2 April 2009 Edition
Sinn Féin Emergency Budget Submission launched
Sinn Féin addresses shortfall in public finances
Proposals protect low to middle income earners
BY ROBBIE SMYTH
Spreading the tax burden equitably, investing wisely and spending prudently. These are three things in the history of the 26-County state that no government has managed to do.
They are though the core themes of the Sinn Féin Emergency budget submission launched this week. A fair approach to revenue raising and a positive strategy to ending government waste through carefully thought through cost saving proposals are the key pillars of the Sinn Féin document.
This week An Phoblacht summarises some of the key proposals in the Sinn Féin policy.
How did we get here?
As Fianna Fáil finance minister Brian Lenihan sat down after delivering his first budget speech last October, it was clear to many political and economic analysts that the September budget called early amid a constant background of coalition government hype was a stop gap and we would be back within months with a Budget 2009 mark II. And so here we are.
There has also never been a year where Fianna Fáil or any establishment government have been accurately able to forecast the tax revenue they expected to gather in to pay for government spending. 2009 is no different. There has also never been a government with the political will to ensure money is spent prudently and effectively. 2009 is no different.
Sinn Féin believes that Fianna Fáil and the Green Party’s handling of the public finances is putting economic recovery at risk. Instead of bringing forward a framework and strategy for growth they have introduced a set of non-aligned short-term initiatives, many of which are counterproductive, for example, the increase in VAT. The government has confused accountancy with economics.
They should have put more money aside in the boom and put more of the available resources into long-term priority projects. Instead it wasted much of the state’s money on non-productive schemes such as property incentives, fuelling and prolonging the property bubble. Now we have the same thinking in reverse. They will exacerbate the recession by over taxing and spending cuts, rather than stimulating the economy.
The Sinn Féin submission stresses that they were “the only party that did not promise tax cuts in the last election because it was the right thing to do to protect the economy” and is now “putting forward solutions to fix the economy that are based on sound economic proposals”.
In the core factors driving Sinn Féin's approach to the emergency budget there were two key untouchables. They were that those earning the minimum wage must be kept out of the tax net and that social welfare payments cannot be cut.
Sinn Féin are opposed to selling off profitable state companies, or firms that could be made profitable again as this is counter productive for future economic development.
The only way to secure the economic future is to retain existing jobs and to create new ones; to create a fair and progressive taxation system and better regulate the financial sector. This emergency budget must include measures to start stimulating as well as stabilising the economy.
Sinn Féin believes that their submission contains, “the fairest and effective recovery proposals”.
In the document Sinn Féin sets out proposals to raise an additional €3 billion in tax revenue and savings in 2009 and almost €5 billion in a full year. They are also calling for borrowing to be increased to 10.5% which would raise €2 billion this year. This borrowing must be for strategic investment and used to avert further contraction of the economy.
In terms of raising revenue the key strands of the Sinn Féin approach are:
- Standardising tax reliefs
- Reviewing and levying tax expenditures
- Ending waste and duplication in the public sector
- Changes to the tax system
- Using borrowing strategically
- Investing the National Pension Reserve Fund
A range of cost saving proposals are made including:
- Ending the privatisation of health services
- Reducing salaries for hospital consultants and CEOs of state bodies
- Tackling the HSE drugs bill
- Reducing travel subsistence across government departments.
A fair approach
In the past when the public finances have been under pressure, Fianna Fáil and Fine Gael-led governments have implemented policies targeting the low-to-middle income PAYE worker. They are doing the same thing again today.
People are willing to contribute to rebuild the state, but they are unwilling to shoulder the lion’s share of the burden to repair a mess they did not create, particularly when they have no confidence in what their taxes are being used for.
Sinn Féin’s approach to public finance is based on these guiding principles:
- Tax rates and bands must be fair, equitable and progressive
- Tax reliefs can only exist where they return a greater good for society as a whole
- Those earning the minimum wage must be kept out of the tax net
- Taxation should be used for the provision of public services, to eradicate poverty and to stimulate economic activity
- Stealth taxes should not be used to keep income tax artificially low
- There must be taxation justice – everyone must pay their fair share, there can be no exile status or legal evasion, tax defaulters should be vigorously pursued
- A start must be made on tax harmonisation across the 32 Counties with an aim of completing the process in ten years
- Waste and duplication must be eradicated in the public sector, but frontline services must be protected
- Social welfare payments cannot be cut
- Borrowing must be strategic and, as in other states, an acceptable method of financing infrastructure
- The National Pension Reserve Fund should be used for domestic investment, not allowed to collapse in unstable stocks and shares abroad, and not a cent more of the Fund can be put into the banking sector under the current arrangements
The dramatic contraction in the economy indicates a genuine emergency, the treatment of which has to take precedence over all other concerns, including debt accumulation.
The government did nothing over the last ten years to broaden the tax base on a progressive basis and as a result, as the construction and retail sectors began to depress, public finances went into freefall.
The government has stated that it needs to raise €4.7 billion to meet budgetary targets, but this figure is only an estimate based on current receipt projections, which have been consistently wrong.
The Irish tax structure by tax type (indirect 44%, direct 40% and social security contributions 15%) differs considerably from the structure typical for the EU as a whole (39%, 31% and 30%)
In January and February, the state collected €2.2 billion in VAT, down from €2.6 billion in the same period last year, despite the government’s 5% increase.
