Let’s have a budget that makes Ireland more equal

The Irish people deserve better.

This is the not unreasonable thrust of ICTU’s pre-budget submission for 2017.

People deserve better than the five-in-a-row inequality-increasing budgets they were subjected under the previous Fine Gael-led government.

People deserve more investment in the health, education and welfare services on which they depend: more hospital beds, more special needs assistants, more home care packages. These can make a real and positive improvement in people’s immediate living standards, while reducing reliance on the sort of spending that becomes necessary when such early interventions have been in short supply. Home care packages are a prime example. For a relatively small outlay, people can be helped to live a full life in their homes and in their communities, as they grow older, rather than being carted off to a more expensive hospital or nursing home.

The country also urgently needs to ramp up its capital spending programme to address the housing crisis and plug the most critical infrastructure gaps that are holding our economy back. The Action Plan for Housing and Homelessness is clearly welcome, but it’s a case of too little too late. The housing crisis has been brewing for years as the dysfunctional rental and owner-occupier property markets have been allowed to fester. The Plan’s social housing target of 5,000 new builds per year by 2021 – from next to zero currently – lacks ambition in the face of the scale of the emergency. More generally, capital spending has been cut to the bone since 2008. Under-investment in public transport, rural broadband, flood defence, waste management and water infrastructure reduce living standards today while imposing constraints on future economic growth.

The four pillars of ICTU’s 2017 pre-budget submission are thus well-judged: 1) repair & rebuild, 2) tackle the housing emergency, 3) decent work & a living wage, 4) raise the social wage. Quite rightly, it is pointed out that a €1bn package split 2-1 between spending increases and tax cuts can’t hope to deliver on the progressive, equality-proofed budget the country needs to address the lasting legacy of the age of austerity.

There is nothing set in stone about the size of the budget package or the allocation of measures. These are political choices. There are EU-level constraints on fiscal recklessness, but these do not impinge at all on the Irish government’s capacity to fund social investment through progressive taxation. Moreover, the famous ‘fiscal space’ is a flexible creature. It can be expanded so long as there are matching revenue raising measures: whether these include a ‘sugar tax’, a ‘pollution tax’ or a ‘wealth tax’, for example.

Rather than further narrowing the tax base, as happened to our great cost before the economic crisis, ICTU argues that the ‘fiscal space’ should indeed be expanded by a) tightening tax breaks on high incomes and capital transfers; b) imposing a modest, annual ‘millionaires’ tax on wealth; c) hiking employers’ PRSI from its current levels, which are a fraction of those in comparable European countries; d) bringing forward the levy on vacant development sites; e) investing resources in cracking down on tax fraud – the Revenue Commissioners estimate this can reap fifteen euro for every euro spent!; f) increasing tax on online betting and tobacco; g) abolishing the personal tax credit for those earning over €100,000 per year; and h) abolishing the VAT subsidy to the hospitality sector now that its recovery is accelerating – and its prices increasing.

Are such proposals possible within the fiscal constraints face? Certainly.

Will they be universally possible? Of course not.

So, are they worth considering? Absolutely.

ICTU should be commended for their ‘grown up’ approach to engagement in the budget process. Not merely special pleading for pet projects or special interests, but a fully-costed and economically sound package, coupled with the complimentary policy proposals that would be necessary to deliver on its promise. In a political era of spin, ‘truthiness’ and false promises, this is a refreshingly honest reflection on both the imperative and the fiscal price of social progress, as well as the government’s power to deliver on it through budgetary policy.

When Michael Noonan rises to deliver what might be his last budget as Finance Minister on 11 October, let’s hope he’s ready to break the habit of a lifetime.

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