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Rich gain more in Budget of missed opportunities
Fourth regressive Budget in a row
Budget 2015 is the fourth regressive budget in a row. While it contains a number of welcome initiatives and positive developments, overall the Budget is deeply disappointing.
Over €1bn was allocated in tax cuts and expenditure increases but the choices made by government show a profound lack of a coherent, guiding vision. It was a Budget of missed opportunities. It lacked the long-term focus on real recovery that this particular moment required. It failed, in effect, to even set out a clear pathway forward that would promote the common good.
Rich-poor gap widens
Budget 2015 widened the rich-poor gap by €499 a year. This measures the gap between the disposable income of a single unemployed person and a single person on €50,000 per annum. If compared with people on higher salaries the rich-poor gap has widened even more. (cf. p. 9)
Budget 2015 gave €0.90 a week increase to an unemployed single person while giving €14.30 a week to a single person earning €75,000. In the case of couples, the unemployed got €1.51 a week (€78.52 a year) extra while a couple with two earners on €125,000 will receive an extra €23.57 a week (€1,225.64 a year) as a result of the Budget changes. (cf. pp.8-9)
Hardest hit lose out again.
Those who proportionately took the greatest hits during the crisis were left behind again as priority was given to reducing the top income tax rate.
In the period 2008-2015 budget changes in tax and social welfare have impacted most on two groups i.e. welfare-dependent households (losses up to 12.5%) and working poor households (losses up to 11.3%). (cf. p. 10)
Budget 2015 does little to reverse this situation and fails to prioritise such groups.
There were a number of welcome initiatives including the increase in child benefit and the increased allocation in areas such as social housing and health. The recognition of the need for multi-annual planning in a few areas is a very welcome development. For example, the promise of a new Plan for Social Housing to be published within weeks is a move in this direction even though the overall target of 30,000 new homes over several years falls far short of what is needed in a country with a growing waiting list which is currently over 90,000 households.
The recognition of the need for the health budget to be adjusted over a two-year period is a welcome development within a budget that shows a modest increase in funding for 2015. A concern in this area is the lack of any evidence that provision has been made for demographic changes and the consequent increasing number of older people and people with disabilities needing care.
Failure on working poor
The Budget fails dramatically to address the working poor issue. These have been among the worst hit in the period since 2008 (cf. p. 10). Government will claim that they did as much as they could with the resources available. However this is not the case.
The total cost of the income tax and USC adjustments was €642m
The distribution of the benefits resulting from Government’s choices was skewed in favour of the better off and dramatically widened the rich-poor gap.
End of ‘Double-Irish’ welcome
The decision to end the ‘Double-Irish’ tax scheme was long over-due and is very welcome. However, €95m in tax breaks was given to the corporate sector. This was an extraordinary decision which fails to recognise that Ireland’s low overall tax-take is not sustainable.
It also fails to recognise that corporations, irrespective of their size or significance, should contribute a reasonable proportion of their profits in taxation—such as small and medium enterprises (SME) do. (cf. p.9)
A fairer outcome was possible
On page 6 we set out an alternative that Government could have followed that cost exactly the same amount.
For the same cost Government could have chosen a much fairer set of alternatives as follows:
a. Refunding the unused proportion of PAYE and personal tax credits to those who are active in the labour market but earn insufficient income to use up allthose tax credits (i.e. introduce a system of refundable tax credits) - full year cost of €140m.
b. Increase the personal tax credit for all earners by €175 a year - full year cost of €400m.
This would provide an increase in income of €175 to all single earners and couples with one earner across the system.
Couples with two earners would gain twice this amount, €350 per annum.
In contrast to the Budget outcomes a single person earning €25,000 would gain €175 a year while a single person on €75,000 would gain the same.
The scale of the challenge
Ireland is facing many challenges as it moves forward.
· More than 750,000 people live in poverty including almost one in every five children.
· Almost 150,000 people are long-term unemployed.
· There are more than 90,000 households on waiting lists for social housing.
· Healthcare waiting lists are continuing to grow.
· Net migration was minus 21,000 in the year to April 2014 (most recent data) while net migration of Irish nationals in 2008-2014 was minus 120,000.
These and many more challenges needed a Budget that mapped out a road to real recovery. That was what the present moment required.
Budget 2015 did not meet this requirement.
A guiding vision
Social Justice Ireland believes that Ireland should be guided by a vision of becoming a just society in which human rights are respected, human dignity is protected, human development is facilitated and the environment is respected and protected.
The core values of such a society would be human dignity, equality, human rights, solidarity, sustainability and the pursuit of the common good.
An alternative was available
On page 24 we present twelve more initiatives (not an exhaustive list) that Government could have implemented in Budget 2015 that would produce the same borrowing requirement but would have far different outcomes.
These initiatives cover a wide range of issues including: poverty, the working poor, social housing waiting lists, taxation, jobs and unemployment, ODA, education, healthcare, older people, rural Ireland, sustainability and participation.
There is a pathway to real recovery, a more just and egalitarian alternative that meets the challenges Ireland faces today.
That alternative was spelled out in detail by Social Justice Ireland in our Policy Briefing on ‘Budget Choices’ published in June 2014.
In that we presented a series of fully-costed initiatives—in all the areas mentioned above—that would have moved Ireland towards real recovery.
Social Justice Ireland has also presented much more detailed versions of these proposals in other publications, most notably in ‘Steps Towards A Fairer Future—Securing Economic Development, Social Equity and Sustainability’ published in April 2014. The full text is available on the Social Justsice Ireland website: www.socialjustice.ie
We recommend these detailed proposals to all policy-makers, especially those who are members of our parliament at this critically important moment.