21 November 2002 Edition
People's needs a low priority
After months of denial and confusion from coalition government spokespersons, it all became clear last week. Finance minister Charlie McCreevy's budget estimates showed up not just the dire state of government finances but a battery of cutbacks that struck at the weak, those on low income, and the least powerful in society.
"Lower priority areas" was the term used by McCreevy used to justify his cutting of first time buyers' grants, reneging on commitments to replace damp rodent infested school buildings and cutting the grants available to Irish small businesses.
The double standard of rewarding one group while penalising another runs all the way through the estimates. For example, Progressive Democrat leader Mary Harney promised that corporation taxes on business profits will decrease, while workers' PAYE tax remains unchanged. However, workers will still have to accommodate higher gas, ESB and VHI bills as double-digit price hikes bite into disposable income and with two weeks to the actual budget day, we wonder what type of other stealth taxes Charlie McCreevy has in store for us.
For now we can only marvel at the audacity of McCreevy and the scale of cutbacks he has proposed in spending. McCreevy's strategy is a simple one. Day to day spending will increase by 4% next year, barely in line with the current rate of inflation, so there will be no real change in services provided. If you add in a higher rate of inflation and increasing wages, it will probably mean a real reduction in public services.
The next plank in the McCreevy strategy is to cut capital spending by 7%. This is an extremely dangerous gamble. By cutting capital spending, many important infrastructural projects will either not be started in 2003 or will only be rolled out in a piecemeal way. McCreevy is hoping, it seems, that the current dip in tax revenue is a one year blip and that in coming years the economy will grow again and generate increased revenue. Then capital spending will increased again, or maybe not.
This would be an interesting plan, except that it overlooks the reality of years of underfunding in government capital spending, otherwise we wouldn't have to be shelling out hundreds of millions of euro on transport infrastructure. We wouldn't have 54,000 households waiting for homes, an acute lack of hospital beds and adequate schools and a western seaboard systematically starved of vital resources.
The 7% cut in capital spending is a slap in the face to all of those who are waiting for simple things like a school with a toilet, a house, an old people's home, a health service in their local area, not a six-month wait to be treated in Dublin.
McCreevy's 'lower priorities' are among the weakest and least powerful in society. For example, much has been said about the abolition of the first time buyers grant which in a calendar year will cost the exchequer €40 million. Last year, Minister McCreevy reinstated the mortgage relief for purchasers of second homes, giving an estimated €50 million tax break to house speculators.
It is clear that these estimates are budgeting to protect the rich and the wealthy while penalising average workers and their families.
Where the cuts will fall
First time buyers grants - cut completely
Enterprise Ireland - down 18%,
Shannon Development - down 30%
County Enterprise Boards - down 13%
Arts Council - down 8%
Office of the Ombudsman - down 14%
Non national roads - down 27%
Local authority and social housing - down 5%
Environment - down 9%
Building primary schools - down 4%
Building secondary school - down 10%
Third level building - down 24%
Marine Emergency - down 8%
Harbour improvements - down 39%
Forestry - down 22%
TG4 - down 11%
Teagasc - down 13%
Bord Bia - down 13%
Bord Glas - down 32%
LUAS - down 9%
FáS training - down 41%
Estimates confirm government "confidence trick" - Ó Caoláin
Sinn Féin Dáil leader and Finance spokesperson Caoimhghín Ó Caoláin TD led the party's interventions on the budget estimates debate in Leinster House. Here is an edited version of his speech:
"The Book of Estimates confirms the fact that Fianna Fáil and the Progressive Democrats pulled a massive confidence trick on the electorate before the General Election. The huge gap in the public finances did not appear out of the sky this summer. Preparations were being made in the Department of Finance before the General Election for such a shortfall. Yet the government parties assured the people there was no deficit and there would be no cutbacks.
The government has effectively torn up its own Programme for Government, the National Development Plan and the National Health Strategy.
The most shameful and disgraceful broken promise has to be this government's reneging on its commitment to extend medical card cover to a further 200,000 people. It should not be seen simply in the context of this year's u-turns by the government. Throughout the years of the Celtic Tiger, people on low incomes who earn that little bit over the limit for qualification for the medical card, had a right to expect that increased prosperity would finally allow the government to extend qualification. They were led to believe that before the election and now they have been betrayed.
The government is bragging about its increases in the health budget but the reality is that the 6% spending increase for next year is far behind medical inflation, which is running at 10%.
The drop in expected spending will cause substantial cutbacks in services and jobs. Patients will suffer and perhaps even die as a result. The Department of Health has confirmed that no new beds will be opened next year. We were promised over 3,000 new beds within the ten-year period of the Health Strategy.
I want to express here the outrage of people at the government's slashing of the first-time homebuyers' grant. This is an appalling act and it must be reversed. It too must be seen in a broader context and that is the abject failure over five years of the government's so-called housing policy.
In the last Dáil, there was hardly a deputy that did not raise the cases of schools in their constituencies that were waiting years for badly needed new build or repair work.
Some of these children are trying to learn in atrocious Dickensian conditions. Again, the pre-election promise from this government was that they would deliver, the budget would go up and the work would be done. Another false commitment, another betrayal."
