10 December 2009 Edition
Savage Budget will cause poverty and drive economy deeper into recession
BRIAN LENIHAN introduced one of the most brutal budgets in the history of the 26 Counties on Wednesday, which included savage cuts in social welfare and public service pay.
Lenihan’s Budget seeks to save €4 billion with the bulk of it coming from spending cuts rather than extra taxation.
The budget targeted young people, reducing jobs seekers benefit to €100 for those aged 20 and 21 and to €150 for those aged between 22 and 24. It involves cuts in social welfare rates which range from about 4.1 per cent for those claiming jobseekers’ allowance to 10 per cent in child benefit.
The budget saw the introduction of pay cuts for the public service ranging from 5 per cent for those on average pay (a loss of €1,500 a year for someone on €30,000) to 15% for those at the most senior level in the civil service.
A carbon tax is being introduced as is a new measure to tackle tax exiles. No wealth tax was introduced nor was a third rate of tax for high income earners brought in. Income tax rates did not change. Minister Lenihan indicated that a significant change in the social insurance system will be introduced in 2011.
The government is seeking to have all stages of the Social Welfare Bill pass through the Dáil by the end of this week before its backbenchers come under pressure from public anger. Legislation to give effect to public service pay cuts will be debated next week.
Sinn Féin's Arthur Morgan said what he called a “savage Budget” is the economic equivalent of “kicking an injured man when he is down”.
He said the Budget would cause poverty and deflation and drive the economy deeper into recession.
Morgan pointed out that the huge Budget deficit is a result of recession caused by disastrous government policies. With this budget, the government had chosen to treat the symptom “in the most brutal fashion” while doing nothing about the cause.
He said the Budget should serve as a wake up call for the Irish people.
“Over the course of the last 12 months, we as a people have been witnessing this government committing a series of con jobs, from the levies and social welfare cuts in April, to the €54 billion NAMA rip off. The government has been helped by the media, and Fine Gael and Labour, in convincing people that the savagery of this budget is necessary. Well it is not. There was another way.”
Sinn Féin had shown in its Pre-budget Submission, ‘The Road to Recovery’, carefully considered by the party and by like-minded economists, and costed by the Department of Finance, that there was an alternative way to raise money through bringing fairness to an unfair and unequal taxation system, through cutting state subsidies to the private sector and through ending the greed amongst high earners fostered and encouraged by the government.
Morgan called Brian Lenihan “Robin Hood in reverse”.
“You’ve taken from the poor to give to the rich. And worse, you’ve made absolutely sure that recovery will take longer than it should because you’ve hit the lifeblood of the economy. You’ve hit the spenders, in an economy reliant on consumption taxes. You’ve hit the education system, the building blocks for a turnaround. For a party that has long prided itself on its alleged ability to manage the economy you’ve outed yourself today”, he said.
The Louth TD said replacing Fianna Fáil and the Greens with Fine Gael and Labour would make no difference to economic recovery. Fine Gael and Labour would implement the same policies in a different package, with the same bad results.
Sinn Féin was the only party with an alternative analysis.
“We address the problems in the economy with the aim of eventually reducing the deficit. The other parties set out proposals to reduce the deficit without ever dealing with the problems of the economy.”
Cutting social welfare payments, Morgan said would have a detrimental effect on the economy and society and was a false economy that will ultimately cause misery for those on the receiving end.
He said there has been a great deal of PR conducted by the government in relation to why taxation is an untouchable but there is a great deal of inequality in the taxation system.
“On the one hand you tell us that we cannot afford to raise tax. On the other hand you’re going around telling all and sundry that we are still a low tax economy and that has been this government’s greatest achievement.
“This is nothing to be proud of. We have a €22 billion deficit and the government is still refusing to create a fair taxation system. We need to stimulate the economy and to do that we need revenue. Taxation cannot continue to be the untouchable and you cannot continue to go around lauding our low tax economy as being job creation friendly.
“Here are the facts. We are low tax for business and high earners and we are haemmorhaging jobs. Low taxes for business and high earners are not stimulating the economy. We are not low tax for the bulk of PAYE workers. The bottom percentage rate of income tax is low but there is a huge degree of stealth taxation and a lack of service provision that makes Ireland, for this group, a high tax economy. They are the group that cannot be touched for more tax. But the government is determined to have it both ways – high taxes at the bottom, low taxes at the top – it is not sustainable.”
Morgan said differences in VAT, Corporation Tax, Excise Duties and Currency create barriers to economic development on both sides of the border, and cost millions in tax revenue. The removal of such impediments will create efficiencies, employment, wealth and opportunity across this island. Sinn Féin proposes an All Ireland Economic Committee from the Dáil and the Assembly tasked with harmonising taxes across this island; A joint north south Ministerial approach to promote our international food brand; An all-Ireland agricultural body to implement all standards that safeguard the reputation of Irish agricultural produce.
The Sinn Féin TD said that in failing to use the budget to introduce an economic stimulus package, the government had “ensured we will be back here again next year in an even worse position”.
“There is no easy way out of this recession. The government’s way is to slash spending. Our way is to save and create jobs, and protect the most vulnerable. Our way is better for the economy and better for people.”
MISERY: Cutting social welfare payments will have a detrimental effect on the economy and society