Budget 2009 #2 CORI Justice Analysis and Critique

Budget lacks vision as banks escape and children are targeted

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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

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