The Budget debate starts to heat up

THE pre-Budget debate is already beginning to heat up in the 26 Counties. 

Before the state’s overpaid TDs and senators have even returned from their three-month holiday, the commentariat have started to make the case for cuts to wages, social welfare and public services.

With unemployment rising and consumer spending falling, the gap between what the state spends and what it earns continues to grow. The only solution, we are being told, is to cut. The Government must balance the books and its only option is to spend less.

It all sounds very sensible really. We all know that you can’t spend more than you earn and that we should live within our means.

Except that running an economy is not the same as running your public finances.

As tax receipts fall and unemployment rises, any sensible government would invest in job creation and reform the tax regime. If you tax fairly and sustainably, your tax receipts start to rise. If you invest carefully in targeted job creation, the number of people reliant on social welfare starts to fall, which in turn helps tax receipts rise further.

Unfortunately, the Fianna Fáil/Green Party Government, the Fine Gael/Labour opposition and much of the media thinks otherwise. They believe that cuts are the only way to balance the books.

The irony is that cuts not only hurt those on low wages or social welfare, they also damage the economy further, cost more to the taxpayer in the long run and delay economic recovery.

The explanation is simple. If you cut the wages of ordinary working people or social welfare rates then people have less money to spend. As people spend less, tax receipts fall, businesses go bust, unemployment rises and the social welfare bill increases.

To demonstrate this simple fact of economic life, ‘The Poor Can’t Pay’, an anti-poverty campaign, has calculated the impact of the welfare cuts on struggling local economies around the country.

They estimate that last year’s social welfare cuts have taken €22m out of the Cork economy, €12.6m out of the Limerick economy, €12m from Galway, €3.4m from Sligo, €9m from Waterford, and €4.5m from Kilkenny.

For Waterford, for example, this lost revenue is equivalent to the closure of an employer the size of Waterford Glass; in Galway it’s like cancelling the Arts Festival; or no Jazz Festival in Cork.

Nobody doubts the impact that the closure of Waterford Glass has on the local economy in that part of the country. And as the Poor Cant’ Pay campaign rightly points out: “Imagine the uproar from local businesses if Cork and Galway were to cancel their festivals.”

Yet, ironically, these same business organisations remained silent when the incomes of their customers was slashed last year. And in many cases they are the people calling for private sector wages to be slashed too.

So, if like me, you are increasingly frustrated by the lack of commonsense in the pre-Budget debate so far, log on to www.thepoorcantpay.ie, equip yourself with some powerful arguments and get ringing your local radio station chat show to explain why cuts to wages and social welfare is bad for all of us.