf 

CORI Justice Analysis and Critique of Budget 2008 Download Pdf

CORI Justice Analysis and Critique of Budget 2008

Download Pdf

Welfare Benchmark Honoured but Anti-Poverty Momentum Lost

Budget 2008 honoured the Government’s commitment on benchmarking the lowest social welfare payment. It also contained a number of initiatives that are very welcome. However, it failed to maintain the momentum of the last three Budgets in addressing poverty and social exclusion.

While the proportion of the population at risk of poverty fell by 2.4 per cent as a result of the Budgets of 2005 and 2006, and will fall further as a result of Budget 2007, that momentum will not be maintained following Budget 2008.

Benchmark Honoured

The increase of €12 a week in the lowest social welfare rate for a single person maintains this payment at 30% of gross average industrial earnings (GAIE). The slow-down in the economy has reduced the level of GAIE for 2008 (which reduced the required rise to €12 from our original estimate of €13.20).

Anti-Poverty Momentum Lost

Almost a third of all households at risk of poverty today are headed by a person with a job. These are the working poor. More than half of all households at risk of poverty are headed by people outside the labour force (i.e. people who are older, ill, have a disability or are in caring roles). To tackle poverty effectively these two groups must be targeted.

The momentum in reducing poverty has been lost for the coming year because of

• the failure to address the working poor issue
• the failure to increase the qualifying adult social welfare rate to make it equal to 100% of the claimant’s rate (except in the case of the contributory old age pension where some progress has been made), and
• the failure to do substantially more to tackle child poverty.

Social Housing Targets Honoured

The overall housing package of €2.5 billion is most welcome. In particular, providing resources for 9,000 new social housing units in 2008 honours the commitment contained in Towards 2016 and will have a very positive impact on addressing the needs in this area. The continued roll-out of the Rental Accommodation Scheme (+€24m) and the allocation of an additional €26m under the loans and capital scheme (for Voluntary and Co-Operative Housing) are also very welcome.

Budget fails to deliver on Social Partnership commitments on Primary Care Teams

One of the most regrettable and unacceptable failures of Budget 2008 is its failure to honour the commitment contained in Towards 2016 to create 300 primary care teams by the end of 2008. Primary care has been recognised as one of the cornerstones of the health system. Between 90 and 95 per cent of the population are treated by the primary care system. The failure to allocate the necessary resources to meet this commitment is a disgrace.

Budget omissions provide new challenges for social partnership review

Distribution of resources in Budget

As a direct result of the Budget’s tax and welfare measures a single person on the lowest social welfare rate will benefit by €12 week while a person earning €100,000 a year will benefit by €6.96 a week. A couple on social welfare will benefit by €20 a week while a couple on €100,000 will benefit by €8.30 a week. Social welfare recipients have done better than those who are wealthy.
The full year cost of the personal income tax package was €546m. The full year cost of the Social Welfare package and other support services in Budget 2008 was €980m.

Working Poor issue not addressed

However, the working poor issue was not addressed. A single person or a couple on €15,000 a year gained nothing from Budget 2008.

As pointed out earlier almost a third of all households at risk of poverty today are headed by a person with a job. These are the working poor. To tackle poverty effectively this group must be targeted.

The most effective way of doing this is to make tax credits refundable (which would enable people on low pay to benefit from the full value of the tax credits to which they are entitled). People in this category pay neither income tax nor PRSI. Consequently they are the only people who do not benefit from budget changes. This is very disappointing.

Carbon Report

The moves towards producing a Carbon Report is welcome. So too are the changes on vehicle registration tax, on motor tax and the other environmental tax measures indicated in the Budget. These are welcome steps in the right direction but much more needs to be done if the issue of climate change is to be addressed effectively.

Adult illiteracy not addressed effectively

The very small allocation of an additional €3m for adult literacy programmes and related issues is most disappointing. Government’s current target on illiteracy is totally unacceptable. This target states that the proportion of the population aged 16-64 with restricted literacy will be reduced to between 10-15 per cent by 2016. If this Government target is achieved then 10-15% of Ireland’s labour force will be illiterate in 2016. This would have a very negative effect on Ireland’s economic development, its unemployment levels and poverty rates. Far more resources should have been made available to address this issue.

More could have been done within responsible fiscal parameters to address problems in the areas of income adequacy, service provision and activation.

Honouring Towards 2016 commitments?

The national agreement presents a new approach to social policy in which programmes are developed for various stages of the life-cycle and each of these programmes seeks to ensure that:

• Every person has sufficient income to live life with dignity;
• Social services are accessible, appropriate and adequate for all, and
• All people are supported to ensure their activation and participation in society.

Budget 2008 failed to take adequate steps to address many of these areas, as we identify in this analysis.

More could have been done

While we welcome the allocations to ensure the National Development Plan is delivered we also point to the fact that sufficient resources exist to do much more on the issues of income, services and activation.
The Current Budget surplus will be €4,866m in 2008 A part of this money could have been used to address the social challenges in the areas of income adequacy, service provision and activation. This could have been done within responsible fiscal parameters. We deeply regret the failure to so.

Conclusion

This Budget has positive and negative impacts. However one of its major consequences will be the challenges it provides to the review of social partnership due in Spring 2008.

Increase in Social Welfare

Budget 2007 marked a major achievement in Irish Economic and Social Policy when the lowest welfare rates were benchmarked at a rate equalling 30% of Gross Average Industrial Earnings (GAIE). We welcomed this achievement last year and predicted that the raising of welfare payments over recent Budgets would have notable benefits in terms of reducing the numbers recorded as living at risk of poverty. The most recent poverty figures, published by the CSO in late November, demonstrated this.

Over the past year the slowdown in the economy has impacted on the growth rate of GAIE - a fact reflected in recent earnings figures from the CSO and projections from the ESRI. An implication of these effects is that the required increase in the lowest welfare rate, needed to maintain the 30% benchmark, is less than the €13.20 we projected in the response to the Budget last year, and in our pre-Budget Policy Briefing. While we note that the resources did exist to provide this amount (see table on page 6) we accept that the increase of €12 reflects the current projection of a GAIE level of between €650-€660 per week for 2008.

Future Budgets must continue to increase welfare in line with this benchmark.

We regret that the momentum for welfare reforms, built up over recent years, was notably reduced in this Budget. An opportunity to make the welfare system more equitable, by increasing the qualifying adult rate to equal 100% of the claimant’s rate was missed.

Distribution and the Budget

Each year CORI Justice examines the Budget from a number of perspectives, including its effect on the income distribution. In Chart 1 (on page 4) we have examined how the resources available to the Minister for Finance were used. The chart reports the combined effect of changes in welfare payments (to the unemployed) and changes in tax credits and bands (to those earners who are employed and whose incomes are high enough to be liable for taxation).

In this Budget the unemployed have gained more per week than those in any other income group

We strongly welcome the fact that in this Budget the unemployed have gained more per week than have those in any other income group. A single person who is long-term unemployed gains €12 per week following the Budget while a single earner on €30,000 per year gains €2.68 per week and an earner on €100,000 per year gains €6.96 per week. An unemployed couple are €20 per week better off, more than twice the gain by a couple with one earner on an income of €100,000 per year and almost €5 per week more than the gain to a couple earning €100,000 .
CORI Justice welcomes this distributive approach.

Social Housing Commitment—Welcome

Budget 2007 has honoured the commitments made in Towards 2016 in the area of social housing. The Budget allocated the resources to ensure an additional 9,000 social housing units will start in 2008. This will maintain the commitment to have 27,000 social housing starts in the 2007-2009 period.

The Budget also allocated a further €27m under the Rental Accommodation Scheme. This will ensure progress will be maintained in moving people from rent supplement into a much more appropriate housing tenure.

€50m has been allocated for the Affordable Housing Purchase Scheme. An additional €26m is being provided under the Capital Loans and Subsidy scheme for Voluntary and Co-Operative Housing.

All of this is very welcome as it moves housing policy towards a destination of ensuring that everyone has appropriate accommodation.

A central conclusion of the 2004 housing report produced by the National Economic and Social Council (NESC) is that the supply of social housing will have to rise dramatically if the needs of Irish society are to be addressed in the years ahead.

Budget 2008 has made the required allocations for social housing and we welcome this development wholeheartedly

The main recommendation of the Council on the issue of social housing called on Government to “create an expanded and more flexible stock of social housing - adding in the order of 73,000 permanent social housing units to bring the stock to 200,000 dwellings by 2012 - in a manner that is consistent with other public investment needs and sound public finances”.

The figure of 200,000 social housing units was calculated based on the projected increases in the Irish population over that period and in the context of limited responses to existing social housing needs (e.g. homelessness, community based accommodation for disabled and elderly persons).

NESC concluded that to achieve the target of 200,000 units over the eight year period between 2005 and 2012, an annual increase of in excess of 9,000 units is necessary. They also pointed out that an estimated capital investment of €1.4bn a year would be required to achieve a net increase of 73,000 units by 2012.

Given the present level of capital expenditure this would mean an additional investment per annum of the scale of €500m to €600m on what is already projected.

This policy approach was adopted in the current national agreement.

CORI Justice welcomed the commitment in Towards 2016 to provide 27,000 new social housing units by 2009. We also welcomed the acknowledgement in that agreement of the 2012 NESC target of 73,000 new units. Reaching that target during the lifetime of the next National Development Plan (i.e. by 2013) is essential if Ireland is to achieve the goal of ensuring that everyone in the country has appropriate accommodation.

Zero gains for Low Income Earners

A major regret arising from Budget 2008 is the failure to address the issue of the working poor. While we welcome the fact that Government adjusted tax credits to ensure that those on the minimum wage pay no tax, we are concerned at the lack of attention for low paid workers.

Chart 1: Income Distribution and Budget 2008

Notes: * Except in LTU case where there is no earner ** LTU: Long Term Unemployed
Couple with 2 rners are assumed to have equal shares of income.

As chart 1 shows , the Budget has benefited those who are unemployed through increases in unemployment benefit and those who are working and paying taxes through alterations to tax credits and tax bands. However, for low paid workers and their families, they benefit from neither the tax changes (as their incomes are too low to pay any tax) nor welfare changes.

This is the second year that Budgetary changes have overlooked this group

A low income worker on €15,000 a year has gained nothing from Budget 2008. Similarly, families with 1 earner on an income of €15,000 and those with two earners on an income of €30,000 have gained nothing from this Budget. This is the second year that Budgetary changes have overlooked this group. It implies that such workers, and their dependents, are falling behind the rest of society; a fact that is reflected in the latest set of poverty figures. The EU-SILC poverty report for 2006, published by the CSO in late November, showed that three of every ten households at risk of poverty in Ireland are headed by somebody who is employed.

To significantly address this anomaly in future Budgets, government should make tax credits refundable. We look forward to highlighting this issue in the next year and bringing this problem to the attention of the proposed Commission on Taxation.

Effective Tax Rates after Budget 2008

Central to the ongoing debate on taxation in Ireland are effective tax rates. These rates are calculated by comparing the total amount of income tax a person pays with their pre-tax income. For example, a person earning €50,000 who pays €10,000 in taxation will have an effective tax rate of 20 per cent. Calculating the scale of income taxation in this way provides a more accurate reflection of the burden of income taxation faced by earners.

Following Budget 2008 we have calculated effective tax rates for a single person, a single income couple and a couple both earners. Table 1 presents the results of this analysis.

For a single person with an income of €15,000 the effective tax rate will be 0%, rising to 8.3% of an income of €25,000 and 35.4% of an income of €120,000. A single income couple will have an effective tax rate of 0% at an income of €15,000, rising to 2.9% at an income of €25,000, 19.8% at an income of €60,000 and 31.6% at an income of €120,000.

Effective tax rates provide a more accurate reflection of the burden of income taxation faced by earners.

In the case of a couple where both are earning where their combined income is €40,000 their effective tax rate is 3.6%, rising to 27.2% for combined earnings of €120,000.

As chart 2 shows these effective tax rates have decreased considerably over the 11 years for all earners. For example, in 1997 a couple with two earners on an income of €60,000 had an effective tax rate of 36.6%. This fell to 19.3% in 2002 and will fall to 12.2% after this budget.

