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Budget 2018 should be economically sound and socially fair

Budget 2018 should substantially increase investment in infrastructure such as social housing and rural broadband, should address major problems in services like healthcare and education, should support development of the economy by investing in affordable childcare while not generating any net reduction in taxation.  These are the key recommendations of Social Justice Ireland's Budget Choices policy briefing which sets out fully-costed proposals on expenditure and taxation for Budget 2018.

Following several difficult years after the crash of 2008, Ireland is doing very well on a range of fronts. GDP is growing dramatically. There are more people employed and fewer unemployed. Ireland’s population is rising steadily. Challenging fiscal targets have been met and, in some cases, exceeded. Exports are booming and the cost of borrowing is low.

At the same time, there are many problems that need to be addressed urgently. Budget 2018 is an opportunity to address these issues.

A Question of Priorities

Most Irish people want to see an end to homelessness, social housing shortages, hospital waiting lists and child poverty. They want to see the lack of affordable childcare addressed, and investment in climate change mitigation, rural broadband, and much more. These should be the priority targets of Budget 2018.

The fiscal space available for the Budget should be supplemented by additional resources garnered from savings within the current budget, tax changes that make the system fairer, and new resources made available through special purpose vehicles as required.

The Fiscal Rules should also be changed to allow a country like Ireland to close the gap in infrastructure that we experience because of historical constraints that contrast dramatically with its wealthy European neighbours

Taking account of the demographic changes since the crash, there are still over 100,000 fewer jobs in Ireland than was the case a decade ago. Precarious employment (i.e., a job that is insecure and uncertain, often low-paying, and in which the risks and costs of work are shifted from employers and the government to workers) has emerged as a serious concern for individuals and families and underlies many of the insecurities that have fuelled recent populist political movements.

A quarter of Ireland’s population (1.2 million people) are experiencing poverty or social exclusion. Of these, 308,000 are children under 16. The urban/rural divide is widening.

Investment in infrastructure, especially social housing, is far too low and has been this way for far too long. This is also the case where rural broadband and affordable childcare are concerned. If Ireland’s economy is to thrive in the years immediately ahead, it is essential that these infrastructure deficits are addressed.

If these problems are not addressed we are likely to see the ongoing development of a two-tier society where some people do very well but others are blocked from participation because they don’t have appropriate accommodation or necessary childcare, or they are forced to migrate to the larger cities or to commute inordinately long distances every day because businesses are unable to locate in desired locations because of the lack of infrastructure such as broadband.

Social Justice Ireland acknowledges and has welcomed the commitment to dramatically increase funding for social housing. There is still quite a distance to go, however, before this allocation is sufficient to eliminate homelessness and ensure everyone has appropriate accommodation.

Economically Sound, Socially Fair

In the Programme for Government there is a commitment to creating a fair and compassionate society supported by a strong economy which will support people at all stages of the lifecycle (Programme for Government, 2016, p. 9). Social Justice Ireland welcomed this commitment when itwas published.

Budget 2018 should be designed so that it is both economically sound and socially fair. Otherwise this commitment will not be honoured. These twin objectives are both realistic and achievable. However, they need to be underpinned by a clear policy commitment and by Budget decisions aimed at achieving both.

On page 4 we set out the parameters Social Justice Ireland believes should guide fiscal policy in Budget 2018. While the ‘fiscal space’ is relatively small, Government is free to generate additional taxation revenue and to invest this money to improve Ireland’s infrastructure and social services.

In recent years the scale of the Budget package has notably differed from the size previously signalled by Government (in the Stability Programme Updates and Summer Statements). However, irrespective of the scale of the final Budget package announced by Government for the forthcoming Budget, this document clearly highlights that fairer choices are feasible and possible in Budget 2018. All our proposals have been independently costed and we have set out clearly how they can be financed.

Low Overall Tax-take is Unsustainable

Social Justice Ireland believes that, over the next few years, policy should focus on increasing Ireland’s tax-take. On pages 5, 6 and 7 of this publication we set out our proposed choices and reforms in this area.

In the absence of a robust measure of national income, it is difficult to propose a measure fixed to this benchmark. However, given the historically low levels of taxation reported in recent documents from the Department of Finance, we believe an increase in the overall tax-take is more than feasible.

For example, raising the overall tax-take by 3 percentage points of GDP would be a small overall increase, which, if properly structured, is unlikely to have any significant negative impact on the economy in the long term. The yield from such an increase would average €9 billion per annum in additional taxation revenue between now and 2021.

There will be additional demands on Government resources to meet needs that already exist in areas such as Local Government, water infrastructure, the health and pension needs of an ageing population, EU contributions, and funding pollution-reducing environmental initiatives

An increase in Ireland’s overall level of taxation is unavoidable in the years to come; even to maintain current levels of public services and supports, more revenue will need to be collected.

Consequently, an increase in the tax-take is a question of how, rather than if, and we believe it should be of a scale appropriate to maintain and improve current public service provisions while providing the resources to build a better society.

The Brexit Effect

The impending departure of the UK, our largest trading partner, from the European Union will have a significant effect on Ireland, economically and socially. It is important the infrastructure, services and supports required to mitigate the worst impacts of the departure are put in place.

Social Justice Ireland believes Government should engage civil society much more actively than heretofore in preparing to make the adjustments that will be needed to tackle the post-Brexit challenges effectively.

Investment Proposals

In this Policy Briefing our proposals include:

  • Social Housing: €500m towards increasing the resources needed to move Ireland towards providing an additional 90,000 social housing units. (p. 8)
  • Rural/Regional Development: €450m to help complete the rollout of a high quality rural broadband network, as well as additional investment in the rural transport programme, a rural enterprise scheme, retrofitting houses and community facilities as well as developing community hubs within the Post Office Network. (p. 10)
  • Education: €460m investment focused on adult literacy, lifelong learning, and further/higher education. (p. 12)
  • Healthcare and disability: €459m investment prioritising a statutory scheme for home care services, primary care, programmes for children, families, and an obesity and chronic disease programme. (p. 11)
  • Pensions: A universal pension financed mostly by reducing tax-breaks that currently strongly favour the better-off. (p. 13)
  • Social Welfare: €346m to finance an increase of €5 a week on social welfare payments, an equalisation of jobseekers rates for under-26s and an increase in direct provision payments. (p. 9)
  • Children: €90m focused on Early Childhood Care and Education, paternity leave and affordable childcare. (p. 12)
  • ODA: An additional €106m as a contribution towards increasing the aid budget over the next seven years to 0.59 per cent of GNI* (which it had reached before the crash in 2008. (p. 13)

The full Policy Briefing, entitled Budget Choices, is available here.