Some facts about the recession
The Public Sector
Size and social welfare rates
Far from what the government would have us believe the Irish Public Sector is not bloated. The 2008 OECD Review of public services showed that spending on public services in Ireland in 2005 was third lowest of 25 OECD countries.
CSO data show s that current public spending dropped from 33.6% of GDP in 1996 to 28.5% in 2005.
According to CSO between December 08 and June 09 public sector numbers have fallen by 3,000.
Recent EU data shows that spending on social protection in Ireland was 18.2% of GDP in 2006 compared to an EU average of 27%. Welfare rates are the fifth lowest in the EU.
Pay
In response to a Dail Question from Joan Burton on 21 Oct 2009 the following information was given in relation to the incomes in the public sector and more generally
Income Tax Year 2007 Public Sector Employees All Employees
Range of Gross income Total Number Total Number
€0 – €10,000 49,747 414,298
€10,001 – €20,000 64,116 392,697
€20,001 – €30,000 69,766 379,180
€30,001 – €40,000 69,954 263,576
€40,001 – €50,000 55,586 167,904
€50,001 – €60,000 34,562 103,273
€60,001 – €70,000 22,555 67,776
€70,001 – €80,000 15,635 45,237
€80,001 – €90,000 10,379 29,668
€90,001 – €100,000 7,045 19,868
Over 100,000 15,278 46,794
Totals 414,623 1,930,271
In addition, the number of all PAYE workers earning less than the average industrial wage of €32,730 in 2007 was 1,267,865, of which 201,727 were public sector employees.
We can see from this that:
Many workers are very are very poorly paid:
Some facts about the recession
The Public Sector
Size and social welfare rates
Far from what the government would have us believe the Irish Public Sector is not bloated. The 2008 OECD Review of public services showed that spending on public services in Ireland in 2005 was third lowest of 25 OECD countries.
CSO data show s that current public spending dropped from 33.6% of GDP in 1996 to 28.5% in 2005.
According to CSO between December 08 and June 09 public sector numbers have fallen by 3,000.
Recent EU data shows that spending on social protection in Ireland was 18.2% of GDP in 2006 compared to an EU average of 27%. Welfare rates are the fifth lowest in the EU.
Pay
In response to a Dail Question from Joan Burton on 21 Oct 2009 the following information was given in relation to the incomes in the public sector and more generally
Income Tax Year 2007 Public Sector Employees All Employees
Range of Gross income Total Number Total Number
€0 – €10,000 49,747 414,298
€10,001 – €20,000 64,116 392,697
€20,001 – €30,000 69,766 379,180
€30,001 – €40,000 69,954 263,576
€40,001 – €50,000 55,586 167,904
€50,001 – €60,000 34,562 103,273
€60,001 – €70,000 22,555 67,776
€70,001 – €80,000 15,635 45,237
€80,001 – €90,000 10,379 29,668
€90,001 – €100,000 7,045 19,868
Over 100,000 15,278 46,794
Totals 414,623 1,930,271
In addition, the number of all PAYE workers earning less than the average industrial wage of €32,730 in 2007 was 1,267,865, of which 201,727 were public sector employees.
We can see from this that:
Many workers are very are very poorly paid:
- 67% earn less than the average industrial wage (compare this with the top earners below)
- 49% of public servants earn less than the average industrial wage. 75% earn less than 50,000
High Earners
Of those who earn over 100,000:
33% are in the public sector while 67% are in the private sector. That’s 31,516 in the private sector.
According to the Revenue Commissioners there were 20,840 self employed people earning over 100,000 in 2004
Its hard to argue that all public sector workers should take all the pain while those on over 100,000 in the private sector are asked for nothing.
Tax and High Earners (2008) (see Vincent Browne Irish Times 18 March 2009)
The government has been arguing that the top 6% of earners pay almost half of all income tax and therefore it cant be increased but:
The top 6% with over 100,000 get 28% of total income, an average of 190,699 each: That’s 13 times the average for the bottom 50% of earners
The top 6% pay on average 27% of their income in tax
24,000 earn between 200 and 500,000: an average of 204,207 (14 times the average of the bottom 50%)
3946 earn between 500,000 and 1 million: average = 464,452 (32 times…)
1447 earn 1m + : average = 1.6m (110 times the average…)
If you were to increase the proportion of their income they pay in tax from 27% to 32% (and why stop there) you would raise 1.5b (all the pay cuts for the public sector or all the cuts in services)
In a later article in the Irish Times (Com Keena 20/3/2009) it emerged that the Revenue figures on which Brownes analysis was based were based on taxable units (in many cases couples) rather than individual taxpayers.
The data for individuals shows that far from the top earners with over 100,000 paying half of all tax they only pay 31.4%. Further
Those between 30 and 100,000 pay 57% of income tax
Those between 30 and 50,000 have 30% of income and pay 28% of all income tax. Almost the same as the 2% earning over 100,000.