Chart 2: Effective Tax Rates in Ireland, 1997-2008

How Much Better Off Will People Be In 2008?

When assessing how much better off people are going to be in 2008 it is important that wage increases and tax changes be included as well as social welfare increases. Unemployed people, for example, gain nothing from wage increases or tax reductions while those with jobs may gain from both. In our calculations we have included the general wage increase in various national agreements as well as the impact of Budget changes on social welfare and taxation.

We have not included the impact of any future benchmarking increases for public servants, as they do not apply to everyone.

Single people who are long-term unemployed will be €12.00 a week (€626 a year) better off in 2008. Those on €30,000 a year will be €24.22 a week (€1,264 a year) better off while those on €50,000 will be €34.46 a week (€1,798 a year ) better off in the coming year.

Couples who are long-term unemployed will be €20.00 a week (€1,044 a year) better off. Couples with one income on €30,000 a year will be €25.56 a week (€1,334 a year) better off while those on €50,000 will be €35.80 a week (€1,868 a year) better off in the coming year.

Couples with two incomes on €30,000 a year will be €27.36 a week (€1,428 a year) better off while those on €50,000 will be €41.69 a week (€2,176 a year) better off in the coming year.

The impact of Budget 2008 on the distribution of income in Ireland can be further assessed by examining the rich-poor gap. This measures the gap between the disposable income of a single person on long-term unemployment and a single person on €50,000 per annum. Budget 2008 has widened the rich-poor gap by €22.46 per week.

Budget 2008 - Summary of the Key Numbers

To accompany the Budget speech, the Department of Finance has published a series of documents detailing the changes announced in the Budget. Through this Analysis and Critique document we examine various aspects of these changes. The table below brings together the key figures from the published Budget documents. It presents the Department of Finance’s expectations of National Income (GDP and GNP) next year, and for the next three years. It outlines the projected exchequer budgetary position over that period. Expectations of future changes to employment, unemployment and inflation are detailed. The table also includes details on the taxation system following the implementation of the Budgetary changes. Finally, the table outlines the Department of Finance’s calculations regarding the full year cost of the tax and social welfare changes announced in the Budget.

ODA increase reinforces White Paper Commitment

Budget 2008 provides an increase of €84m in overseas development assistance (ODA). This increase brings the total ODA allocation in 2008 to €914m, representing 0.54% of GNP.

CORI Justice welcomes this increase, it marks a welcome commitment by government to aiding the poorest people of the world. It also serves as an important step towards honouring the ODA commitments outlined in the White Paper on Irish Aid and in Towards 2016. Last year, in Budget 2007, ODA was increased to meet the interim benchmark of 0.5% of GNP (some €813m). CORI Justice warmly welcomed this achievement in our response to that Budget. This years increase marks an important step towards the second interim target of 0.6% of GNP to be achieved by 2010. Achieving this next goal, and eventually the UN target of 0.7% by 2012, is an important national commitment and its achievement would be a major success both nationally and internationally.

Towards 2016 Health Commitments Not honoured

Budget 2008 raises very serious questions concerning Government’s willingness to honour the healthcare commitments contained in the National Agreement Towards 2016. Of particular concern are the failures on primary care teams and on mental health.

On primary care teams

Towards 2016 commits Government to create 100 new primary care teams in each of the years 2006, 2007 and 2008. Budget 2008 does not contain the required funding to ensure that these 300 primary care teams will be created by the end of 2008. This is a totally unacceptable situation. Primary Care has been recognised as one of the cornerstones of the new model for health service delivery. These teams were meant to ensure integrated accessible services for people within their own community. It will not be possible to deliver a comprehensive, integrated primary healthcare programme without the provision of these primary care teams. Failure to provide the resources to meet the already-agreed targets raises serious doubts concerning Government’s bona fides where these commitments are concerned.

Of particular concern are the failures on primary care teams and on mental health

On Mental Health commitments

The National Economic and Social Forum report Mental Health and Social Inclusion supported the development of mental health services in line with A Vision for Change, the Government’s agreed policy on mental health. The National Health Strategy identifies mental health as an area to be developed. The importance of addressing this whole area has been emphasised by the World Health Organisation. Consequently, we regret the failure to resource the development of mental health services in line with Towards 2016 commitments.

Education Capital Spending

The increase of €95m in funding for the Primary School Building programme is welcome. However, we note a simultaneous 14% decrease in the provision for capital building in secondary schools.

It remains a worry that it is only at the end of 2008 that we have begun to plan for increases in child number at primary schools, starting September 2009. This is particularly the case given the available data from Census 2001 and 2006 which signalled these impending increases. In that context we believe it is important that Government, and in particular the Department of Education, pay attention to the population projections calculated by the CSO for the years to come. In its Population and Labour Force Projections 2006-2036 the CSO signalled that the number of primary school children will increase from 433,900 in 2001 to exceed 500,000 by 2011 and will climb further to 560,000 by 2016. These increases require long-term planning and more comprehensive programmes of school expansion.

Adult Literacy

Despite the sustained and ongoing problem of adult literacy, the Budget has made minimal efforts to adequately address this crisis. A total of €3m in additional funding was allocated to “adult literacy and related measures”. As we highlighted in our Policy Briefing on Monitoring Social Partnership (Sep. 2007) the current government plan to tackle adult literacy, aims to reduce ‘restricted literacy’ rates - where people possess “very poor skills, where the individual may, for example, be unable to determine the correct amount of medicine to give a child from information printed on the package” - to between 10-15% of the adult population by 2016. This figure represents a ‘restricted literacy’ adult population of between 317,000-475,000 by 2016. Such a figure would be totally unacceptable and more resources are needed to competently address this issue. The Budget could have done better.

The Budget and the Poor

Despite the advances in employment and economic growth achieved over the last few years, the proportion of the population at risk of poverty remains large. Its sustained existence challenges many of the improvements of recent years.

The most up-to-date data available on the nature and extent of poverty in Ireland comes from the 2006 EU-SILC (Survey on Income and Living Conditions) results published by the Central Statistics Office in late-November. Its results showed that 17% of the Irish population is at risk of poverty - a decline for the third year in a row.

In financial terms this means that almost one in five of the population lives with incomes equivalent to less than €210 a week for a single person in 2007 terms.

It is useful to translate the poverty percentages into numbers of people. The latest poverty figures indicate that in 2006 approximately 720,000 people were at risk of poverty.

This figure includes a large number of children with the data showing that approximately 20 out of every 100 Irish children live in a household that is at risk of poverty.

The latest EU-SILC data show that the groups at highest risk of poverty are: the unemployed, those who are ill/disabled, single parents and those who rent. A large proportion of these groups depends on social welfare payments and that fact underscores our sustained call over recent years to increase welfare payments in line with Gross Average Industrial Earnings. The recent poverty figures also highlighted that non-Irish people record a poverty risk that is much greater than that of Irish people. Future policy will need to address this issue.

As we have shown in other areas of this Analysis and Critique, the Budget has made some progress in addressing the low income of the unemployed, however it has not adequately addressed the working poor issue. We are concerned that this group of working low income households will increase in the years to come unless more targeted policies are pursued. In particular, we believe that the introduction of refundable tax credits would benefit this group.

Government’s Current Budget for 2008

Below we outline the government’s current budget for the forthcoming year. The current budget comprises the income (or receipts) and expenditure associated with the day-to-day running of the country. Income includes revenue from taxation and flows of funds to the government from other sources, including the Central Bank and the National Lottery. Collectively these give a figure for the total income expected to be received by the government during the next year - total current receipts (labelled b below).

Expenditure includes interest payments on the national debt, contributions to the EU and the costs associated with running, on a day-to-day basis, Ireland’s economic and social services. When transfers to the social insurance fund (PRSI) and unspent resources from previous years are excluded, a figure for net current expenditure planned for next year is reached (labelled a below). The current budget balance (b minus a) indicates how much day-to-day income exceeds (if positive), or falls short (if negative), day-to-day spending.

Taxation

Our Submission Asked that the Budget :

• Make tax credits refundable (to address the working poor issue).
• Adjust tax credits so as to keep the minimum wage out of the tax net.
• Commit to moving Ireland’s total tax take closer to the EU average.
• Standard rate all discretionary tax expenditures.
• Continue to review the costs and benefits of discretionary tax expenditures.
• Introduce a speculative tax on windfall gains from land rezoning.
• Reform the structure of motor tax.
• Proceed with individualisation in the income tax system in a fair and equitable manner.
• Poverty-proof all budget tax packages to ensure they do not further widen the rich/poor gap.
• Increase capital gains tax.
• Increase the corporate tax rate to 17.5% in the context of EU tax integration.
• Move decisively to shift the burden of taxation from income tax to eco-taxes and taxes on consumption.
• Expand the levy on financial institutions introduced in Budget 2003 to rebalance the windfall profits these make following Ireland’s corporate tax rate cuts.
• Investigate policies which allow taxation on wealth and land to be increased.

The Budget

INCOME TAX

• Employee Tax Credit increased by €70 to €1,870.
• Personal Credits increased by €70 single and €140 married.
• Tax exemption for people aged over 65 increased by €2,000 single and €4,000 married.
• Standard Rate Tax band increased by €1,400 single, married (one income) and lone parent and €2,800 married (two incomes).
• Ceiling on interest on a mortgage increased by €2,000 single and €4,000 married.
• Maximum level of rent paid for private rented accommodation, on which tax relief can be claimed increased to €2,000 single and €4,000 married person under 55 and €4,000 and €8,000 over 55.
• Employee PRSI annual ceiling increased to €50,700.
• Employee PRSI weekly threshold increased to €352.
• Health Levy threshold increased to €500 weekly.
• Tax allowance in respect of Trade Union Subscriptions increased to €350.
• Exemption limit on rent received on room or rooms in principal private residence increased to €10,000.
• Increase in Rate for Preferential Home Loans from 4.5% to 5.5% and in respect of other loans from 12% to 13%.
• Income on investments and foreign employment outside the State extended to include UK-sourced income.

FARMER TAXATION

• Introduction of relief from Capital Gains Tax on the dissolution of farm partnerships.
• Payments for Sugar Beet Diversification to be spread over six years for purpose of calculating taxable income.
• Farmers VAT Flat-rate addition being maintained at 5.2%.

VAT & EXCISES

• Excise Duty on cigarettes increased by 30 cent.
• Licensing Fees for Off-licences increased to €300 per licence.
• Excise Duty on electricity introduced at 50 cent per MWh for business use and €1 for non-business use. Household will be exempt.
• VAT registration thresholds for small businesses increased to €37,500 for services and €75,000 for goods.

VRT & MOTOR TAX

• VRT system to be revised to take account of CO2 emission levels rather than engine size. With 7 bands from 14% to 36%.
• VRT relief scheme for Hybrid electric and flexible fuel vehicles to be extended.
• Increase in Motor Tax rates to 9.5% for cars < 2.5 litres and 11% for cars > 2.5 litres.

CORPORATION TAX

• Base year for expenditure which is used to calculate qualifying incremental expenditure on research and development, extended to 2013.
• Corporation tax liability threshold of small companies increased to €200,000.

STAMP DUTY

• Stamp Duty reformed with first €125,000 exempt and excess charged at two rates: 7% up to €1million and 9% over €1 million.
• Stamp Duty on ATM, and Debit Cards reduced to €5 for single card, €10 for combined card and €30 for credit cards.
• Stamp Duty on cheques increased to 30 cent per cheque.

Social Welfare

Our Submission Asked that the Budget :

• Provide a fair income distribution between people on different incomes. To achieve this the combined impact of the tax and social welfare packages should favour those on low incomes whether they depend on social welfare or are in low-paid employment.
• Increase the lowest social welfare rates by €13.20 a week for a single person.
• Continue benchmarking the lowest social welfare payments for single people at 30% of gross average industrial earnings (GAIE).
• Individualise all social welfare payments. Budget 2007 took some welcome steps in this direction and CORI Justice believes that Budget 2008 should complete this transition.
• Increase the ‘qualifying adult’ payments and commit to moving all of them towards 100% of the adult payments.
• Increase child benefit substantially and do not tax it.
• Introduce a cost of disability allowance.
• Increase the weekly allowance for asylum seekers in ‘direct provision’ to €60 a week for an adult and €30 for a child.
• Develop a national programme, on an inter-departmental basis, to address fuel poverty.
• Update tax credits so as to keep the minimum wage out of the tax net.
• Adopt policies to address child poverty - by increasing child benefit and/or the early childhood supplement.