Stamp duty take fell by 50% in 2008 to €1.6 billion. In January and February only €153 million was collected.
1,447 people, 0.06% of all earners, earned approximately €3.459 billion between them in 2008. The latest figures available show that more than 25% of the top 400 earners paid tax at a rate of less than 20%.
As at 31 March 2008, the amount of outstanding tax due to the state was €1.286 billion. According to the revenue commissioner’s report, almost 25% of that was not available for collection. The revenue must be given additional resources to pursue outstanding taxes and close down loopholes and tax evasion measures. These resources must target on a priority basis those evaders and defrauders at the top of the food chain, most able to pay.
Treating in-patients in private hospitals costs the taxpayer €850 more per patient than in public hospitals. With 20,000 in-patients being treated through the National Treatment Purchase Fund, private hospitals are pocketing €17 million of taxpayers’ money each year.
Irish hospital consultants earn €250,000 per annum for a 33-hour week. The implementation of the new consultants’ contract will cost the Government more than €140 million in 2009
In 2006, the drugs bill exceeded €1.84 billion or approximately 15% of total healthcare expenditure in Ireland. The cost of drugs is far higher in Ireland than in most other European countries
The salary of CEOs of public bodies can range from €114,335 to €534,998. Most of these individuals earn more than the President of the United States who is on a salary of €300,000. Brendan Drumm who is on a salary of €380,000 received a further bonus of €80,000 in 2007
Between 2002 and 2008 €230 million was claimed in expenses by civil servants operating across state departments.
Key proposals for revenue raising
Revenue raising total 2009: €2.730.610,000 (€2.730 billion) Full year €4.479.610,000 (€4.479 billion)
The following are our proposals, as costed by the Department of Finance, to deal with the budget deficit. Our figures, where possible, cover the rest of 2009 and a full year. In several instances, the Department failed to provide estimates for the remainder of 2009, and where this occurs, we have indicated our own estimated figures.
Make all discretionary tax relief schemes available only at the standard rate, exceptions should be made only if there is a proven benefit to the Exchequer – 2009 (estimated) – 600 million. Full year – €1 billion
Abolish the PRSI ceiling and raise PRSI on employees by 1% – 2009 – €563 million. Full year – €950 million
Increase health levy by 3% on those earning in excess of €100,000 – 2009 – 90 million. Full year - €230 million
Increase motor tax for the highest emissions non commercial vehicles (Class F and Class G) – 2009 – NA. Full year €610,000
Cap pension contributions from €150,000- €100,000 – 2009 – €25. Full year – €70million
Introduce a new 48% tax rate on individual income in excess of €100,000 – 2009 – €180 million. Full year – €435 million
Place a 40% levy on property based tax reliefs – 2009 – €203 million. Full year €203 million (figures based on €508 million to be paid out in current property based tax reliefs and legacy tax relief in 2009 and assuming levy is paid as a once off payment)
Reduce the €800 million per annum in tax reliefs on mortgage interest for landlords by 50% – 2009 (estimated) – €233 million. Full year – €400 million
Raise the tax on second homes from €200 to €600 per annum – 2009 – €120 million. Full year €120 million (assuming the tax is paid in a once off payment)
Increase Deposit Interest Retention Tax by 5% – 2009 – €100 million. Full year – €140 million
Increase tax on bookies profits from 2% to 6% – 2009 – €120 million. Full year – €120 million (assuming the tax is paid in a once off payment)
Charge Capital Gains Tax at 30% (up from 22%) – 2009 – €286 million. Full year – €491 million
Key proposals for revenue saving
Cost saving proposals – 2009 €297,658,000 (€297 million) Full year €495,555,931 (€495 million)
Phase out all subsidies of private practice in public hospitals and charge practitioners for the use of public equipment and staff in their private practice (Government unable to provide figures)
Implement a new contract on all hospital consultants which would cap their start off pay at €100,000, with a maximum of €150,000 of remuneration – 2009 – €122 million. Full Year €210 million
End co-location – 2009 – €50 million (€400 million over 7 years)
Nationalise the wholesale distribution of subsidised drugs and compel medical practitioners to prescribe low cost generic drugs – 2009 – €100 million. Full year – €200 million.
A 20% cut in travel expenses across all departments – 2009 – €8.4 million. Full year – €14.4 million
Reduce by 50% consultant use across government departments – 2009 – €12 million (figure based on 2009 estimated expenditure for consultants)
Cap TDs salaries at €80,000 – 2009 (estimated) €4 million. Full year – €7 million
Cap senators salaries at €60,000 – 2009 – €423,000. Full year – €725,000
Remove the allowances payable to the Chairperson, vice-Chairpersons and Whips of the 23 Oireachtas Committees and 5 Sub-Committees – 2009 (estimated) – €485,000. Full year – €830,931
Prohibit former and current legislators and senior civil servants from holding more than one public pension - Government unable to provide answer.
Impose a 10% levy on all executives and non-executives of directors on state bodies – 2009 – €350,000. Full year - €600,000
Increase the charges to private hospital beds by 83%, – 2009 €300 million.
• FAIR AND POSITIVE PROPOSALS: Sinn Féin Finance Spokesperson Arthur Morgan TD, Vice President Mary Lou McDonald MEP and Joanne Spain, Chair of the party's policy committee at Tuesday's press conference