Budget for an Ireland of equals
Did you know that Sinn Féin is the only party that has produced a budget submission? It is the only party that has a plan about how the government spending should be directed.
This year, with five TDs and an eight-member backup team, Sinn Féin in Leinster House has produced a detailed submission, offering not just a stinging critique of government failure but also a radical socialist republican alternative that could produce a just budget.
This morning Sinn Féin will launch the submission and we sample some of the high points on equality and tax.
Step 1 Equality-proof the Budget
Discrimination and social and economic marginalisation go hand in hand. As a matter of priority, we want a budget that moves us closer to an Ireland of Equals.
Sinn Féin calls for the government to:
Equality-proof this budget (including poverty-proofing) - in a transparent process. We want to see a "report card" on this budget.
Equality/poverty proof ANY budget cuts.
Recognise inclusivity and equalisation as significant "value for money".
Back promised equality measures with adequate financial commitments.
Put its money where its mouth is on equality and - at minimum - fund full implementation of the recommendations of the National Anti-Poverty Strategy; the National Plan for Women; the Taskforce on the Travelling Community (1995) and Traveller Health Strategy; the National Plan Against Racism; and the report of the Commission for the Status of People with Disabilities.
Increase transparency by creating a line-itemised "Equalisation Measures" section of the budget, reflecting spending across all departments to redress regional inequality, economic inequality, social inequality, and global inequality (ODA); and a similar line-itemised "Equality Measures" section reflecting spending per department.
Step 2 What is a budget for?
Sinn Féin believes that we need a fair and just tax regime as a means to redistribute resources and invest in those parts of society suffering economic marginalisation and social exclusion.
We want to use tax revenue to invest in health, education, pensions, and child welfare, and to invest also in economic development and aid business to grow sustainably and make a positive contribution to society.
A priority is building infrastructure that benefits all and is grounded in the guarantee of universal provision, whether it is energy, roads, public transport, telecommunications, social, health or educational resources and facilities.
Step 3 Time to tackle tax inequality
We need to rebuild our tax regime based on the principles of equity and transparency.
(1) A comprehensive tax review
When it comes to formulating tax policy, there has been one question that successive governments have been afraid to ask. Who is paying tax and more importantly who isn't?
There must be a comprehensive review of the tax regime. To do this properly would involve all the social partners. It must be time limited and must seek to formulate proposals for a truly equitable tax system.
(2) Room at the top? Analyse and publicise the revenue data
Request the Revenue Commissioners to redo a survey last undertaken in 1997 of what percentage income tax the richest earners in the 26 Counties are paying. The 1997 survey found that some of the top earners were paying little or no tax through the use of avoidance measures. One in five was paying tax at an effective rate of less than 5%.
The 26 Counties has one of the lowest taxation takes in the industrialised world, and 82.6% of income tax is being paid by the PAYE sector.
(3) A cost benefit analysis of tax reliefs and shelters
We need a cost benefit analysis of the battery of tax reliefs that have been set up by minister after minister. What benefits are we as a society getting from these tax reliefs and what are the costs?
Step 4 Justice in Income Tax
(1) Super tax
Figures released last January showed that 62% of workers earn less than €25,396 annually. But there is a super wealthy group of more than 28,000 households who in 2001 earned more than €126,984 (£100,000) per year.
Sinn Féin proposes a new 50% super tax band for individual incomes more than €100,000 as an appropriate measure while we wait for the Department of Finance to come clean on how little tax the wealthy in Irish society are paying.
(2) Take the low paid out of the tax net
At the other end of the scale, we need to take the low paid completely out of the tax net and not just those on the minimum wage. Increasing tax credits is the fairest way of doing this.
(3) Tax Exiles
This is a complicated issue and needs to be addressed vigorously. Sinn Féin believes that all income generated in the state should be liable to general taxation, irrespective of the residency of the individuals concerned.
Step 5 Fair Business Taxes
(1) Tax relief for Research & Development and investment in workers
R&D investment in the 26 Counties is 40% of the EU average and must be increased. It is a vital element of any future job creation strategy. Here too there is a role for the social partners in formulating proposals for generating incentives not just for increased R&D but also for investing in the education and training of workers. Tax credits for real R&D makes sense.
(2) Capital Gains Tax
We call for an increase in Capital Gains Tax to 40%, back to the level it was before Minister McCreevy took office.
We want to return employers PRSI to 12%. Employers' payroll taxes are already the lowest in the EU and would still be competitive internationally at a 12% PRSI rate.
(4) Corporation Tax
There should be no more cuts in corporation tax. The rate should be maintained at 16%, given that the ESRI has stated that a rate of 17.5% could be sustained without damage to competitiveness.
Step 6 Tackle Vested Interests
(1) Mortgage relief for speculative investors
Rescind the decision taken in the last budget to restore mortgage relief on second homes and curtail existing property reliefs.
(2) Bringing the banks into line
The banking sector might have got away with paying off their outstanding DIRT taxes years late, but with profits way above the EU average, we need more inventive ways of using the massive financial resources of the Irish banking sector in a positive way.
One proposal is to get them to divert some of their profits in social and infrastructural investments such as ICT networks, small business development and social economy projects, such as addressing the lack of effective childcare provision.