The Budget

• Provided Total Social Welfare improvements costing €900 million in a full year.

PERSONAL RATES (weekly)

• State Pensions: + €14 (contributory) and €12 (non-contributory)

• + €12 for all others on lower rates

• PERSON WITH QUALIFIED ADULT ALLOWANCES (weekly)

• + €41 State Pension, 66 and over (contributory)

• + €23.30 Pension (contributory) and Transition, under 66

• +€19.90 Non contributory Pension

• + €20.60 Invalidity Pension, < 66

• + €14 - €20 for other QAA payments.

CHILD AND FAMILY INCOME INCREASES

• €6 monthly in Child Benefit for first and second child and €8 for third and subsequent child.

• FIS income threshold by €10 per week per child.

• BSCFA by €20 (2-11 years) and by €20 (12 and to, where appropriate, 22 years)

• Early Childcare Supplement by €100 to €1,100 per year

• Fuel Allowance extended by 1 week to 30 weeks

• One-Parent Family +€14 and the earning threshold up to €425

• Increase of €14 to €221.80 in the minimum rate of Maternity and Adoptive Benefit.

CARER’S INCREASES

• Carer’s payment of €14 per week.

• Weekly income disregard in the Carer’s Allowance Scheme - €12.50 to €332.50(single) and €25 to €665 (couple)

• Respite Care Grant €200 increase

Our Response

We welcome:

• The €12 increase in Social Welfare payments which is in line with the commitment to benchmark the lowest social welfare payments for single people at 30% of GAIE.
• The commitment to keep people on the minimum wage out of the tax net.
• The increase in the Qualified Adult Rate for the Contributory Pension.
• The increase in the Carer’s payment, Income Disregard, Respite Care Grant and the earning threshold for Carer’s Benefit.
• The additional funding awarded to the Citizens Information Board, Money and Advice and Budgeting Service (MABS) and the Family Support Agency.
• The increase in the Widowed Parent Grant.
• It should be noted that:
• The increases in Child Benefit, BSCFA, Early Childcare Supplement and FIS income thresholds, will not meet the cost of living increases.
• There is no attempt to develop a national programme to address fuel poverty.
• The additional funding for School Meals is grossly inadequate.

We regret:

• The failure to increase the abysmal weekly allowance for Asylum Seekers in direct provision.
• The failure to introduce the cost of disability allowance.
• The failure to maintain the momentum to equalise the ‘qualifying adult’ payments with the personal rate (with the exception of the contributory pension).

Work/Unemployment/Job Creation

Our Submission Asked that the Budget :

• Place an ongoing emphasis on preparing and enabling unemployed people to access jobs. This would involve providing additional resources to support:
  • Increased numbers of places providing quality education and training, retraining and up-skilling.
  • Expanded opportunities for unemployed people to gain work-place experience.
  • Adequate numbers of places on Active Labour Market Programmes (ALMPs).
• ALMPs need to be resourced adequately to ensure that appropriate pathways are available to all who need them.
• Increase the education/training grants for participants in active labour market programmes.
• Resource life long learning.
• Allocate resources to address the youth unemployment problem.
• Resource the development of employment-friendly income tax policies which ensure that no unemployment traps exist.
• As part of the process of addressing the working poor issue, reform the taxation system to make tax credits refundable.
• Recognise the right to work of all asylum seekers whose application for asylum is at least six months old.
• Resource the CSO to conduct an annual survey to discover the value of all unpaid work in the country (including community and voluntary work and work in the home).

The Budget

• Increased the gross budget to the Department of Enterprise, Trade and & Employment by

• 7% (€101.6m) to €1.49 billion.

• Increased the National Training Fund by €72.7m to €1,998m. This includes extra €7m to further support the National Skills Strategy.

• Increased the allocation to the National Employment Rights Agency by 26% to €10.8m.

• Increased the Capital funding to Science, Technology and Innovation Programme by a further €36.5m. The increase is split between Enterprise Ireland (€19.9m) and the Science Foundation Ireland (€16.6m).

• Increased FORFAS grant by 10%.

• Reduced allocation to INTERTRADE Ireland by 10% to €10.68m.

• Reduced the allocation to the Technical Support for Community Initiatives by 32% to €500m.

• Allocated an additional €25.8m for FÁS participants on training and employment programmes.

• Increased allocation to FÁS Training and Integration Supports by 7% to €99.98m and Employment Programmes to €439.5m.

• Reduced the allocation for the Equal Community Initiative Development Partnerships by 56% to €2.5m.

• Increased the allocation to the Work Place Innovation Fund Promotion of Partnership by 189% to €2.7m.

• Increased the allocation to Enterprise Ireland Grant to Industry to €56.7m.

• Increased the allocation to the National Framework Committee for Work/Life Balance Policies by 26% to €0.35m

Our Response

• We welcome the increase to the National Training Fund and to the Science, Technology and Innovation Programme. This will continue to improve the skills of Ireland’s labour force and strengthen the development component of economic development.
• While we welcome the increased allocation for FÁS Training and Integration Supports and the FÁS Employment Programmes, the allocations must be used to up skill-workers, particularly those in danger of becoming unemployed as the economy slows done.
• We welcome additional funding to the National Training Fund that will support the National Skills Strategy.
• The Department of Finance is forecasting the creation of 24,000 new jobs with the total number at work increasing by a little over 1%. This is an encouraging outlook.
• We welcome the increased allocation to the Work Place Innovation Fund Promotion of Partnership.
• The increased support to the National Employment Rights Agency is welcomed as this meets a key commitment contained in Towards 2016.
• We regret the continued failure to recognise the right to work of all asylum seekers whose application for asylum is at least six months old.
• We regret the failure to resource the CSO to conduct an annual survey to discover the value of all unpaid work in the country including community and voluntary work and work in the home. The economic value of such work tends to be ignored. It is not included in measurements of GNP or GDP. The value of such work needs to be recognised, quantified and included in economic calculations as well as in measurements of people’s and society’s wellbeing.

Public Services

Our Submission Asked that the Budget :

• Target funding strategies to ensure that far greater priority is given to providing an easy access, affordable and high quality public transport system.
• Take the initiatives required to ensure broadband is available nationwide.
• Introduce a system that ensures people on low incomes can access information communications technology on an ongoing basis.
• Adopt further information technology programmes to increase the skills of school children, early school-leavers and the unemployed.
• Regulate the removal of public payphone services. This is particularly necessary for poor areas and rural areas where the revenue generated by a pay-phone can give a misleading interpretation of its significance in the community.
• Provide substantial additional resources for the development of library services throughout the country.
• Increase the provision of open access information technology in public libraries and meet the commitment in the national agreement to “include everybody in the information society”.
• Provide additional funding to the Sports Partnership initiative.
• Increase the allocation for the local sports partnerships.
• Take initiatives to ensure equality of access across all public services.

The Budget

Efficiency

• Committed to the delivery of an Efficiency Review of the civil service.

• Transport and Communications

• Gave an increase of €262m for Public Transport Investment Projects for additional capacity on commuter rail and bus services.

• Provided €74m for national roads programme for 2008 and €45m for improving non national roads.

• Gave €25m for road safety programmes and campaigns including the reduction of waiting lists for tests to ten weeks by end of 2008.

• Allocated €10m for National Broadband Scheme for 10% of population with no current access to services.

Social Inclusion

• Provided additional funding to the Family Support Agency, MABS and the Citizens Information Board.

• Justice

• Provided for the continued expansion of the Garda Siochana, the delivery of a modern communications system and other measures to support the fight against crime.

Equality

• Allocated €4m to the Minister of State for Integration.

• Increased the overall allocation to equality by 52% to €33.7m

• Gave increased resources to COSC the National Office for the Prevention of Domestic Sexual and Gender based Violence.

Libraries

• Gave extra €6m for libraries.

Sports arts and culture

• Gave an increase of €6m to the Irish Sports Council and an increase of €12.5m to enhance art and cultural facilities.

Our Response

• We welcome the allocation to public transport as a step in the right direction.
• We welcome funding for increased broadband provision but regret that further investment in increasing access to information technology for adults and children has not been provided
• We regret the failure to recognise the importance to rural communities of a public payphone
• We regret that a more substantial investment has not been made in the library service
• We welcome the increased commitment to equality
• We welcome the commitment to improving efficiency in government departments
• While we welcome the increased budget for sport we question the value of allocating €76.6million to horse and greyhound racing. This amounts to a subsidy of about €40 for every person attending a horse or greyhound meeting. This subsidy would be much better spent funding the development and expansion of local sports partnerships promoted by the Sports Council and which are open to people irrespective of their means.
• In this context we regret the reduction in grants to support sport in disadvantaged areas by 25% to €1.5 million which should have a far higher priority within the budget.

Community & Rural Development

Our Submission Asked that the Budget :

• Ensure the Budget takes particular account of rural disadvantage.
• Expand the programme providing direct funding for community and voluntary organisations that provide services and do not make this funding dependent on C+V organisations employing people who do not have the requisite skills.
• Reform and adequately resource the Social Economy programme to ensure it has a real social economy focus.
• Provide additional resources for rural housing and for the development of rural public transport strategies and initiatives tailored to meet the needs of people in local communities.
• Support policies that encourage alternative farm enterprises through the promotion of quality (including organic) food production and processing and support programmes to create employment for part-time farmers with a view to effectively targeting the needs of smaller farmers.
• Support additional special outreach education programmes in rural areas, particularly those where no major third level colleges are located.
• Double the number of places on the rural social scheme and make it available to people without herd numbers.
• Reverse the trend of centralising services away from local communities in areas such as healthcare, education, post offices, etc.
• Adequately resource the Local and Regional Drugs Task Forces.

The Budget

• Gave a total of €250m to community affairs and provided an overall total of €119m for rural affairs ─an increase of 13% on 2007 funding.

• Provided increased funding of €64m under the Drugs Initiative to support the work of the Regional Drugs Task Forces, including the provision of further facilities and services for young people at risk, the implementation of the National Drugs Rehabilitation Report, and the provision of respite and information services for the families of problem drug users

• Provided €4m for the development of the recreational infrastructure as recommended under the National Countryside Recreation Strategy

• Allocated €5m to Dormant Accounts funded initiatives to address social and economic disadvantage, a decrease of €5m from the allocation in the 2007 budget

• Gave €35m extra to meet increased demand under the Farm Waste Management Scheme to facilitate compliance with the EU Nitrates Directive

• Gave an additional €15m for the Suckler Welfare Scheme to develop business opportunities in the beef sector

• Gave an additional €10m for an enhanced vessel decommissioning scheme in order to achieve more appropriate balance between fishing capacity and stocks

• Provided an additional €5.7m to cover the 2008 costs of 2,600 participants on the Rural Social Scheme.

• Provided €28m for the Islands and funding of €67m for the Gaeltacht

Our Response

• We welcome the increased allocations to community and rural affairs and to the Drugs Initiative.
• We are disappointed that there is no increase in places on the Rural Social Scheme.
• We also regret the failure to bring real improvements to the Social Economy programme.
• We believe that the real opportunity to bring fundamental economic and social changes to rural communities, so that rural life can become a sustainable alternative to urban living, still remains a challenge to be addressed.
• The failure to provide substantial additional direct funding for community and voluntary organisations that provide services in local communities across the country is most disappointing. Many of these organisations developed their services through employing people from the live register through the Community Employment programme. Now that unemployment is at a much lower level and the number of people on CE has fallen from 40,000 to about 20,000 the capacity of these organisations has been dramatically reduced. Additional funding was required.
• Rural Ireland is in transition from an agricultural to a rural development agenda. Action should be focused on issues such as implementing the National Spatial Strategy to secure a more balanced distribution of population and economic activity throughout the country. It requires development of rapid communications and supporting infrastructure in all parts of the country.

