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31 August 2006 Edition

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Equality redistributative tax system needed


Sean Healy of CORI

The government aren't listening

Poverty and inequality are a way of life in modern Ireland with nearly 20% of the population suffering deprivation on a daily basis. Yet as Fianna Fail and the Progressive Democrats prepare for their 11th consecutive budget is the coalition government really concerned about the poor in Ireland today?

Two events this week highlighted the gulf between the reality of living in poverty and government policy. On the same day that Fianna Fail junior minister Brian Lenihan announced €18 million in additional funding for community driven child poverty projects in Tallaght, Darndale and Ballymun, a 242-page annual socio-economic review by the Conference of Religious in Ireland (CORI) highlighted the scale of inequality and exclusion in Ireland.

CORI publishes their review annually and it's a shocking indictment of the scale of inequalities and exclusion permeating modern 26-County society. However it was in 2004 that the West Tallaght study titled How are our Kids was published to widespread acknowledgement that the survey has exposed the scale of child poverty in an urban society and was also solution focused in that it fed into the Childhood Development Initiative, a ten year strategy aimed to improve and enhance the daily living experiences of children from disadvantaged areas.

Bertie Ahern thought it was such a good idea that in October 2005 he travelled to Tallaght to launch the strategy. Now nearly 11 months later the government finally found their half of the €36 million money for the three projects, even though the Atlantic Philanthropies half of the funds had been in place for months and even though there has never been a government in Irish history with so much cash to spend and so little debt to budget for. So why not take the CORI challenge and plan for a fairer Ireland?

Below we highlight the core themes of the CORI analysis and spotlight some of their proposals that seem like simple logic but are an anathema to the Fianna Fail/Progressive Democrat coalition.

Rich and poor - the reality of Ireland today

According to CORI sustained economic growth has transformed 26-County society and the economy will in coming years continue to "outperform the rest of Europe and the developed world". Department of Finance projections show another three years of massive budget surpluses of approximately €4.5 billion annually.

In terms of human development the news is not good. The 26 Counties has the second highest income per person in the world according to the UN Human Development Report, but at the same time 22.6% of the population is functionally illiterate, "unable to read basic texts or a newspaper".

In terms of healthcare at 5.5% of GDP the government is spending less annually than the USA - 6.6%, Germany - 8.6%, or Denmark at 7.3%. In simple terms it means that the 26 Counties has a life expectancy less than most other developed states.

19.4% of the population are at risk of poverty yet in this wealthy economy we spend less on social protection than 20 of our 25 other EU member states. The 26 Counties spends 16.5% of GDP annually on areas such as "sickness/healthcare, disability, old age, survivors, family/children, unemployment, housing and social exclusion initiatives". In Sweden the share is 33.5% and 30.9% in Denmark. Only Cyprus, Lithuania, Estonia and Latvia spend less than the Irish government. The EU average is 23.4%.

Who is being excluded

So who are the poor in this super rich 26-Counties, who is being excluded? Women make up the largest group, while pensioners, children, the unemployed and households living in local authority housing, especially in rural areas are all likely cases for exclusion. CORI believes that a new excluded group in Irish society is migrants, refugees and asylum seekers.

CORI defines exclusion being left out of decision making, and that their opinion is "not sought and doesn't count". The CORI report goes even further when it says, "In fact, you are not expected to have an opinion; rather you are encouraged to trust the opinion of the shapers and movers of the society".

A rights based approach

According to CORI there is an "ever more urgent" need to develop a rights based approach to social, economic and cultural issues. They identify seven basic rights that should be acknowledged and recognised. They are: sufficient income to live life with dignity; meaningful work; appropriate accommodation; relevant education; essential healthcare; cultural respect and real participation.

CORI believes that there should be constitutional recognition for these rights followed by legislation and time limited government targets and that this could be a policy strategy not just in Ireland but also across the EU.

The Tax Solution

The CORI report offers a range of policy goals and strategies but the centrepiece in is their proposals on taxation. Their core policy objective for government is to "collect sufficient taxes to ensure full participation in society for all, through a fair tax system in which those who have more pay more, while those who have less, pay less".

The backdrop against which the 26-Counties poverty figures must be measured according to CORI is that the Irish government accounts are "the healthiest in Europe". CORI believe that the 26 Counties has a limited tax base skewed towards consumption and income.

Included in their analysis is the loss of €650 million annually through the reduction in the 26-County corporation tax rate from 20% to the 12.5% it is today. They point out that with 0% corporation tax rates in Estonia and the Isle of Man, that the Irish economy cannot in the long term compete on tax rates as a means to attract and or retain multinational investment in the economy. They draw attention also to the €8.4 billion in lost revenue annually due to tax reliefs, highlighting in particular property based tax allowances introduced in the 1990s.

CORI proposes a range of taxation measures with two basic themes. They are to make the tax system fairer, and to increase the tax base.

On fairness CORI propose measures such as integrating the tax and welfare systems and the Family Income Supplement also, making take credits refundable, keeping the minimum wage workers out of the tax net, ensure all tax changes benefit those on low to middle incomes as much they do the better off and poverty proof all budget tax packages.

On broadening the tax base CORI proposes raising corporation tax to 17.5%, increase taxes on wealth like windfall taxes on rezoned land and a Tobin tax on financial speculation as well as increasing capital gains tax to 25%.

The data and analysis form CORI is not new, they have had access to Fianna Fail at the highest level to put their case. To date the government have not been listening. The 11th coalition budget in December will show if this latest analysis made any impact on ending a decade of inequality.