9,129 people (0.3% of earners) earned 6.7b (6.6% of all income)
The Super Rich (2007)
5% had 40% of all wealth
That’s 320b or an average of 4.2b per household
There were 33,000 millionaires
UNITE has estimated that their assets are probably now worth about 250b and have called for a levy on them.
ICTU say in their 10 Point Plan For A Better Fairer Way
“We know that the top 1 per cent of the population made about €75 billion during the boom era. Specifically, it can be computed from revenue data that a minimum of €66 billion was made by individuals between 2002 and 2008 – almost €10 billion a year. The top 1 per cent in 2007 held 20 per cent of the wealth, the top 2 per cent held 30 per cent and the top 5 per cent held 40 per cent. How can this money have disappeared because for every developer who paid over the odds for land there had to be an owner who received the money? “
Unemployment
Unemployment has doubled in the last year from under 6% to over 12.6%.
183,000 extra people signed on in the last year (+76%). Over 423,000 signed on in September
In the 1980s it peaked at 226,000 and took four years to rise from 6% (1979) to 14% (1984).
Cutting Your Way Out of the Boom: Borrowing and Debt
While the deficit is not the key issue for us, unemployment is, it is quite clear that the policy the government is pursuing won’t even reduce the deficit. How do we know this?
First, we have had three budgets since October 08 and after each the deficit has got worse.
In July 08 the deficit was 6.7b, in July 09 it was 16.4b and in Oct it was 20b. It is estimated to be 22b by December.
Remember that the deficit will include 4b paid to Anglo Irish Bank and 3b to recapitalise AIB and Bank of Ireland. (These are the sums that are coming out of current revenue. Further payments totalling 4b are being made for the National Pension Reserve Fund)
Secondly, in April the ESRI looked at some proposals that would save the government €1b . One of them was a reduction of 17,000 jobs in health and education. This happens to be the same number proposed by the Mc Carthy Report.
The ESRI analysis showed that this proposal would lead to:
1% fall in GDP (1.2b), a 1% fall in consumption (750m) and an increase in unemployment of 0.7%.
Given all this it only leads to a 0.1% fall in the barrowing requirement. A cut of 1b in fact turns into a saving of 490m but GDP goes down. We cut national income by 1.2b to make a saving of 490m.
The ESRI looked at a range of proposals (not proposals we would make) such as pay cuts, a property tax, a carbon tax and come to the conclusion that “cuts in public sector employment have the biggest negative impact on GDP and GNP both in the short-term and the long-term”.
UNITE have argued that there is a lot of scaremongering about the level of debt. EU projections produced in Spring 2009 show that overall debt as a percentage of GDP will be 79.4% in the EU (84% in the Euro zone) and 73% in Ireland. We could barrow 12b over the above the governments projections and still be below the Eurozone average.
The table below from the ICTU document Congress 10 Point Plan For A Better Fairer Way published November 2, 2009 shows projected level of debt in 2010 in the EU.
Some arguments
The problem in the economy is lack of demand not the debt. We need productive investment to create jobs and increase demand. We can barrow and raise taxes from the rich to do so.
Its mad to cut the income of poor people and low and middle earners as they spend most of their income. The rich don’t. That’s why we should tax their income and assets because they are not being used productively.
Cutting public services now will lead to long-term damage. We are still recovering from cuts in the health services in the 1980s.
Its completely inequitable that millionaires pay tax at the same rate as those earning modest incomes. The Standard Rate Cut Off for a single person is 36,400 while it is 45,400 for a married couple with one person working.
December 2009
An Bord Snip: An Elite Plan to Attack the Poor
There is nothing independent or objective about the Bord Snip Report. It pretends to be an expert body which stands above social conflict. In reality it was pre-programmed to produce a wish list of neo-liberal attacks on the poor and social services.
This is evidenced in three main ways.
- Composition:
Bord Snip is composed of six individuals who are drawn from elite circles and who share a common mindset. Its includes: a former business consultant turned academic; the second secretary of the Department of Finance; a former regulator who is now a European vice-president of a hedge fund administration company; a former deputy CEO of the HSE who resigned because his pension payments were not high enough; a former governor of the Central Bank who a failed to act on tax evasion of the wealthy in the DIRT scandal; a former partner of Pricewaterhouse Coopers.
The neo-liberal mindset is best summarised by the deep hostility which its chairperson, Colm McCarthy, displayed to pay bargaining with public sector unions. He stated that there is, ‘something redolent of Soviet-era central planning about Irish procedures for determining public pay … Bolshevik-style central bodies determine the minutiae of pay and conditions for 350,000 employees nationwide. ’
The neo-liberal mindset is also evident in Bord Snip’s description of its ‘first principles’. These principles include ‘why public service provision might be warranted, rather than allowing the private sector to provide the service’. In other words, even though there is a catastrophic economic crisis as a result of the failure of private capitalism, justifications have to be advanced for continuing public sector provision.