Environment & Carbon Budget

Our Submission Asked that the Budget :

• Resource the development of ‘satellite’ national accounts that include the costs of items such as environmental damage and resource consumption, and the value of a range of traditionally ‘uncounted’ items such as unpaid work.
• Resource the development of policy instruments that will allow these shadow accounts to be integrated into public policy making.
• Allocate the necessary resources to achieve waste reduction targets by implementing the relevant sections of the Waste Management Act..
• Allocate substantial new resources to develop and reward recycling.
• Provide additional resources to ensure that water pollution is reduced.
• Undertake to review the water pollution acts so as to increase the penalties associated with water pollution. (It remains a concern that over 30% of Ireland’s river channels are classified as polluted to some extent).
• Reverse the decision to abandon carbon taxation and introduce a coherent series of initiatives aimed at reducing dependence on oil, gas, coal and other fossil fuels.
• Introduce public purchasing policies that encourage sustainable practices.
• Target funding strategies in the transport area to ensure far greater priority for public transport initiatives.
• Reform Motor tax so that the highest polluting vehicles are taxed most.

The Budget

• Provided €13 m for capital expenditure on energy conservation.

• Provided €7m capital funding for energy research looking especially at renewable energy from ocean sources.

• Adjusted Vehicle Registration Tax (VRT) to ensure that emissions from a car will replace engine size as the criterion to determine the rate of VRT payable on the car at the point of registration.

• Introduced a revised scheme of capital allowances and leasing expenses for cars used for business purposes by which the availability of these allowances and expenses will be linked to the CO2 emission levels of the vehicles.

• Provided an additional €45m for Water Services for capital investment in infrastructure.

• Gave an additional € 4m for payments under the salmon hardship scheme and €2.8m to Inland Fisheries boards to implement the Water Framework Directive.

• Provided €13m additional funding to the Environmental Protection Agency for essential research and development and monitoring the cost of construction of its new headquarters and staffing costs.

• Gave an additional €8m to National Heritage for the management of national parks and for programmes under the Habitats and Birds Directives.

• Allocated an additional €3m for landfill remediation.

• Allocated €40m for the new Gateways Innovation Fund.

Our Response

• We welcome the increased focus on environmental sustainability and energy efficiency in this budget. However we believe that more could and should have been achieved.
• We welcome the taxation focused on encouraging the use of vehicles with lower CO2 emission rates
• We regret that the opportunity to introduce satellite national accounts has been neither introduced nor considered.
• Much more remains to be done to reduce waste and pollution and we therefore regret that waste reduction targets were not set, together with a comprehensive portfolio of initiatives to ensure that they are achieved
• It is to be hoped that the new focus within the budget, on efficiency in the public service will also encompass a focus on the sustainable use of resources.

Some key Environmental facts

• The number of private cars in Ireland per 1,000 population aged 15 and over has increased from 364 in 1995 to 495 in 2004. The EU-25 average is 555 cars per 1,000.
• There are almost 710,000 hectares of forestry in Ireland. This has increased by 47% since 1990.
• Imported oil and gas now accounts for 73% of Ireland's energy supply.

Housing and Accommodation

Our Submission Asked that the Budget :

• Acknowledge that everyone has a right to appropriate accommodation and develop policy from this perspective.
• Take the necessary steps in Budget 2008 to ensure that social housing provision will reach 200,000 units by 2013. This would mean that Budget 2008 should:
  • Provide the resources to local authorities, to voluntary/non-profit and co-op housing organisations to ensure an increase of 9,000 social housing units in 2008.
  • Ensure the agreed additional sites are provided to the voluntary/ non-profit and co-op organisations as committed in Towards 2016.
  • Allocate sufficient resources to the Rental Accommodation Scheme (RAS) to ensure it can be effective in moving households off the rent supplement scheme.
  • Provide sufficient resources to address the housing problems of those with a disability.
  • Provide sufficient resources to the rent supplement programme and to the housing support programme to ensure that both programmes are adequate to meet current needs.
• Provide new resources for the security and management of local authority housing.
• Give a special focus to tackling issues concerning accommodation for refugees and asylum seekers.
• Provide the resources for implementation of the Travellers Accommodation programme.

The Budget

• Increased the allocation to Social Housing Provision and Renewal by 14% to €1.5b.

• Provided an additional €124m for social housing which will allow progress to be maintained on meeting the NDP and Towards 2016 targets of 27,000 starts/acquisitions in the 2007 – 2009 period. 9,000 new social housing units to be commenced or acquired in 2008 and the provision of 5,500 new affordable homes.

• Provided an additional €26m under the Capital Loans and Subsidy Scheme (Voluntary and Co-operative Housing).

• Provided a further €27m under the Rental Accommodation Scheme.

• Increased the ceiling on mortgage interest relief for first time buyers by €2,000 for a single person and €4,000 for a married couple or widowed person, to €10,000 and €20,000 respectively.

• Provided a specific allocation of €50m under the Affordable Housing Purchase Scheme.

• Increased tax relief on rent payments by 11%. Increased the threshold for rent-a-room scheme from €7,620 to €10,000.

• Introduced New Stamp Duty Regime. Purchases of residences under €125,000 are exempt and residences of less than €1m will be charged a Stamp Duty at 7% and residences in excess of €1m will pay at 9% on the portion of the price that is in excess of that figure.

Our Response

• We strongly welcome the increased allocation to meet the NDP and Towards 2016 commitment to provide an additional 27,000 starts/acquisitions in the period 2007-2009 with 9,000 new social housing units to be commenced or acquired in 2008.
• We welcome the additional allocation of €27m under the Rental Accommodation Scheme.
• We welcome the provision of the extra €26m under the Capital Loans and Subsidy Scheme to the Voluntary and Co-operative Housing.
• The Government’s decision to increase the ceiling on mortgage interest relief, the tax relief on rent payments and the introduction of the New Stamp Duty Regime is welcome.
• We welcome the Government’s commitment to addressing housing needs and through targeted measures, providing appropriate accommodation solutions for lower income groups and people with special housing needs.
• We regret that new resources were not identified for the security and management of local authority housing.
• We acknowledge that everyone has a right to appropriate accommodation therefore we regret that the issues re accommodation for refugees and asylum seekers were not addressed and that the resources needed for the implementation of the Travellers Accommodation Programme were not allocated.

Education

Our Submission Asked that the Budget :

• Prioritise funding for Primary education and family based pre-school.
• Provide ‘early start’ programmes in all disadvantaged communities. This would require the initiative be extended outside disadvantaged areas to communities within which there are marked pockets of disadvantage.
• Significantly increase the funding provided to address literacy problems including the funding provided to the National Adult Literacy Agency (NALA).
• Introduce a Basic Educational Allowance for education, including part-time, for persons between ages 18 and 40 who do not proceed to third level from school.
• Extend early start initiatives beyond school year framework to an all year support initiative anchored in the host community, with especial links to family units.
• Research Pupil-Teacher Ratio allocations in all Primary and Post Primary schools with a view to ensuring equity of provision.
• Include ongoing credentialised training for providers of Exchequer funded pre-school initiatives. This should include ongoing evaluation of the outcomes of these initiatives for children and their families.
• Extend the current two-year timeframe and allow greater flexibility for completion of modular Leaving Certificate Applied to facilitate certain workers and parents.

The Budget

• Increased the gross budget by €693 million (€8.633bn to €9.326bn) i.e. 8.3%.

• Allocated additional

  • €95.2 million to Primary School Building Programme.

  • €26m to temporary accommodation in schools.

  • €23.3 m for grants to schools.

  • €21 m to school transport.

  • €12 m to research in 3rd level Institutions .

  • €18m to Special Education needs for the employment of Special Needs Assistants.

  • €25m for tackling Educational Disadvantage.

  • €3m for social inclusion measures including adult literacy places, Back to Education initiatives and Youthreach places.

• Increased allowances for Back to School Clothing and Footwear by 20 euro per child ( 2 – 22 years).

• Made available additional funding for School Meals Programme.

• Raised early Childcare supplement by 10%.

• Provided additional funding for child counselling.

Our Response

• We welcome the increased allocation for education. The increase in funding to the Primary School Building Programme is particularly welcome. However this seems to be at the expense of second level Building Grants and Capital costs, where according to the estimates there is a drop of 14% on the previous year.
• It is regrettable that €26m must be spent on temporary accommodation which points up the need for long term planning and investment in rapidly developing areas.
• We welcome the additional €25m for tackling educational disadvantage and also increases in clothing and footwear allowances and school meal provision. While we note that there is extra funding for child counselling we are concerned that the provision for the National Educational Psychological Services is increased by only 1%. Given the increased school population and the added diversity of psychological needs now evident in school children, this is unsatisfactory.
• While the additional €3 million for social inclusion is welcome, the number of additional places for Adult Literacy Places and Back to Education initiatives are scant. It is a cause for serious concern that there is no provision for the educational needs of new immigrants to Ireland, particularly in the area of language acquisition and cultural immersion. The failure to address the extension of the two year framework for completion of the Leaving Cert. Applied is also regrettable.
• We regret that no enhanced initiatives or additional provision was made for ‘early start’ programmes and that no additional allocation for training and evaluation relating to pre school initiatives was provided.

Healthcare

Our Submission Asked that the Budget :

• Fund 100 additional primary care teams in 2008 to bring the total to 300 teams by the end of 2008 as committed to in Towards 2016.
• Enhance the provision of community care and restructure the healthcare budget accordingly. This requires development of infrastructure in the community which has not been provided over the years in the capital programme e.g. primary care centres, long-stay facilities for older people, community-based mental health facilities and residential and day facilities.
• Provide the resources necessary to meet the targets on homecare packages.
• Resource and implement targets on health status within the NAPInclusion.
• Increase the percentage of the health budget allocated to health promotion and education in partnership with all relevant stakeholders.
• Provide the childcare services with the additional resources necessary to effectively implement the Child Care Act.
• Resource the development of mental health services, recognising that this will play a key factor in health status.
• Facilitate and fund a campaign to give greater attention to the issue of suicide in Irish society.
• Raise the eligibility threshold for the medical card.

The Budget

• Increased allocation to the Department of Health and Children and HSE to €16.2b an increase of over €1,100m on 2007 provision.

• Allocated €110m for the introduction of a new long term residential care scheme – A Fair Deal.

• Allocated €25m extra for Community Support Services for older people.

• Allocated €35m extra for Cancer Services, inclusive of the continued support of the full national roll-out of Breast Check.

• Provided an additional €25m to support the implementation of the National Childcare Investment Programme.

• Provided €12.5m extra to fund the implementation of the recommendations of the National Drug Strategy Rehabilitation Report.

• Provided €50m extra for the Disability sector.

• Increased by 10% all in-patient charges for Acute Hospitals including A&E. The monthly threshold under the Drugs Payment Scheme increased from €85 to €90.

• Increased the allocation to the Medical Card Services Scheme by 7% to €1.7b.

• Increased the allocation to the Office of the Ombudsman for Children to €2.46m.

• Increased the allocation to Information Systems and Related Services for Health Agencies by 10% to €254m.

• Increased the allocation to the National Treatment Purchase Fund Board by 13% to €100,374m.

• Increased the Respite Care Grant by €200 to €1,700 from June 2008.

Our Response

• We welcome the increase in allocation to the health budget.
• Primary Care has been recognised as one of the cornerstones of the new model for health service delivery. The national agreement Towards 2016 committed to provide sufficient investment to ensure integrated accessible services for people within their own community, with a target of 300 primary care teams by the end of 2008. We regret that the Budget has failed to honour this commitment by failing to resource an additional 100 Primary Care Teams to bring the total to 300 teams by the end of 2008.
• We regret that there is insufficient capital funding to meet the requirements to develop the infrastructure required to enhance the provision of community care and community based facilities.
• We welcome the allocation of monies for community support services for older people however substantial additional funding is still required to fully implement these services.
• We welcome the allocation to the Cancer Services.
• We welcome the provision to support the implementation of the National Childcare Investment Programme.
• We welcome the continued commitment to resource Disability sector.
• We welcome the additional funding for the National Drug Strategy Rehabilitation Report.
• The NESF report ‘Mental Health and Social Inclusion’ supported the development of mental health services in line with ‘A Vision for Change’ report. We regret the failure to resource the development of mental health services in line with Towards 2016 commitments.
• We regret the failure to raise the eligibility threshold for medical cards while recognising the commitment to make progress in this area.

