13 December 2007 Edition
Budget 2008 : Fiannna Fáil pre-election promises abandoned
Rise in stealth charges bad news for those on low incomes
By Caoilfhionn Ní Dhonnabháin
FINANCE MINISTER and Tánaiste Brian Cowen’s 2008 Budget last Wednesday week, 5 December (as An Phoblacht went to press), contained no major surprises as many suspected stealth charges were increased while minor adjustments were made to tax credits and bands.
The decision by the Minister for Finance to borrow for capital projects – as Sinn Féin had advocated – was sensible given the sharp downturn in tax revenue in recent months. The Budget fell far behind the promises which Fianna Fáil had been making in advance of the general election. The Minister for Finance did not proceed with income tax cuts but he did make changes in terms of stamp duty.
As Sinn Féin’s Economic Affairs spokesperson, Arthur Morgan TD, put it when responding to the Budget:
“The Tánaiste has been beavering away to condition the public for a tight Budget. He has been strenuously trying to dampen expectations created by his own party’s unrealisable pre-election promises. Despite the fact that the economy is still relatively strong, the Tánaiste has done such a good job of lowering expectations that people expected nothing from this Budget”.
The media, which failed to question the Government’s pre-election promises to increase spending while cutting taxes, went along with the efforts by Government to lower expectations and has in the last week been lauding the minimalist provisions of the Budget. As Arthur Morgan put it:
“It suited Minister Cowen to keep expectations low and to foster fears of a harsh Budget because it allowed him to present the Budget he has delivered as being better than expected.”
Speaking during the second day of the debate, Sinn Féin Dáil leader Caoimhghín Ó Caoláin said:
“It is plain for all to see that this Budget bears little or no relation to the promises made by Fianna Fáil in advance of the election.
“What has been given with one hand has been taken away with the other. It will make little difference to the vast majority of people struggling with increased costs of living.”
An overall analysis of the Budget demonstrates that it failed to specifically focus on those on low incomes (including the working poor) and that what increases were given in terms of changes in taxation were taken away again through increases in regressive stealth changes. It did not deliver on the improvement in quality and capacity in public services which Sinn Féin argued should have been at the heart of the Budget.
So what are the key failures of Budget 2008?
• The failure to increase the income threshold for the full medical card (which now falls below the rate of the lowest rate of social welfare);
• The increase in stealth charges, including the 10 per cent increase in A&E charges and the changes in the threshold for the Drugs Payment Refund Scheme whereby non-medical card holders will have to pay over €90, an increase from €85, per month for medicines before benefiting under the scheme;
• The failure to increase the qualifying adult social welfare rate to make it equal to 100 per cent of the claimant’s rate;
• The failure to increase the fuel allowance;
• The absence of a focus on retraining and up-skilling workers;
• The failure to introduce a cost of disability payment;
• The failure to introduce a universal pre-school session of 3.5 hours per day, five days a week, for all children in the year before they go to school.
There has been a substantial amount of spin and misrepresentation regarding what is contained in the Budget. Take the issue of social housing. The Budget included the allocation of an additional €124 million for social housing. Given that the average unit cost of constructing a three-bedroom unit of social housing is €137,278, this means that the additional allocation announced in this Budget for social housing would deliver approximately an additional 903 units of social housing.
Speaking in the Dáil during the Budget debate last week, Arthur Morgan summed up Sinn Féin’s response to the Budget, saying:
“This is a minimalist Budget. I acknowledge that increases are being made to Social Welfare but these are too low to keep families faced with sharp increases in the cost of living out of poverty.
“This Budget will be disappointing for ordinary workers struggling on low and medium incomes and people seeking an improvement in public services such as health and education. There will be widespread disappointment at the failure to increase the medical card threshold, which is set at a mere €184.”
During the debate, Morgan highlighted the fact that Sinn Féin was the only party to oppose proposals from the Government parties and others to introduce tax cuts on the grounds that such cuts were not viable.
Responding to the taxation element of the Budget, Morgan said:
“While the Minister has announced a number of positive taxation measures as part of the Budget, these initiatives maintain the status quo and do not constitute a move towards a fairer or more progressive taxation system.
“Why has he again failed to strengthen the limit on the use of tax reliefs by certain high-income individuals introduced as part of the 2006 Finance Act? This should have been done to ensure tax reliefs are not exploited by some high income individuals to reduce their tax bill to the point at which they pay less tax than ordinary workers.”
Morgan welcomed the decision not to proceed with the cut of 1 per cent in the top rate of income tax which Fianna Fáil proposed in advance of the general election:
“This measure would have cost the Exchequer €280.4 million and benefited those on higher incomes most, as was the case with the reduction in the top rate from 42 per cent to 41 per cent in last year’s Budget. Reducing the standard rate tax band by 2 per cent would have cost the Exchequer €1.13 billion, revenue that is clearly needed to fund our public services.”
During the Budget debate, the Louth TD highlighted attempts by employers to depress wages through the use of agency workers and slammed the Government’s refusal to deal with this issue.
“Nothing in the Budget, in terms of adjustments to tax credits and bands will compensate for the loss of earnings people across the state will experience if the downward pressure on pay and conditions arising from the failure to regulate for equal rights for agency workers is not addressed.”
While the media provided little critical analysis of Budget 2008 and the property sector reacted with glee, the reaction in other quarters has been much more negative.
The Conference of Religious in Ireland (CORI) criticised Budget 2008 for the Government’s failure to tackle poverty and social exclusion. SIPTU General President Jack O’Connor said the Minister for Finance had promised very little in Budget 2008 and delivered accordingly. The trade union leader expressed concern that the increase in the expenditure in health in the light of the inadequacies of the service appears minimal in the extreme.
The Irish Congress of Trade Unions said that the Budget did not deliver for workers’ families and prioritised economic needs over social necessities. ICTU General Secretary David Begg said:
“Overall, the Minister has failed to effect the changes necessary to rebalance social and economic development and particularly to do what he himself declared was the main purpose Budget 2008 - to support working people.”
The Children’s Rights Alliance was equally critical of the Budget:
“If the Tánaiste was serious about eliminating consistent child poverty, a promise already broken this year, he would have targeted the most vulnerable children in our society in today’s Budget.”