Budget 2019 fails to grasp the nettle of real reform

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Budget 2019 fails to make any notable impact on Ireland’s entrenched inequalities and fails to tackle any of the major challenges the country currently faces.  

This Budget pays lip service to social investment, but skewed priorities and a reluctance to support much needed tax increases to fund public spending mean inequality in Irish society will remain fundamentally unchanged.

Currently Ireland has 780,000 people in poverty, a quarter of a million of whom are children and over 100,000 of whom have jobs.  Ireland also has 700,000 people on healthcare waiting lists, 110,000 households waiting for social housing and hundreds of thousands of people without adequate broadband in rural Ireland.

Budget 2019 fails to provide resources on the scale required to address any of these challenges effectively.

Social Justice Ireland is glad that Ireland’s economy is growing, that unemployment is low and that emigrants are returning.  But when most economic indicators are on a positive upward trend, Ireland should be looking at how it can relieve the burden on its most vulnerable and improve the quality of life for all.

Times of prosperity are the times to build a more equal, and therefore stronger, society. We need to extend our understanding of fiscal policy beyond economic growth alone and give equal weight to just taxation, decent services and infrastructure, good governance and sustainability. A buoyant economy alone will not deliver a more equal, fairer Ireland.

Investment and Taxation

We need to take heed of the shocking social exclusion being experienced by so many Irish people and invest in solutions. Investment requires funding and this will only be delivered by increasing our total tax take.

This additional revenue and increased investment can be delivered without risk to the economy, without adding to the national debt and without sacrificing the goal of a budgetary surplus. While politically unpopular, with real political leadership this can be achieved by progressive taxation: which has already been done in some of the most successful and stable economies in the world.

Inequality is a disease of society that has many distressing consequences. Treating it means taking a long term view of what is best for our society and economy.

Ireland’s Budgets need to start to move the needle on equality as a priority, not least because a rich country should not have 780,000 people living in poverty; but also because the data shows that, unless we do this, we will pay eventually in lower economic growth, poorer levels of education, reduced economic output, severe health issues, ongoing housing crises and reduced competitiveness on the international stage.

Paying for the level of social investment we need is the issue. We can only borrow so much and, as Minister Paschal Donohoe pointed out in his Budget speech, our national debt is already at a dizzying level.

While Ireland’s income tax system is progressive, further progressivity on the wider tax front is the route to a broader tax base and resulting funds for social investment. We need to find the courage to take that route for the long term health and sustainability of our society and economy (pp.10-11)

Tax changes could be much fairer

Even if policymakers felt they had to make some tax cuts, the ones chosen are unfair. Low-paid workers gained €26.52 a year as a result of the tax changes while those with higher incomes gained up to ten times that amount.

For the same amount of resources Government allocated to income tax/USC changes all single workers and one-job couples could have gained €85 a year while all couples with 2 earners could have benefitted by €170. This would have been the outcome if Social Justice Ireland’s proposals to make tax credits refundable and to increase the personal tax credit for all earners were followed by Govt. (p.4) It would have been a much fairer outcome.

Low total tax-take is not sustainable

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 current public service provisions while providing the resources to build a better society.

The Budget has introduced changes in taxing the  capital gain on assets which are transferred overseas which will now be taxed at a low rate of 12.5%.   This rate is substantially lower than the regular capital gains tax rate of 33%.

Social Justice Ireland believes that the issue of corporate tax contributions is principally one of fairness. Profitable firms with substantial profits should make a contribution to society rather than pursue various schemes and methods to avoid these contributions.

We believe that Government should introduce a minimum effective rate of tax on corporate profits. We have proposed a rate of 6% and regret that Budget 2019 did not do this.

Greater public investment required

Budget 2019 provides a welcome increase in the levels of public investment.  However, the approach taken in Budget 2019, towards addressing the need for a substantial programme of building social housing, is totally inadequate.

Transparency - Obscuring facts?

Social Justice Ireland’s analysis of the Budget documents supplied by Government raises some questions about transparency.  For example, we do not believe that the information and back-up figures on the healthcare budget are really transparent.  These numbers don’t appear to us to add up.

While welcome new initiatives and increased overall expenditure on health have been announced we do not believe it will be possible to maintain the existing level of service and implement the new initiatives with the budget provided.  

Budget proofing

The response  to the economic crisis has had a devastating impact on poor and vulnerable people. There is an urgent need to ensure that the annual Budget does not increase inequality, but rather reduces it - in particular that it reduces poverty among all groups and that it reduces socio-economic divisions and addresses issues such as disability. 

There has been some small progress on gender proofing. However, Budget 2019 has not taken any significant initiative to measure whether or not poverty and inequality will fall or rise as a result of the  overall impact of the decisions taken or whether any of the other areas listed above are impacted by budgetary decisions.

Budget proofing should be an integral part of all future Budgets in Ireland. While we welcome the allocation to study the impact of disability, far greater resources and commitment are required if  this is to be part of the annual Budget process.

Conclusion

Drafting a Budget involves Government in major decision-making about the direction of society and of how the available resources can best be used to address the challenges currently being faced by society while moving towards a desirable and just future. 

Budget 2019 included a number of welcome initiatives such as increasing social welfare rates and the minimum wage.  However, its failure to address some of the major challenges Irish people currently face, such as the housing crisis or climate change, on anything like the scale required, is very disappointing.

Read our full analysis here.