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Troika Briefing on Budget-2011

Social Justice Ireland shows ‘Troika how poor and vulnerable people can be protected in Budget 2012 and beyond

The ‘troika’ has been told that the reduction in Ireland’s borrowing in 2012 and subsequent years should be achieved by increasing taxation (but not income tax) by €2 for every €1 reduction in funding of public services.

At a meeting in Dublin with the ‘Troika’ (European Central Bank, the International Monetary Fund and the European Commission) on Monday, October 17, 2011, Social Justice Ireland argued that persisting with the approach followed in recent Budgets would further seriously damage Ireland’s poorest and most vulnerable people and undermine the social infrastructure supporting delivery of the country’s services.  According to Social Justice Ireland: “The approach of recent years has provided short term gain by reducing borrowing; but it has also spread the burden of adjustment very unjustly with those who can least afford to pay being targeted in a most unfair manner. This situation is unjust and must change. Following Social Justice Ireland’s proposed approach would still leave Ireland a low tax country but with a fairer tax system.” 

Social Justice Ireland's Briefing document for the troika contained a fully-costed series of proposals that would achieve this outcome in Budget 2012.

Social Justice Ireland also strongly urged the ‘troika’ to accept that €3.6bn in adjustments in 2012 was sufficient.  Seeking an even greater adjustment would make a bad situation worse. Social Justice Ireland pointed out that:

  • Targets and benchmarks on a wide range of issues set out in the Bailout Agreement are being met by the Irish Government and Ireland’s citizens. 
  • Benchmarks on banks and fiscal issues set out in the Memorandum of Understanding are being met.
  • However, the promised outcomes are not materialising:

  • Economic growth is not reaching the forecast targets.
  • Jobs are not being created on the scale required.
  • Unemployment is not falling at the rate envisaged.
  • Finance is not available on the scale required for small and medium enterprises.
  • Essential services are being reduced! to such an extent that the health and wellbeing of citizens are being put at risk.  
  • The Community and Voluntary sector, often the place of last resort for many vulnerable people, has seen a huge increase in demand for its services.  At the same time its funding has been reduced dramatically.

Seeking an adjustment greater than €3.6bn would make this situation even worse according to Social Justice Ireland.   They pointed out to the ‘troika’ that the adjustments already being imposed would require the economy to record Celtic Tiger growth rates to have any prospect of recovery, job creation etc.  This is not credible given where Ireland and the EU/World economy are currently and are likely to be in the years immediately ahead.

  • The scale of the challenge for 2012, for example, serves to illustrate this point.  In 2012 adjustments of €3.6bn are required toget! her with a growth rate of 2.5%.  In practice this means that all of the following must be achieved:
  • The economy must grow enough to make up the €3.6bn
  • Beyond that it must grow to finance the multiplier effect of the removal of €3.6bn which brings the total required to about €4bn.
  • On top of this the economy must then grow by 2.5% which is over €3.9bn. So, underlying growth would need to be close to €8bn in 2012 to achieve 2.5% growth. This is an underlying growth rate of almost 5% of GDP. 
  • All of this must be achieved without any new investment programme of scale.

This is simply not credible according to Social Justice Ireland.

Social Justice Ireland went on to claim that the Bailout Agreement is a process which in reality is dispossessing poor and vulnerable people of their meagre resources so as to re-pay those banks, financial institutions and others who gambled recklessly, invested unwisely and were paid premium interest rates to do so but lost their gamble.   The Social Justice Ireland delegation told the ‘troika’ that the Memorandum of Understanding should be amended to ensure its conditions achieve economic growth and financial stability while securing REAL protection of poor and vulnerable people.

According to Social Justice Ireland in precarious times such as these a country, a government, a society or an international institution defines itself by the cuts it makes, the people it protects, its effectiveness on economic growth/jobs, its actions on public services and the values underpinning its choices.  Using this yardstick, the ECB, the IMF and the European Commission have on balance acted in the interests of the wealthy and the strong while seriously damaging those who are poor and vulnerable.”

  • Social Justice Ireland presented detailed proposals on issues such as poverty and! income distribution, employment and job creation, securing finance for small and medium enterprises, unemployment and labour market activation, adult literacy and a wide range of public services.
  • They also argued for a fairer sharing of responsibility which, among other things would ensure:
    • Poor and vulnerable people would be protected, and
    • The ECB and the EC both accept their share of responsibility for the current situation and consequently accept their fair share of the cost of adjustment
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