SOCIAL WELFARE: Social Insurance increases January 2008

Increases in Monthly Rates of Child Benefit from April 2008

SOCIAL WELFARE: Social Assistance increases January 2008

Increases in Maximum Weekly Rates of Health Allowances from January 2008

Motor Taxation Reform

CORI Justice welcomed the decision by the Minister for Finance to undertake a review of the nature and structure of vehicle registration tax (VRT) and motor taxes as announced in Budget 2007.

For some time CORI Justice has advocated the need to reform the tax system such that appropriate environmental taxes are introduced. As we have outlined elsewhere, this view is grounded in our belief that all development should be socially, economically and environmentally sustainable. Reforming these taxes is also appropriate in the context of government commitments to address environmental emissions contained within The Kyoto Protocol, the National Climate Change Strategy and Towards 2016. CORI Justice also believes that these reforms are appropriate in the context of the need to develop a fairer taxation system.

As part of a consultation process during the last year CORI Justice submitted two detailed documents to the Departments of Finance and Environment outlining the possibility and nature of potential reforms (these are available on our website). We also met with the Departments to discuss these proposals. The general thrust of the reforms we proposed suggested that both VRT and motor taxes should be increased on the most heavily polluting cars and reduced on those with the lowest engine sizes and the smallest carbon dioxide emissions levels. In particular, there would be significant increases in the taxes levied on the highest polluting and largest engine cars. In that context we welcome the reform introduced by the Minister in Budget 2008. Although we regret that the start date of these new taxes has been delayed until July next - long after the vast majority of car sales for 2008 will have occurred. However, these new taxes are a welcome step in the right direction. We hope the proposed Commission on Taxation follows with recommendations for further carbon and anti-pollution taxes.

New Budget Process

We welcome most of the new processes introduced as part of Budget 2008. These changes had been long-overdue. We are also conscious that as this is the first year of the process there are ‘teething problems’ that require sorting out. In particular we note that some government departments have delayed announcements related to the Budget until the day after the Budget. This is most unwelcome and clearly undermines the intended transparency of the Budgetary process. In future all Budget announcements should occur on Budget day. We also note a need to integrate the pre-budget outlook ‘estimate’ figures with the ‘estimates’ figures published within the Budget documentation. Again, an ability to distinguish increases intended for extra services from those required to maintain the existing level of public services would enhance transparency.

Analysis &amp; Critique Budget 2008

CORI Justice Analysis and Critique of Budget 2008

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Welfare Benchmark Honoured but Anti-Poverty Momentum Lost

Budget 2008 honoured the Government’s commitment on benchmarking the lowest social welfare payment. It also contained a number of initiatives that are very welcome. However, it failed to maintain the momentum of the last three Budgets in addressing poverty and social exclusion.

While the proportion of the population at risk of poverty fell by 2.4 per cent as a result of the Budgets of 2005 and 2006, and will fall further as a result of Budget 2007, that momentum will not be maintained following Budget 2008.

Benchmark Honoured

The increase of €12 a week in the lowest social welfare rate for a single person maintains this payment at 30% of gross average industrial earnings (GAIE). The slow-down in the economy has reduced the level of GAIE for 2008 (which reduced the required rise to €12 from our original estimate of €13.20).

Anti-Poverty Momentum Lost

Almost a third of all households at risk of poverty today are headed by a person with a job. These are the working poor. More than half of all households at risk of poverty are headed by people outside the labour force (i.e. people who are older, ill, have a disability or are in caring roles). To tackle poverty effectively these two groups must be targeted.

The momentum in reducing poverty has been lost for the coming year because of

• the failure to address the working poor issue
• the failure to increase the qualifying adult social welfare rate to make it equal to 100% of the claimant’s rate (except in the case of the contributory old age pension where some progress has been made), and
• the failure to do substantially more to tackle child poverty.

Social Housing Targets Honoured

The overall housing package of €2.5 billion is most welcome. In particular, providing resources for 9,000 new social housing units in 2008 honours the commitment contained in Towards 2016 and will have a very positive impact on addressing the needs in this area. The continued roll-out of the Rental Accommodation Scheme (+€24m) and the allocation of an additional €26m under the loans and capital scheme (for Voluntary and Co-Operative Housing) are also very welcome.

Budget fails to deliver on Social Partnership commitments on Primary Care Teams

One of the most regrettable and unacceptable failures of Budget 2008 is its failure to honour the commitment contained in Towards 2016 to create 300 primary care teams by the end of 2008. Primary care has been recognised as one of the cornerstones of the health system. Between 90 and 95 per cent of the population are treated by the primary care system. The failure to allocate the necessary resources to meet this commitment is a disgrace.

Budget omissions provide new challenges for social partnership review

Distribution of resources in Budget

As a direct result of the Budget’s tax and welfare measures a single person on the lowest social welfare rate will benefit by €12 week while a person earning €100,000 a year will benefit by €6.96 a week. A couple on social welfare will benefit by €20 a week while a couple on €100,000 will benefit by €8.30 a week. Social welfare recipients have done better than those who are wealthy.
The full year cost of the personal income tax package was €546m. The full year cost of the Social Welfare package and other support services in Budget 2008 was €980m.

Working Poor issue not addressed

However, the working poor issue was not addressed. A single person or a couple on €15,000 a year gained nothing from Budget 2008.

As pointed out earlier almost a third of all households at risk of poverty today are headed by a person with a job. These are the working poor. To tackle poverty effectively this group must be targeted.

The most effective way of doing this is to make tax credits refundable (which would enable people on low pay to benefit from the full value of the tax credits to which they are entitled). People in this category pay neither income tax nor PRSI. Consequently they are the only people who do not benefit from budget changes. This is very disappointing.

Carbon Report

The moves towards producing a Carbon Report is welcome. So too are the changes on vehicle registration tax, on motor tax and the other environmental tax measures indicated in the Budget. These are welcome steps in the right direction but much more needs to be done if the issue of climate change is to be addressed effectively.

Adult illiteracy not addressed effectively

The very small allocation of an additional €3m for adult literacy programmes and related issues is most disappointing. Government’s current target on illiteracy is totally unacceptable. This target states that the proportion of the population aged 16-64 with restricted literacy will be reduced to between 10-15 per cent by 2016. If this Government target is achieved then 10-15% of Ireland’s labour force will be illiterate in 2016. This would have a very negative effect on Ireland’s economic development, its unemployment levels and poverty rates. Far more resources should have been made available to address this issue.

More could have been done within responsible fiscal parameters to address problems in the areas of income adequacy, service provision and activation.

Honouring Towards 2016 commitments?

The national agreement presents a new approach to social policy in which programmes are developed for various stages of the life-cycle and each of these programmes seeks to ensure that:

• Every person has sufficient income to live life with dignity;
• Social services are accessible, appropriate and adequate for all, and
• All people are supported to ensure their activation and participation in society.

Budget 2008 failed to take adequate steps to address many of these areas, as we identify in this analysis.

More could have been done

While we welcome the allocations to ensure the National Development Plan is delivered we also point to the fact that sufficient resources exist to do much more on the issues of income, services and activation.
The Current Budget surplus will be €4,866m in 2008 A part of this money could have been used to address the social challenges in the areas of income adequacy, service provision and activation. This could have been done within responsible fiscal parameters. We deeply regret the failure to so.

Conclusion

This Budget has positive and negative impacts. However one of its major consequences will be the challenges it provides to the review of social partnership due in Spring 2008.

Increase in Social Welfare

Budget 2007 marked a major achievement in Irish Economic and Social Policy when the lowest welfare rates were benchmarked at a rate equalling 30% of Gross Average Industrial Earnings (GAIE). We welcomed this achievement last year and predicted that the raising of welfare payments over recent Budgets would have notable benefits in terms of reducing the numbers recorded as living at risk of poverty. The most recent poverty figures, published by the CSO in late November, demonstrated this.

Over the past year the slowdown in the economy has impacted on the growth rate of GAIE - a fact reflected in recent earnings figures from the CSO and projections from the ESRI. An implication of these effects is that the required increase in the lowest welfare rate, needed to maintain the 30% benchmark, is less than the €13.20 we projected in the response to the Budget last year, and in our pre-Budget Policy Briefing. While we note that the resources did exist to provide this amount (see table on page 6) we accept that the increase of €12 reflects the current projection of a GAIE level of between €650-€660 per week for 2008.

Future Budgets must continue to increase welfare in line with this benchmark.

We regret that the momentum for welfare reforms, built up over recent years, was notably reduced in this Budget. An opportunity to make the welfare system more equitable, by increasing the qualifying adult rate to equal 100% of the claimant’s rate was missed.

Distribution and the Budget

Each year CORI Justice examines the Budget from a number of perspectives, including its effect on the income distribution. In Chart 1 (on page 4) we have examined how the resources available to the Minister for Finance were used. The chart reports the combined effect of changes in welfare payments (to the unemployed) and changes in tax credits and bands (to those earners who are employed and whose incomes are high enough to be liable for taxation).

In this Budget the unemployed have gained more per week than those in any other income group

We strongly welcome the fact that in this Budget the unemployed have gained more per week than have those in any other income group. A single person who is long-term unemployed gains €12 per week following the Budget while a single earner on €30,000 per year gains €2.68 per week and an earner on €100,000 per year gains €6.96 per week. An unemployed couple are €20 per week better off, more than twice the gain by a couple with one earner on an income of €100,000 per year and almost €5 per week more than the gain to a couple earning €100,000 .
CORI Justice welcomes this distributive approach.

Social Housing Commitment—Welcome

Budget 2007 has honoured the commitments made in Towards 2016 in the area of social housing. The Budget allocated the resources to ensure an additional 9,000 social housing units will start in 2008. This will maintain the commitment to have 27,000 social housing starts in the 2007-2009 period.

The Budget also allocated a further €27m under the Rental Accommodation Scheme. This will ensure progress will be maintained in moving people from rent supplement into a much more appropriate housing tenure.

€50m has been allocated for the Affordable Housing Purchase Scheme. An additional €26m is being provided under the Capital Loans and Subsidy scheme for Voluntary and Co-Operative Housing.

All of this is very welcome as it moves housing policy towards a destination of ensuring that everyone has appropriate accommodation.

A central conclusion of the 2004 housing report produced by the National Economic and Social Council (NESC) is that the supply of social housing will have to rise dramatically if the needs of Irish society are to be addressed in the years ahead.

Budget 2008 has made the required allocations for social housing and we welcome this development wholeheartedly

The main recommendation of the Council on the issue of social housing called on Government to “create an expanded and more flexible stock of social housing - adding in the order of 73,000 permanent social housing units to bring the stock to 200,000 dwellings by 2012 - in a manner that is consistent with other public investment needs and sound public finances”.

The figure of 200,000 social housing units was calculated based on the projected increases in the Irish population over that period and in the context of limited responses to existing social housing needs (e.g. homelessness, community based accommodation for disabled and elderly persons).

NESC concluded that to achieve the target of 200,000 units over the eight year period between 2005 and 2012, an annual increase of in excess of 9,000 units is necessary. They also pointed out that an estimated capital investment of €1.4bn a year would be required to achieve a net increase of 73,000 units by 2012.

Given the present level of capital expenditure this would mean an additional investment per annum of the scale of €500m to €600m on what is already projected.

This policy approach was adopted in the current national agreement.

CORI Justice welcomed the commitment in Towards 2016 to provide 27,000 new social housing units by 2009. We also welcomed the acknowledgement in that agreement of the 2012 NESC target of 73,000 new units. Reaching that target during the lifetime of the next National Development Plan (i.e. by 2013) is essential if Ireland is to achieve the goal of ensuring that everyone in the country has appropriate accommodation.