Removing Ireland's Inequalities


Spokesperson on Social and Family Affairs

"...prosperity such as they speak of is purely capitalistic prosperity - that is to say, prosperity gauged merely by the volume of wealth produced, and entirely ignoring the manner in which the wealth is distributed amongst the workers who produce it."

- James Connolly, 
Labour in Irish History

Reading through CORI's annual socio-economic review, Developing a Fairer Ireland, published at the weekend, I was forcibly reminded of this famous quotation by James Connolly. Throughout the document, the authors point to surveys and reports from the OECD, the UN, the ESRI and The Economist outlining our economic growth, pointing to the huge volume of wealth produced in Irish society. These statistics are the meat and drink of establishment economic thought in Ireland. If we are, as the OECD states, one of the world's 'high income economies', then this is a cause for celebration, and a vindication of the economic policies of not just this Government, but the preceding one.

But this is what Connolly, writing almost 100 years ago, described a 'capitalistic prosperity'. He accurately pointed out that unless one analyses the distribution of that prosperity, examines where the money goes within society and who benefits from the wealth produced, then the picture is incomplete. CORI's report goes some way to addressing this discrepancy, and it is a point acknowledged in the report.

"It would be wrong to judge Ireland using traditional economic measures alone. On closer examination, Irish society still has many problems, some of which persist almost as if they were acceptable. These include sustained levels of poverty, an unequal income distribution, high levels of illiteracy including high rates among young early school-leavers, homelessness, growing social exclusion and problems of racism and discrimination. In no way is this list complete; however, it underscores the necessity to look more broadly at our recent success and assess just how extensive it has been."

Next to the OECD's boast about 'high income economies', is the statistic from the Central Statistics Office pointing out that 19.4% of Irish people are at risk of poverty, the third highest in the 25 EU member states, behind only Greece and Slovakia. Even more shocking, despite the economic growth of the last ten years, this is up almost 4% since 1994, an increase of over 200,000 people living in poverty. And despite our growing GDP rate, we still spend less than the EU average on provision of healthcare and social services.

And these inequalities are nothing short of fatal. Unskilled manual workers are twice as likely to die prematurely as higher professional men, eight times more likely to die as a result of an accident. Unemployed women are more than twice as likely to give birth to low birth-weight babies as women in higher socio-economic groups, and those babies are more likely to die. On average, 39 per cent of men and women surveyed in 2003 identified financial problems as the greatest factor in preventing them from improving their health.

In their recent book How Ireland Cares, essential reading for those with an interest in the Irish health service, Maev-Ann Wren and Dale Tussing state: "One of the most striking aspects of health experience in many states, and notably striking in Ireland, is the difference in health status and life expectancy between those on lower incomes and those on higher incomes."

Published in 2001, Inequalities in Mortality 1989-1998 - A Report on All-Ireland Mortality data compiled by the Institute of Public Health suggested that there would be some 6,000 fewer premature deaths on the island of Ireland every year if social inequalities were eliminated. It also pointed out that death rates throughout Ireland are also significantly higher than the EU average. It is estimated that almost 5,400 fewer people would be saved every year if our death rates were reduced to those of our European neighbours. It is a report that, since its publication, has disappeared off the radar screen of the Irish media, with the honourable exception of Vincent Browne's Village.

The struggle for equality in Ireland is therefore neither a buzzword nor a soundbite, but an absolutely fundamental area of political activity that goes to the very core of how we define our society, how we perceive ourselves as human beings. The commitment in the 1916 Proclamation to 'cherish all the children of the nation equally' continues to be a vibrant call to arms, regardless of how many times it is used as empty sloganeering by those in power.

The solution advanced by CORI is the great unmentionable in Irish economic thought. Off-hand, I think the only other organisation arguing the same is Sinn Féin. And it is not a complex one. Anyone who has ever balanced a household budget can appreciate it. You cannot spend what you do not have. You cannot increase household spending, unless you increase household income. Similarly, we cannot invest in our social services, ending the housing waiting list and tackling poverty, unless we increase taxation on the wealthy in our society.

Fine Gael and Labour claim they can increase spending to near limitless levels without any increase in taxation. How can they do this? The short answer is that they cannot. But they also know that the notion of increased spending on public services without increasing taxes sounds good to voters but does anyone believe it will really happen? It is fundamentally deceitful.

Sinn Féin believes that in order to address the massive, and growing, inequalities in Irish society, we need to generate more income, to be invested in our social infrastructure. This means raising taxes. But it does not necessarily mean raising taxes on everyone.

While there have been reductions in personal income tax over the last few years they have been offset, particularly for low-income families, by the introduction of regressive stealth taxes like the bin charges, hospital charges, visa and credit card levies. According to the CORI report, "among the 1.89 million workers in Ireland in 2004, just over 132,000 were at risk of poverty."

Sinn Féin believes a redistributative tax system is necessary, one that abolishes regressive stealth taxes and reduces the tax paid by workers on the minimum wage and the average industrial wage. This would alleviate the burden on low-income families and it would be facilitated by transferring wealth from those who have profited from the economic boom, to those who have created it.

This can be done by increasing Corporation Tax to 17.5%, restoring Capital Gains Tax to 40%, introducing a new tax rate of 50% for individuals who earn over €100,000, conducting a thorough and critical review of existing tax breaks to assess their social or economic value and by reducing the supports given to private investors in areas such as the health service.

We are supposed to be proud to be living in a state where a new millionaire is created every day while approximately 70,000 children go to school hungry every day and more d more families are living on credit, beyond their means. Prosperity, how are you!

An Phoblacht Magazine


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