- The current approach to resolving Ireland’s series of crises is not working.
- This situation has been exacerbated by the Government’s protection of the rich at the expense of the rest of us.
- Budget 2013 should provide a major investment programme and protect public services.
- It should also make the tax system fairer and distribute the ‘hits’ fairly.
- All of this can be done while reducing borrowing by €3.5bn in 2013.
Social Justice Ireland‘s latest Policy Briefing claims that the current approach to resolving Ireland’s crisis is protecting the rich at the expense of the rest of us. Banks and bondholders have been prioritised over tax-payers. Budget 2012 targeted the poor more than the rich and provided very little investment. Without investment there will be no jobs. Without jobs there will be no recovery. Without a recovery Ireland will be forced to continue its current austerity programme indefinitely.
The briefing, titled ‘Budget Choices’, presents a fully-costed series of proposals for Budget 2013 that would see Ireland’s borrowing reduced by €3.5bn, provide substantial targeted investment, make the tax system fairer and protect public services as well as the vulnerable and the communities in which they live. It proposes no changes in social welfare rates or in Child Benefit and if implemented would see the ‘hits’ distributed more fairly in Budget 2013.
Current approach not working
The current approach to resolving Ireland’s series of crises is not working. More than 700,000 people are at risk of poverty. Domestic demand continues to fall. The number of jobs in the country fell by 33,400 in the past year – more than the total population of Leitrim. Long-term unemployment rose from 7.7% to 8.8% of the labour force in the past year. It was 1.3% in 2007. It now accounts for 60% of all those unemployed. Emigration is high. The working poor issue is not being addressed. 100,000 households are on waiting lists for social housing.
Bailout not working for Ireland
Ireland has achieved all the benchmarks required by the Bailout agreement with the Troika. Yet the economic benefits that were supposed to flow from these adjustments have not emerged. Fr Healy said: “In part this is due to the international economy being weak. But in major part it is also due to the failure of the economic model on which the bailout is based. Without investment the jobs required to drive the recovery will not be created. “
A new approach is needed
Budget 2012 saw Ireland’s poorest taking the biggest hits. This is totally unacceptable. A new approach is needed. This new approach requires:
- A major investment programme that will create jobs;
- Protection of public services, the vulnerable and their communities;
- A fairer tax system collecting up to 35% of GDP in tax;
- A fairer distribution of the ‘hits’ in the budget.
All of this can be done while reducing borrowing by €3.5bn
Essential parts of a new approach
In this Policy Briefing Social Justice Ireland sets out a series of fully-costed proposals following this new approach. The proposals involve:
- Achieving the borrowing reduction target by tax increases and expenditure reductions on a ratio of 2:1.
- Introducing a new capital investment programme.
- Maintaining welfare rates and Child Benefit.
- Addressing the working poor issue by making tax credits refundable.
- Eliminating the household charge and introducing a site value tax.
- A programme to reduce long-term unemployment by 100,000.
- Protecting the social services infrastructure.
- Honouring our ODA commitments.
- Introducing a universal pension funded by standard rating the pension tax-break.
This approach would be good for the economy, good for the vulnerable, good for Ireland - it would be fair and seen to be fair.
Budget 2013 – Summary of Key proposals (with relevant page numbers)
In this Policy Briefing Social Justice Ireland sets out a range of fully-costed proposals that would (i) reduce Government’s borrowing; (ii) protect the vulnerable, (iii) provide substantial, targeted investment; (iv) make the tax system fairer; (v) protect public services; (vi) increase domestic demand; (vii) retain social welfare rates and Child Benefit unchanged and (viii) distribute the ’hits’ in Budget 2013 more fairly.
Among our major proposals are the following:
- Reduce borrowing by €3.5bn.
- Do this through tax increases and expenditure reductions on a ratio of 2:1. P.7
- Introduce a Part-Time Job Opportunities Programme to create 100,000 part-time jobs for people who are long-term unemployed. This would cost €50m in 2013 and would be a positive step towards addressing long-term unemployment in a meaningful way. P.12
- Make tax credits refundable in Budget 2013. At a cost of €140m this proposal would directly benefit 113,000 low income individuals and begin to address the ‘working poor’ issue. P.11
- Extend the USC levy of 3% to all income in excess of €100,000 irrespective of its source. This would address the anomaly in the present system whereby only self-employed earners are subject to this additional 3% USC levy. This would increase income by an additional €50m in 2013. P.10
- Introduce a levy of 2.5% on all corporate profits in 2013. This would provide additional revenue of €750m for the Exchequer. It would enable Corporate Ireland to play a meaningful part in aiding Ireland’s recovery. It would also be an acknowledgement of the many benefits Ireland offers, including natural resources and the various financial incentives made available to many companies based here. P.9
- Implement the Commission on Taxation recommendations on tax expenditures, with the exception of proposals on Child benefit. This would save €100m in 2013. P.9
- Scrap the household charge and replace it with a Site Value Tax. The introduction of an SVT is a necessary part of a fairer taxation system. It would bring in an additional €340m in 2013. P.10
- Introduce a universal basic pension payment for all people over the age of 65 from July 2013. This would be set at €230.30, the current level of the Contributory Old Age Pension. Standard rating the tax break for all pension contributions to 20% would increase the tax-take by €700m in 2013 and would help fund the universal basic pension payment. This would be a fairer and more equitable way of organising the pension system in Ireland. P.14
- Remove the price differential between agricultural and road diesel, and replace this pricing arrangement with a rebate system for farmers whereby they can claim the price differential for agricultural diesel. This proposal is largely cost neutral and would have a significant impact on reducing fuel laundering and criminal activity.
- Provide an investment package of €7 billion for the domestic economy to drive Ireland’s recovery. This focussed, off-balance sheet programme would have the dual impact of increasing domestic economic activity while also addressing some of the social and infrastructural deficits which remain in Ireland. P. 13/18
- Introduce a tax of one third of one cent on each text sent by SMS through mobile phones or any other devices. This would provide an additional €40m in taxation revenue in 2013. P.10
- Introduce a ‘bad nutrition’ tax on the main components of junk food, fast food and soft drinks to yield €15m in 2013. P.10
- Invest €65m to enable 12-15 community nursing facilities with approximately 50 beds each to be replaced or refurbished in 2013. P.15
- Invest €50m for the infrastructural development of Primary Care Teams in 2013. P.15
- Invest €50m for the infrastructural development of Children and Family Services. P.15
- Invest €35m to support the development of Community Mental Health teams. P.15
- Introduce an income contingent student loan facility to allow students to borrow to pay for third level fees and living costs. This would save the exchequer €445m in 2013. P.15
- Invest €100m in Early Childhood Education and Care from the ages 0-5. P.15
- Invest €20m in Adult Literacy programmes. P.15
- Increase the provision for Social Housing by €20m.
- Increase the tax take on gambling as per Budget 2012.
- Increase carbon tax by €2.50 per tonne in Budget 2013 to bring the overall carbon tax up to €22.50 per tonne.
- Reduce public expenditure through measures identified in the Comprehensive Expenditure Report 2012-2014, National Procurement Service and Croke Park Implementation Body.