Zero gains for Low Income Earners

A major regret arising from Budget 2008 is the failure to address the issue of the working poor. While we welcome the fact that Government adjusted tax credits to ensure that those on the minimum wage pay no tax, we are concerned at the lack of attention for low paid workers.

Chart 1: Income Distribution and Budget 2008

Notes: * Except in LTU case where there is no earner ** LTU: Long Term Unemployed
Couple with 2 rners are assumed to have equal shares of income.

As chart 1 shows , the Budget has benefited those who are unemployed through increases in unemployment benefit and those who are working and paying taxes through alterations to tax credits and tax bands. However, for low paid workers and their families, they benefit from neither the tax changes (as their incomes are too low to pay any tax) nor welfare changes.

This is the second year that Budgetary changes have overlooked this group

A low income worker on €15,000 a year has gained nothing from Budget 2008. Similarly, families with 1 earner on an income of €15,000 and those with two earners on an income of €30,000 have gained nothing from this Budget. This is the second year that Budgetary changes have overlooked this group. It implies that such workers, and their dependents, are falling behind the rest of society; a fact that is reflected in the latest set of poverty figures. The EU-SILC poverty report for 2006, published by the CSO in late November, showed that three of every ten households at risk of poverty in Ireland are headed by somebody who is employed.

To significantly address this anomaly in future Budgets, government should make tax credits refundable. We look forward to highlighting this issue in the next year and bringing this problem to the attention of the proposed Commission on Taxation.

Effective Tax Rates after Budget 2008

Central to the ongoing debate on taxation in Ireland are effective tax rates. These rates are calculated by comparing the total amount of income tax a person pays with their pre-tax income. For example, a person earning €50,000 who pays €10,000 in taxation will have an effective tax rate of 20 per cent. Calculating the scale of income taxation in this way provides a more accurate reflection of the burden of income taxation faced by earners.

Following Budget 2008 we have calculated effective tax rates for a single person, a single income couple and a couple both earners. Table 1 presents the results of this analysis.

For a single person with an income of €15,000 the effective tax rate will be 0%, rising to 8.3% of an income of €25,000 and 35.4% of an income of €120,000. A single income couple will have an effective tax rate of 0% at an income of €15,000, rising to 2.9% at an income of €25,000, 19.8% at an income of €60,000 and 31.6% at an income of €120,000.

Effective tax rates provide a more accurate reflection of the burden of income taxation faced by earners.

In the case of a couple where both are earning where their combined income is €40,000 their effective tax rate is 3.6%, rising to 27.2% for combined earnings of €120,000.

As chart 2 shows these effective tax rates have decreased considerably over the 11 years for all earners. For example, in 1997 a couple with two earners on an income of €60,000 had an effective tax rate of 36.6%. This fell to 19.3% in 2002 and will fall to 12.2% after this budget.

Chart 2: Effective Tax Rates in Ireland, 1997-2008

How Much Better Off Will People Be In 2008?

When assessing how much better off people are going to be in 2008 it is important that wage increases and tax changes be included as well as social welfare increases. Unemployed people, for example, gain nothing from wage increases or tax reductions while those with jobs may gain from both. In our calculations we have included the general wage increase in various national agreements as well as the impact of Budget changes on social welfare and taxation.

We have not included the impact of any future benchmarking increases for public servants, as they do not apply to everyone.

Single people who are long-term unemployed will be €12.00 a week (€626 a year) better off in 2008. Those on €30,000 a year will be €24.22 a week (€1,264 a year) better off while those on €50,000 will be €34.46 a week (€1,798 a year ) better off in the coming year.

Couples who are long-term unemployed will be €20.00 a week (€1,044 a year) better off. Couples with one income on €30,000 a year will be €25.56 a week (€1,334 a year) better off while those on €50,000 will be €35.80 a week (€1,868 a year) better off in the coming year.

Couples with two incomes on €30,000 a year will be €27.36 a week (€1,428 a year) better off while those on €50,000 will be €41.69 a week (€2,176 a year) better off in the coming year.

The impact of Budget 2008 on the distribution of income in Ireland can be further assessed by examining the rich-poor gap. This measures the gap between the disposable income of a single person on long-term unemployment and a single person on €50,000 per annum. Budget 2008 has widened the rich-poor gap by €22.46 per week.

Budget 2008 - Summary of the Key Numbers

To accompany the Budget speech, the Department of Finance has published a series of documents detailing the changes announced in the Budget. Through this Analysis and Critique document we examine various aspects of these changes. The table below brings together the key figures from the published Budget documents. It presents the Department of Finance’s expectations of National Income (GDP and GNP) next year, and for the next three years. It outlines the projected exchequer budgetary position over that period. Expectations of future changes to employment, unemployment and inflation are detailed. The table also includes details on the taxation system following the implementation of the Budgetary changes. Finally, the table outlines the Department of Finance’s calculations regarding the full year cost of the tax and social welfare changes announced in the Budget.

ODA increase reinforces White Paper Commitment

Budget 2008 provides an increase of €84m in overseas development assistance (ODA). This increase brings the total ODA allocation in 2008 to €914m, representing 0.54% of GNP.

CORI Justice welcomes this increase, it marks a welcome commitment by government to aiding the poorest people of the world. It also serves as an important step towards honouring the ODA commitments outlined in the White Paper on Irish Aid and in Towards 2016. Last year, in Budget 2007, ODA was increased to meet the interim benchmark of 0.5% of GNP (some €813m). CORI Justice warmly welcomed this achievement in our response to that Budget. This years increase marks an important step towards the second interim target of 0.6% of GNP to be achieved by 2010. Achieving this next goal, and eventually the UN target of 0.7% by 2012, is an important national commitment and its achievement would be a major success both nationally and internationally.

Towards 2016 Health Commitments Not honoured

Budget 2008 raises very serious questions concerning Government’s willingness to honour the healthcare commitments contained in the National Agreement Towards 2016. Of particular concern are the failures on primary care teams and on mental health.

On primary care teams

Towards 2016 commits Government to create 100 new primary care teams in each of the years 2006, 2007 and 2008. Budget 2008 does not contain the required funding to ensure that these 300 primary care teams will be created by the end of 2008. This is a totally unacceptable situation. Primary Care has been recognised as one of the cornerstones of the new model for health service delivery. These teams were meant to ensure integrated accessible services for people within their own community. It will not be possible to deliver a comprehensive, integrated primary healthcare programme without the provision of these primary care teams. Failure to provide the resources to meet the already-agreed targets raises serious doubts concerning Government’s bona fides where these commitments are concerned.

Of particular concern are the failures on primary care teams and on mental health

On Mental Health commitments

The National Economic and Social Forum report Mental Health and Social Inclusion supported the development of mental health services in line with A Vision for Change, the Government’s agreed policy on mental health. The National Health Strategy identifies mental health as an area to be developed. The importance of addressing this whole area has been emphasised by the World Health Organisation. Consequently, we regret the failure to resource the development of mental health services in line with Towards 2016 commitments.

Education Capital Spending

The increase of €95m in funding for the Primary School Building programme is welcome. However, we note a simultaneous 14% decrease in the provision for capital building in secondary schools.

It remains a worry that it is only at the end of 2008 that we have begun to plan for increases in child number at primary schools, starting September 2009. This is particularly the case given the available data from Census 2001 and 2006 which signalled these impending increases. In that context we believe it is important that Government, and in particular the Department of Education, pay attention to the population projections calculated by the CSO for the years to come. In its Population and Labour Force Projections 2006-2036 the CSO signalled that the number of primary school children will increase from 433,900 in 2001 to exceed 500,000 by 2011 and will climb further to 560,000 by 2016. These increases require long-term planning and more comprehensive programmes of school expansion.

Adult Literacy

Despite the sustained and ongoing problem of adult literacy, the Budget has made minimal efforts to adequately address this crisis. A total of €3m in additional funding was allocated to “adult literacy and related measures”. As we highlighted in our Policy Briefing on Monitoring Social Partnership (Sep. 2007) the current government plan to tackle adult literacy, aims to reduce ‘restricted literacy’ rates - where people possess “very poor skills, where the individual may, for example, be unable to determine the correct amount of medicine to give a child from information printed on the package” - to between 10-15% of the adult population by 2016. This figure represents a ‘restricted literacy’ adult population of between 317,000-475,000 by 2016. Such a figure would be totally unacceptable and more resources are needed to competently address this issue. The Budget could have done better.

The Budget and the Poor

Despite the advances in employment and economic growth achieved over the last few years, the proportion of the population at risk of poverty remains large. Its sustained existence challenges many of the improvements of recent years.

The most up-to-date data available on the nature and extent of poverty in Ireland comes from the 2006 EU-SILC (Survey on Income and Living Conditions) results published by the Central Statistics Office in late-November. Its results showed that 17% of the Irish population is at risk of poverty - a decline for the third year in a row.

In financial terms this means that almost one in five of the population lives with incomes equivalent to less than €210 a week for a single person in 2007 terms.

It is useful to translate the poverty percentages into numbers of people. The latest poverty figures indicate that in 2006 approximately 720,000 people were at risk of poverty.

This figure includes a large number of children with the data showing that approximately 20 out of every 100 Irish children live in a household that is at risk of poverty.

The latest EU-SILC data show that the groups at highest risk of poverty are: the unemployed, those who are ill/disabled, single parents and those who rent. A large proportion of these groups depends on social welfare payments and that fact underscores our sustained call over recent years to increase welfare payments in line with Gross Average Industrial Earnings. The recent poverty figures also highlighted that non-Irish people record a poverty risk that is much greater than that of Irish people. Future policy will need to address this issue.

As we have shown in other areas of this Analysis and Critique, the Budget has made some progress in addressing the low income of the unemployed, however it has not adequately addressed the working poor issue. We are concerned that this group of working low income households will increase in the years to come unless more targeted policies are pursued. In particular, we believe that the introduction of refundable tax credits would benefit this group.

Government’s Current Budget for 2008

Below we outline the government’s current budget for the forthcoming year. The current budget comprises the income (or receipts) and expenditure associated with the day-to-day running of the country. Income includes revenue from taxation and flows of funds to the government from other sources, including the Central Bank and the National Lottery. Collectively these give a figure for the total income expected to be received by the government during the next year - total current receipts (labelled b below).

Expenditure includes interest payments on the national debt, contributions to the EU and the costs associated with running, on a day-to-day basis, Ireland’s economic and social services. When transfers to the social insurance fund (PRSI) and unspent resources from previous years are excluded, a figure for net current expenditure planned for next year is reached (labelled a below). The current budget balance (b minus a) indicates how much day-to-day income exceeds (if positive), or falls short (if negative), day-to-day spending.

Taxation

Our Submission Asked that the Budget :

• Make tax credits refundable (to address the working poor issue).
• Adjust tax credits so as to keep the minimum wage out of the tax net.
• Commit to moving Ireland’s total tax take closer to the EU average.
• Standard rate all discretionary tax expenditures.
• Continue to review the costs and benefits of discretionary tax expenditures.
• Introduce a speculative tax on windfall gains from land rezoning.
• Reform the structure of motor tax.
• Proceed with individualisation in the income tax system in a fair and equitable manner.
• Poverty-proof all budget tax packages to ensure they do not further widen the rich/poor gap.
• Increase capital gains tax.
• Increase the corporate tax rate to 17.5% in the context of EU tax integration.
• Move decisively to shift the burden of taxation from income tax to eco-taxes and taxes on consumption.
• Expand the levy on financial institutions introduced in Budget 2003 to rebalance the windfall profits these make following Ireland’s corporate tax rate cuts.
• Investigate policies which allow taxation on wealth and land to be increased.

