Budget 2017 ignores the working poor and lacks coherence

Posted on Thursday, 13 October 2016

Budget 2017 yet again ignores the working poor.  Although it contained a number of welcome initiatives, the working poor gain the least. The choices Government made in cutting the Universal Social Charge and income tax are unfair and provide larger gains to those on higher incomes compared to those on lower incomes. 

For example, a single person earning €25,000 gains €127.60 per annum while a single person on €75,000 gains almost three times more (€352.82 per annum). For the same amount of money (€383m) Government could have made tax credits refundable (thus tackling the working poor issue) and given every tax-payer an additional tax credit of €100 per annum. In practice this would have meant that everyone would be €100 better off while the working poor would gain a little more.

The new childcare programme is a positive development.  It is important that sufficient resources are allocated over time to childcare, after-school care and early-years education and that families can avail of the childcare arrangements that are most suitable for them.

Budget 2017’s lack of strategy and coherence can be seen in its failure to address the long-range challenges facing Irish society.  There will be almost a million people over-65 in 15 years time (up 86%), of which 136,000 will be over-85 (up 132%). The increase in the state pension is most welcome. However little is being done to invest in the services and infrastructure required to care for the increasing population of older people.

Government’s social housing policy lacks coherence on two fronts.

  1. Firstly, while the long-range housing plans (to build 47,000 homes by 2021) are welcome, it is clear they will be nowhere near the scale required to eliminate the current waiting list of 89,000 households, and they make no provision for the increased demand for social housing that demographic developments will require.
  2. Secondly, the assistance being granted to first-time house buyers in Budget 2017 is short-sighted and will do nothing to tackle the cause of the current housing crisis i.e. shortage of supply. In effect it is pointless. Whatever resources are available should be allocated to increasing housing supply. This would certainly make more sense than granting tax breaks that will mainly serve to increase the cost of homes.

There is a similar lack of coherence in the Budget’s decisions on healthcare. Additional resources are being made available to address waiting lists, to provide medical cards to all children in receipt of Domiciliary Care Allowance, to promote health and wellbeing and to assist older people and people with disabilities.  However, sufficient funding has not been provided to maintain the existing level of service.  This makes no sense.

Budget 2017 failed to substantially broaden the tax-base, which is the essential pre-requisite to increasing the country’s total tax-take in a fair manner. Our current low-tax model is not sustainable, and means that Ireland does not have sufficient resources to provide the social and economic infrastructure that should be expected in a developed European nation.

Government is claiming that Budget 2017 has been “Brexit-proofed”.  Social Justice Ireland believes that the best way to Brexit-proof the Irish economy is to invest in the infrastructure Ireland so desperately needs.  This would be good for the economy and good for society. 

Budget 2017 does not address the fact that Ireland has one of the lowest levels of public investment in the EU.  While the resources available for distribution were relatively small, Government chose to spend some of these meagre resources reducing the tax-contribution of the better off in Irish society.  Having raised taxes equitably, the net ‘fiscal space’ available should have been put into public investment. Government should also have sought adjustments to the fiscal rules which are blocking the investment Ireland so badly needs if it is ever to address its infrastructure deficits in areas such as social housing, rural broadband and water.

In Budget 2017 Government took a series of decisions that ensured most people gained something.  Some of the decisions made are welcome.  But overall, Budget 2017 failed to tackle major challenges and lacked coherence. It was a missed opportunity.

Download a copy Social Justice Ireland's analysis of Budget 2017 here.