Time to invest in a recovery for all

Posted: October 11, 2016 in Budget 2017, Uncategorized

There was something nasty about the way RTE framed last weeksbudget debate on Claire Byrne Live.

One parent families living on the bread line were pitted against pensioners struggling to heat their homes.

Are the less well off paying their fair share of tax? Are social welfare supports too generous?

Who should get the benefit come budget day, the low income family living in poverty or the so called squeezed middle couple struggling to pay childcare on €60k a year?

It was a false debate, filled with factual inaccuracies and did more to conceal than illuminate the choices facing Government come budget day.

Unfortunately too much of the media commentary in recent weeks has been of this kind.

The old shibboleths are being dragged out once again. We are hearing a lot about the dangers of the tax burden, the limited amount of fiscal space and the need to help the squeezed middle.

Much of this is code for a simple proposition – defend the status quo, don’t rock the boat, as little change as possible please.

The problem is that our society and economy are crying out for change.

Twenty per cent of households are jobless. One in five workers are in low paid precarious work. Small employers, the life blood of our economy, are starved of credit and support.

Half a million people are on hospital waiting lists. Twenty percent of people have no health cover. 4000 adults and 2000 children are sleeping in emergency accommodation.

More and more people are struggling to afford housing, education and childcare. Having a job no longer means earning enough to get by.

The social and economic model that has underpinned the budgets of successive Fine Gael and Fianna Fail governments has produced a dysfunctional economy and an unfair society.

So the choice next week is stark. Do we continue with the same failed social and economic policies of recent decades or do we do something different?

But what could that change look like? Is there really a credible alternative to the proposition of Enda Kenny and Micheal Martin?

A real budget debate would look at three issues – how much do we need to spend, on what should it be spent and who should benefit.

Contrary to the claims of some, the Government is not limited to €1bn next Tuesday. Government can chose to increase discretionary taxation if it believes that it is necessary to invest more in capital and current expenditure.

The available fiscal space is a political choice made in Government Buildings not some technocratic calculation imposed by Brussels. Yes the fiscal rules are badly designed and set arbitrary limits on Government action. But even within these rules there are choices.

Government could decide to put fairness back into the tax code. They could ask multinationals to pay what they owe. They could reform commercial stamp duty and take action against tax avoidance.

They could ask those on very high incomes or accumulating significant wealth to pay just a little bit more. They could reform pension tax breaks and employers social insurance contributions for high earners.

Such measures could raise an additional €1.7bn in tax revenue, significantly increasing the options available on budget day.

Government could then set about putting money back in peoples pockets by abolishing unfair and regressive taxes such as water charges, property tax and USC on those earning below the minimum wage. The could also introduce some tax fairness for the self employed and the hard pressed motorist.

Such measures could cost up to €700m and would give greater relief to those who need it most rather than the proposed phasing out of the USC.

Making these choices would give Government double the available revenue to invest in job creation and public services. It could be used to build homes, schools and hospitals. To invest in childcare, health care and education. To provide flood relief and upgrade our water infrastructure. To ensure balanced regional and all Ireland development.

These investments would help reduce the cost of living for struggling families and improve the quality of peoples lives. They would underpin a budget which for the first time in decades was designed to ensure than no individual or community is left behind.

The result would be a budget that seeks to improve the standard of living for all low and middle income families. It would be a balanced budget, a prudent budget and most importantly a fair budget.

Micheal Martin and Enda Kenny will claim that their budget –and it will be their budget- will also be fair. But when Micheal Noonan makes his budget speech next Tuesday, after it has been checked by Micheal McGrath, keep an eye on the detail.

Fine Gael and Fianna Fails idea of fairness is to give 2,000 people a tax break of €35,000 by raising the inheritance tax threshold to half a million euros costing the state over €70m.

A truly fair budget would leave the tax free allowance at its current level –over a quarter of a million euros- and invest the €70m in housing for some of the 2,000 children who will tonight sleep in emergency accommodation.

Budget day is all about choices. For decades Fine Gael and Fianna Fail have looked after the big guy – whether Denis O’Brien or Apple. Its time we had a budget that looked out for the rest of us.

This article was first published in the Sunday Business Post on 9.10.9

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