The Budget

INCOME TAX

• Employee Tax Credit increased by €70 to €1,870.
• Personal Credits increased by €70 single and €140 married.
• Tax exemption for people aged over 65 increased by €2,000 single and €4,000 married.
• Standard Rate Tax band increased by €1,400 single, married (one income) and lone parent and €2,800 married (two incomes).
• Ceiling on interest on a mortgage increased by €2,000 single and €4,000 married.
• Maximum level of rent paid for private rented accommodation, on which tax relief can be claimed increased to €2,000 single and €4,000 married person under 55 and €4,000 and €8,000 over 55.
• Employee PRSI annual ceiling increased to €50,700.
• Employee PRSI weekly threshold increased to €352.
• Health Levy threshold increased to €500 weekly.
• Tax allowance in respect of Trade Union Subscriptions increased to €350.
• Exemption limit on rent received on room or rooms in principal private residence increased to €10,000.
• Increase in Rate for Preferential Home Loans from 4.5% to 5.5% and in respect of other loans from 12% to 13%.
• Income on investments and foreign employment outside the State extended to include UK-sourced income.

FARMER TAXATION

• Introduction of relief from Capital Gains Tax on the dissolution of farm partnerships.
• Payments for Sugar Beet Diversification to be spread over six years for purpose of calculating taxable income.
• Farmers VAT Flat-rate addition being maintained at 5.2%.

VAT & EXCISES

• Excise Duty on cigarettes increased by 30 cent.
• Licensing Fees for Off-licences increased to €300 per licence.
• Excise Duty on electricity introduced at 50 cent per MWh for business use and €1 for non-business use. Household will be exempt.
• VAT registration thresholds for small businesses increased to €37,500 for services and €75,000 for goods.

VRT & MOTOR TAX

• VRT system to be revised to take account of CO2 emission levels rather than engine size. With 7 bands from 14% to 36%.
• VRT relief scheme for Hybrid electric and flexible fuel vehicles to be extended.
• Increase in Motor Tax rates to 9.5% for cars < 2.5 litres and 11% for cars > 2.5 litres.

CORPORATION TAX

• Base year for expenditure which is used to calculate qualifying incremental expenditure on research and development, extended to 2013.
• Corporation tax liability threshold of small companies increased to €200,000.

STAMP DUTY

• Stamp Duty reformed with first €125,000 exempt and excess charged at two rates: 7% up to €1million and 9% over €1 million.
• Stamp Duty on ATM, and Debit Cards reduced to €5 for single card, €10 for combined card and €30 for credit cards.
• Stamp Duty on cheques increased to 30 cent per cheque.

Social Welfare

Our Submission Asked that the Budget :

• Provide a fair income distribution between people on different incomes. To achieve this the combined impact of the tax and social welfare packages should favour those on low incomes whether they depend on social welfare or are in low-paid employment.
• Increase the lowest social welfare rates by €13.20 a week for a single person.
• Continue benchmarking the lowest social welfare payments for single people at 30% of gross average industrial earnings (GAIE).
• Individualise all social welfare payments. Budget 2007 took some welcome steps in this direction and CORI Justice believes that Budget 2008 should complete this transition.
• Increase the ‘qualifying adult’ payments and commit to moving all of them towards 100% of the adult payments.
• Increase child benefit substantially and do not tax it.
• Introduce a cost of disability allowance.
• Increase the weekly allowance for asylum seekers in ‘direct provision’ to €60 a week for an adult and €30 for a child.
• Develop a national programme, on an inter-departmental basis, to address fuel poverty.
• Update tax credits so as to keep the minimum wage out of the tax net.
• Adopt policies to address child poverty - by increasing child benefit and/or the early childhood supplement.

The Budget

• Provided Total Social Welfare improvements costing €900 million in a full year.

PERSONAL RATES (weekly)

• State Pensions: + €14 (contributory) and €12 (non-contributory)

• + €12 for all others on lower rates

• PERSON WITH QUALIFIED ADULT ALLOWANCES (weekly)

• + €41 State Pension, 66 and over (contributory)

• + €23.30 Pension (contributory) and Transition, under 66

• +€19.90 Non contributory Pension

• + €20.60 Invalidity Pension, < 66

• + €14 - €20 for other QAA payments.

CHILD AND FAMILY INCOME INCREASES

• €6 monthly in Child Benefit for first and second child and €8 for third and subsequent child.

• FIS income threshold by €10 per week per child.

• BSCFA by €20 (2-11 years) and by €20 (12 and to, where appropriate, 22 years)

• Early Childcare Supplement by €100 to €1,100 per year

• Fuel Allowance extended by 1 week to 30 weeks

• One-Parent Family +€14 and the earning threshold up to €425

• Increase of €14 to €221.80 in the minimum rate of Maternity and Adoptive Benefit.

CARER’S INCREASES

• Carer’s payment of €14 per week.

• Weekly income disregard in the Carer’s Allowance Scheme - €12.50 to €332.50(single) and €25 to €665 (couple)

• Respite Care Grant €200 increase

Our Response

We welcome:

• The €12 increase in Social Welfare payments which is in line with the commitment to benchmark the lowest social welfare payments for single people at 30% of GAIE.
• The commitment to keep people on the minimum wage out of the tax net.
• The increase in the Qualified Adult Rate for the Contributory Pension.
• The increase in the Carer’s payment, Income Disregard, Respite Care Grant and the earning threshold for Carer’s Benefit.
• The additional funding awarded to the Citizens Information Board, Money and Advice and Budgeting Service (MABS) and the Family Support Agency.
• The increase in the Widowed Parent Grant.
• It should be noted that:
• The increases in Child Benefit, BSCFA, Early Childcare Supplement and FIS income thresholds, will not meet the cost of living increases.
• There is no attempt to develop a national programme to address fuel poverty.
• The additional funding for School Meals is grossly inadequate.

We regret:

• The failure to increase the abysmal weekly allowance for Asylum Seekers in direct provision.
• The failure to introduce the cost of disability allowance.
• The failure to maintain the momentum to equalise the ‘qualifying adult’ payments with the personal rate (with the exception of the contributory pension).

Work/Unemployment/Job Creation

Our Submission Asked that the Budget :

• Place an ongoing emphasis on preparing and enabling unemployed people to access jobs. This would involve providing additional resources to support:
  • Increased numbers of places providing quality education and training, retraining and up-skilling.
  • Expanded opportunities for unemployed people to gain work-place experience.
  • Adequate numbers of places on Active Labour Market Programmes (ALMPs).
• ALMPs need to be resourced adequately to ensure that appropriate pathways are available to all who need them.
• Increase the education/training grants for participants in active labour market programmes.
• Resource life long learning.
• Allocate resources to address the youth unemployment problem.
• Resource the development of employment-friendly income tax policies which ensure that no unemployment traps exist.
• As part of the process of addressing the working poor issue, reform the taxation system to make tax credits refundable.
• Recognise the right to work of all asylum seekers whose application for asylum is at least six months old.
• Resource the CSO to conduct an annual survey to discover the value of all unpaid work in the country (including community and voluntary work and work in the home).

The Budget

• Increased the gross budget to the Department of Enterprise, Trade and & Employment by

• 7% (€101.6m) to €1.49 billion.

• Increased the National Training Fund by €72.7m to €1,998m. This includes extra €7m to further support the National Skills Strategy.

• Increased the allocation to the National Employment Rights Agency by 26% to €10.8m.

• Increased the Capital funding to Science, Technology and Innovation Programme by a further €36.5m. The increase is split between Enterprise Ireland (€19.9m) and the Science Foundation Ireland (€16.6m).

• Increased FORFAS grant by 10%.

• Reduced allocation to INTERTRADE Ireland by 10% to €10.68m.

• Reduced the allocation to the Technical Support for Community Initiatives by 32% to €500m.

• Allocated an additional €25.8m for FÁS participants on training and employment programmes.

• Increased allocation to FÁS Training and Integration Supports by 7% to €99.98m and Employment Programmes to €439.5m.

• Reduced the allocation for the Equal Community Initiative Development Partnerships by 56% to €2.5m.

• Increased the allocation to the Work Place Innovation Fund Promotion of Partnership by 189% to €2.7m.

• Increased the allocation to Enterprise Ireland Grant to Industry to €56.7m.

• Increased the allocation to the National Framework Committee for Work/Life Balance Policies by 26% to €0.35m

Our Response

• We welcome the increase to the National Training Fund and to the Science, Technology and Innovation Programme. This will continue to improve the skills of Ireland’s labour force and strengthen the development component of economic development.
• While we welcome the increased allocation for FÁS Training and Integration Supports and the FÁS Employment Programmes, the allocations must be used to up skill-workers, particularly those in danger of becoming unemployed as the economy slows done.
• We welcome additional funding to the National Training Fund that will support the National Skills Strategy.
• The Department of Finance is forecasting the creation of 24,000 new jobs with the total number at work increasing by a little over 1%. This is an encouraging outlook.
• We welcome the increased allocation to the Work Place Innovation Fund Promotion of Partnership.
• The increased support to the National Employment Rights Agency is welcomed as this meets a key commitment contained in Towards 2016.
• We regret the continued failure to recognise the right to work of all asylum seekers whose application for asylum is at least six months old.
• We regret the failure to resource the CSO to conduct an annual survey to discover the value of all unpaid work in the country including community and voluntary work and work in the home. The economic value of such work tends to be ignored. It is not included in measurements of GNP or GDP. The value of such work needs to be recognised, quantified and included in economic calculations as well as in measurements of people’s and society’s wellbeing.

Public Services

Our Submission Asked that the Budget :

• Target funding strategies to ensure that far greater priority is given to providing an easy access, affordable and high quality public transport system.
• Take the initiatives required to ensure broadband is available nationwide.
• Introduce a system that ensures people on low incomes can access information communications technology on an ongoing basis.
• Adopt further information technology programmes to increase the skills of school children, early school-leavers and the unemployed.
• Regulate the removal of public payphone services. This is particularly necessary for poor areas and rural areas where the revenue generated by a pay-phone can give a misleading interpretation of its significance in the community.
• Provide substantial additional resources for the development of library services throughout the country.
• Increase the provision of open access information technology in public libraries and meet the commitment in the national agreement to “include everybody in the information society”.
• Provide additional funding to the Sports Partnership initiative.
• Increase the allocation for the local sports partnerships.
• Take initiatives to ensure equality of access across all public services.

The Budget

Efficiency

• Committed to the delivery of an Efficiency Review of the civil service.

• Transport and Communications

• Gave an increase of €262m for Public Transport Investment Projects for additional capacity on commuter rail and bus services.

• Provided €74m for national roads programme for 2008 and €45m for improving non national roads.

• Gave €25m for road safety programmes and campaigns including the reduction of waiting lists for tests to ten weeks by end of 2008.

• Allocated €10m for National Broadband Scheme for 10% of population with no current access to services.

Social Inclusion

• Provided additional funding to the Family Support Agency, MABS and the Citizens Information Board.

• Justice

• Provided for the continued expansion of the Garda Siochana, the delivery of a modern communications system and other measures to support the fight against crime.

Equality

• Allocated €4m to the Minister of State for Integration.

• Increased the overall allocation to equality by 52% to €33.7m

• Gave increased resources to COSC the National Office for the Prevention of Domestic Sexual and Gender based Violence.

Libraries

• Gave extra €6m for libraries.

Sports arts and culture

• Gave an increase of €6m to the Irish Sports Council and an increase of €12.5m to enhance art and cultural facilities.

Our Response

• We welcome the allocation to public transport as a step in the right direction.
• We welcome funding for increased broadband provision but regret that further investment in increasing access to information technology for adults and children has not been provided
• We regret the failure to recognise the importance to rural communities of a public payphone
• We regret that a more substantial investment has not been made in the library service
• We welcome the increased commitment to equality
• We welcome the commitment to improving efficiency in government departments
• While we welcome the increased budget for sport we question the value of allocating €76.6million to horse and greyhound racing. This amounts to a subsidy of about €40 for every person attending a horse or greyhound meeting. This subsidy would be much better spent funding the development and expansion of local sports partnerships promoted by the Sports Council and which are open to people irrespective of their means.
• In this context we regret the reduction in grants to support sport in disadvantaged areas by 25% to €1.5 million which should have a far higher priority within the budget.

Community & Rural Development

Our Submission Asked that the Budget :

• Ensure the Budget takes particular account of rural disadvantage.
• Expand the programme providing direct funding for community and voluntary organisations that provide services and do not make this funding dependent on C+V organisations employing people who do not have the requisite skills.
• Reform and adequately resource the Social Economy programme to ensure it has a real social economy focus.
• Provide additional resources for rural housing and for the development of rural public transport strategies and initiatives tailored to meet the needs of people in local communities.
• Support policies that encourage alternative farm enterprises through the promotion of quality (including organic) food production and processing and support programmes to create employment for part-time farmers with a view to effectively targeting the needs of smaller farmers.
• Support additional special outreach education programmes in rural areas, particularly those where no major third level colleges are located.
• Double the number of places on the rural social scheme and make it available to people without herd numbers.
• Reverse the trend of centralising services away from local communities in areas such as healthcare, education, post offices, etc.
• Adequately resource the Local and Regional Drugs Task Forces.

The Budget

• Gave a total of €250m to community affairs and provided an overall total of €119m for rural affairs ─an increase of 13% on 2007 funding.

• Provided increased funding of €64m under the Drugs Initiative to support the work of the Regional Drugs Task Forces, including the provision of further facilities and services for young people at risk, the implementation of the National Drugs Rehabilitation Report, and the provision of respite and information services for the families of problem drug users

• Provided €4m for the development of the recreational infrastructure as recommended under the National Countryside Recreation Strategy

• Allocated €5m to Dormant Accounts funded initiatives to address social and economic disadvantage, a decrease of €5m from the allocation in the 2007 budget

• Gave €35m extra to meet increased demand under the Farm Waste Management Scheme to facilitate compliance with the EU Nitrates Directive

• Gave an additional €15m for the Suckler Welfare Scheme to develop business opportunities in the beef sector

• Gave an additional €10m for an enhanced vessel decommissioning scheme in order to achieve more appropriate balance between fishing capacity and stocks

• Provided an additional €5.7m to cover the 2008 costs of 2,600 participants on the Rural Social Scheme.

• Provided €28m for the Islands and funding of €67m for the Gaeltacht

Our Response

• We welcome the increased allocations to community and rural affairs and to the Drugs Initiative.
• We are disappointed that there is no increase in places on the Rural Social Scheme.
• We also regret the failure to bring real improvements to the Social Economy programme.
• We believe that the real opportunity to bring fundamental economic and social changes to rural communities, so that rural life can become a sustainable alternative to urban living, still remains a challenge to be addressed.
• The failure to provide substantial additional direct funding for community and voluntary organisations that provide services in local communities across the country is most disappointing. Many of these organisations developed their services through employing people from the live register through the Community Employment programme. Now that unemployment is at a much lower level and the number of people on CE has fallen from 40,000 to about 20,000 the capacity of these organisations has been dramatically reduced. Additional funding was required.
• Rural Ireland is in transition from an agricultural to a rural development agenda. Action should be focused on issues such as implementing the National Spatial Strategy to secure a more balanced distribution of population and economic activity throughout the country. It requires development of rapid communications and supporting infrastructure in all parts of the country.

Environment & Carbon Budget

Our Submission Asked that the Budget :

• Resource the development of ‘satellite’ national accounts that include the costs of items such as environmental damage and resource consumption, and the value of a range of traditionally ‘uncounted’ items such as unpaid work.
• Resource the development of policy instruments that will allow these shadow accounts to be integrated into public policy making.
• Allocate the necessary resources to achieve waste reduction targets by implementing the relevant sections of the Waste Management Act..
• Allocate substantial new resources to develop and reward recycling.
• Provide additional resources to ensure that water pollution is reduced.
• Undertake to review the water pollution acts so as to increase the penalties associated with water pollution. (It remains a concern that over 30% of Ireland’s river channels are classified as polluted to some extent).
• Reverse the decision to abandon carbon taxation and introduce a coherent series of initiatives aimed at reducing dependence on oil, gas, coal and other fossil fuels.
• Introduce public purchasing policies that encourage sustainable practices.
• Target funding strategies in the transport area to ensure far greater priority for public transport initiatives.
• Reform Motor tax so that the highest polluting vehicles are taxed most.

The Budget

• Provided €13 m for capital expenditure on energy conservation.

• Provided €7m capital funding for energy research looking especially at renewable energy from ocean sources.

• Adjusted Vehicle Registration Tax (VRT) to ensure that emissions from a car will replace engine size as the criterion to determine the rate of VRT payable on the car at the point of registration.

• Introduced a revised scheme of capital allowances and leasing expenses for cars used for business purposes by which the availability of these allowances and expenses will be linked to the CO2 emission levels of the vehicles.

• Provided an additional €45m for Water Services for capital investment in infrastructure.

• Gave an additional € 4m for payments under the salmon hardship scheme and €2.8m to Inland Fisheries boards to implement the Water Framework Directive.

• Provided €13m additional funding to the Environmental Protection Agency for essential research and development and monitoring the cost of construction of its new headquarters and staffing costs.

• Gave an additional €8m to National Heritage for the management of national parks and for programmes under the Habitats and Birds Directives.

• Allocated an additional €3m for landfill remediation.

• Allocated €40m for the new Gateways Innovation Fund.

Our Response

• We welcome the increased focus on environmental sustainability and energy efficiency in this budget. However we believe that more could and should have been achieved.
• We welcome the taxation focused on encouraging the use of vehicles with lower CO2 emission rates
• We regret that the opportunity to introduce satellite national accounts has been neither introduced nor considered.
• Much more remains to be done to reduce waste and pollution and we therefore regret that waste reduction targets were not set, together with a comprehensive portfolio of initiatives to ensure that they are achieved
• It is to be hoped that the new focus within the budget, on efficiency in the public service will also encompass a focus on the sustainable use of resources.

Some key Environmental facts

• The number of private cars in Ireland per 1,000 population aged 15 and over has increased from 364 in 1995 to 495 in 2004. The EU-25 average is 555 cars per 1,000.
• There are almost 710,000 hectares of forestry in Ireland. This has increased by 47% since 1990.
• Imported oil and gas now accounts for 73% of Ireland's energy supply.

Housing and Accommodation

Our Submission Asked that the Budget :

• Acknowledge that everyone has a right to appropriate accommodation and develop policy from this perspective.
• Take the necessary steps in Budget 2008 to ensure that social housing provision will reach 200,000 units by 2013. This would mean that Budget 2008 should:
  • Provide the resources to local authorities, to voluntary/non-profit and co-op housing organisations to ensure an increase of 9,000 social housing units in 2008.
  • Ensure the agreed additional sites are provided to the voluntary/ non-profit and co-op organisations as committed in Towards 2016.
  • Allocate sufficient resources to the Rental Accommodation Scheme (RAS) to ensure it can be effective in moving households off the rent supplement scheme.
  • Provide sufficient resources to address the housing problems of those with a disability.
  • Provide sufficient resources to the rent supplement programme and to the housing support programme to ensure that both programmes are adequate to meet current needs.
• Provide new resources for the security and management of local authority housing.
• Give a special focus to tackling issues concerning accommodation for refugees and asylum seekers.
• Provide the resources for implementation of the Travellers Accommodation programme.

The Budget

• Increased the allocation to Social Housing Provision and Renewal by 14% to €1.5b.

• Provided an additional €124m for social housing which will allow progress to be maintained on meeting the NDP and Towards 2016 targets of 27,000 starts/acquisitions in the 2007 – 2009 period. 9,000 new social housing units to be commenced or acquired in 2008 and the provision of 5,500 new affordable homes.

• Provided an additional €26m under the Capital Loans and Subsidy Scheme (Voluntary and Co-operative Housing).

• Provided a further €27m under the Rental Accommodation Scheme.

• Increased the ceiling on mortgage interest relief for first time buyers by €2,000 for a single person and €4,000 for a married couple or widowed person, to €10,000 and €20,000 respectively.

• Provided a specific allocation of €50m under the Affordable Housing Purchase Scheme.

• Increased tax relief on rent payments by 11%. Increased the threshold for rent-a-room scheme from €7,620 to €10,000.

• Introduced New Stamp Duty Regime. Purchases of residences under €125,000 are exempt and residences of less than €1m will be charged a Stamp Duty at 7% and residences in excess of €1m will pay at 9% on the portion of the price that is in excess of that figure.

Our Response

• We strongly welcome the increased allocation to meet the NDP and Towards 2016 commitment to provide an additional 27,000 starts/acquisitions in the period 2007-2009 with 9,000 new social housing units to be commenced or acquired in 2008.
• We welcome the additional allocation of €27m under the Rental Accommodation Scheme.
• We welcome the provision of the extra €26m under the Capital Loans and Subsidy Scheme to the Voluntary and Co-operative Housing.
• The Government’s decision to increase the ceiling on mortgage interest relief, the tax relief on rent payments and the introduction of the New Stamp Duty Regime is welcome.
• We welcome the Government’s commitment to addressing housing needs and through targeted measures, providing appropriate accommodation solutions for lower income groups and people with special housing needs.
• We regret that new resources were not identified for the security and management of local authority housing.
• We acknowledge that everyone has a right to appropriate accommodation therefore we regret that the issues re accommodation for refugees and asylum seekers were not addressed and that the resources needed for the implementation of the Travellers Accommodation Programme were not allocated.

Education

Our Submission Asked that the Budget :

• Prioritise funding for Primary education and family based pre-school.
• Provide ‘early start’ programmes in all disadvantaged communities. This would require the initiative be extended outside disadvantaged areas to communities within which there are marked pockets of disadvantage.
• Significantly increase the funding provided to address literacy problems including the funding provided to the National Adult Literacy Agency (NALA).
• Introduce a Basic Educational Allowance for education, including part-time, for persons between ages 18 and 40 who do not proceed to third level from school.
• Extend early start initiatives beyond school year framework to an all year support initiative anchored in the host community, with especial links to family units.
• Research Pupil-Teacher Ratio allocations in all Primary and Post Primary schools with a view to ensuring equity of provision.
• Include ongoing credentialised training for providers of Exchequer funded pre-school initiatives. This should include ongoing evaluation of the outcomes of these initiatives for children and their families.
• Extend the current two-year timeframe and allow greater flexibility for completion of modular Leaving Certificate Applied to facilitate certain workers and parents.

The Budget

• Increased the gross budget by €693 million (€8.633bn to €9.326bn) i.e. 8.3%.

• Allocated additional

  • €95.2 million to Primary School Building Programme.

  • €26m to temporary accommodation in schools.

  • €23.3 m for grants to schools.

  • €21 m to school transport.

  • €12 m to research in 3rd level Institutions .

  • €18m to Special Education needs for the employment of Special Needs Assistants.

  • €25m for tackling Educational Disadvantage.

  • €3m for social inclusion measures including adult literacy places, Back to Education initiatives and Youthreach places.

• Increased allowances for Back to School Clothing and Footwear by 20 euro per child ( 2 – 22 years).

• Made available additional funding for School Meals Programme.

• Raised early Childcare supplement by 10%.

• Provided additional funding for child counselling.

Our Response

• We welcome the increased allocation for education. The increase in funding to the Primary School Building Programme is particularly welcome. However this seems to be at the expense of second level Building Grants and Capital costs, where according to the estimates there is a drop of 14% on the previous year.
• It is regrettable that €26m must be spent on temporary accommodation which points up the need for long term planning and investment in rapidly developing areas.
• We welcome the additional €25m for tackling educational disadvantage and also increases in clothing and footwear allowances and school meal provision. While we note that there is extra funding for child counselling we are concerned that the provision for the National Educational Psychological Services is increased by only 1%. Given the increased school population and the added diversity of psychological needs now evident in school children, this is unsatisfactory.
• While the additional €3 million for social inclusion is welcome, the number of additional places for Adult Literacy Places and Back to Education initiatives are scant. It is a cause for serious concern that there is no provision for the educational needs of new immigrants to Ireland, particularly in the area of language acquisition and cultural immersion. The failure to address the extension of the two year framework for completion of the Leaving Cert. Applied is also regrettable.
• We regret that no enhanced initiatives or additional provision was made for ‘early start’ programmes and that no additional allocation for training and evaluation relating to pre school initiatives was provided.

Healthcare

Our Submission Asked that the Budget :

• Fund 100 additional primary care teams in 2008 to bring the total to 300 teams by the end of 2008 as