- Terms of Reference:
Bord Snip was established to ‘make recommendations on reducing the numbers employed in each area of the Public Service’. It was precluded from looking at alternative measures which might have, for example, raised taxes on the rich in order to promote a public works programme. All proposals concerning taxation have been hived off to the Commission on Taxation and the composition of this body also displays a distinct social class bias. Its 17 members include three company directors of financial corporations, four tax solicitors or partners in accountancy firms which help corporation avoid tax; the CEO of the Irish Stock Exchange, a representative of the Bankers Federation and one token union official. This Commission has also been pre-programmed to avoid proposals for taxing the rich in any meaningful way. This reality is acknowledged by the Bord Snip report which baldly that ‘The Minister for Finance has stated that the scope for further income tax increases is very limited and that the Government will be looking to the expenditure side for the greater part of fiscal consolidation’.
- No independent Research:
Bord Snip conducted no independent research but relied on Government departments and particularly the Department of Finance to provide ‘possible options for reductions in numbers and programme expenditure’. Its conclusions are merely the result of discussions with elite figures in the state bureaucracy who share a similar neo-liberal mindset. No research was conducted on the social impact of proposed cuts on the lives of the poor.
THE PROPOSALS:
The following outlines some of the proposals of Bord Snip in three key areas. They give a flavour of the elite agenda that is using the shock created by the economic crisis to re-configure Irish society in decisive ways.
Education:
Increase the pupil-teacher ratio in primary and secondary schools: Ireland already has the second highest primary class sizes in the EU and has already lost 1,000 teachers.
Close smaller schools and force parents to pay €500 a year for school transport. Bord Snip claims that 47% of schools are too small and wants to amalgamate many of them into larger schools.
Reduce substitute cover for schools. When a teacher is sick and out of work for three days, a substitute teacher is employed. Bord Snip wants to re-distribute the pupils to other classes, increasing disruption.
Eliminate 2,000 Special Needs Assistants and 1,000 Language Assistants. The former help pupils who are assessed as having special needs.
Cut primary and secondary school funding by 10%.
Re-write teachers’ contracts to intensify their workload.
Eliminate 2,000 jobs in third level – the equivalent to 10 percent of the staff.
Outsource libraries to private for-profit companies
Cut the student support scheme in third level and prevent Back to Education Allowance holders getting a maintenance grant. Irish universities have a low intake of students from working class background – Bord Snip wants to penalise these students further. Instead of attacking the gross salaries paid to university presidents and managers, Bord Snips wants to attack mature students who gained a place in university after spending a considerable period on social welfare.
Re-introduce student fees. Make it even harder for the poor to get to college.
HEALTH:
Tear up the existing contracts of health workers – force them to work between the hours of 8am and 8pm, without overtime payments.
Cut 6,000 jobs through compulsory redeployment and, if necessary, redundancies. Allow for outsourcing of ‘non-routine services’.
Prevent a greater number of poor people getting a medical card. Bord Snip complains that items such as childcare costs, rent and mortgage payments are included in assessments for medical cards. Instead of low income entitling people to a right to a medical card, it wants eligibility determined by ‘medical need’. In other words, the numbers of normally healthy medical card holders to be severely reduced.
Make medical card holders pay a €5 prescription charge and force other to pay €125 a month for cost of drugs. These measures could force some with chronic illness to choose between medicine and food.
Eliminate nearly a quarter of hospital beds. Bord Snip uses a growing dogma within the HSE to claim that Ireland only needs 8,800 hospital beds rather than the current 12,778. No extra resources are proposed from a wider longer term programme of preventative medicine.
Increase hospital charges to A&E to €125. This will be higher than some private hospitals and the clear aim is to drive people towards the private sector. Bord Snip also proposes that the National Treatment Purchase Fund be required to only use private facilities.
Cut 20 percent off the Dublin Ambulance budget, probably through outsourcing.
Make older people pay more for access to long stay care and means test home care packages.
SOCIAL WELFARE
Bord Snip’s class bias is revealed in the fact that the largest cut of all – €1.8 billion – will come from social welfare. The proposed measures include:
Cutting social welfare payments by 5 percent. One of the main reasons advanced is a ‘race to the bottom’ argument. Wages have already been cut by an average of 4 percent and further cuts are expected – so there must be no ‘disincentive’ to work for poverty wages.
Cut the rent supplement further. Social welfare recipients have already been forced to pay an extra €15-€20 a week in rent payments in the last budget.
Discriminate against social welfare recipients according to age. The last budget began this by reducing social welfare for under 20s to less than €100 a week. Bord Snip wants to cut welfare of 20-24 years olds to €150 a week
Slash payment those employed on Community Employment schemes. Someone on a One Parent Family Payment gets €228.70 for taking part in a CE scheme. Bord Snip does not regard CE schemes as providing real work, so it wants the additional payments removed.
Eliminate Family Income Supplement for those receiving One Parent Family Allowance, Disability Allowance or Widow(ers)’s Contributory pension
Increase the retirement age for state pension. The decline in occupational pensions means that huge numbers are dependent on the miserly state pension of €230.30 a week. Bord Snip wants to drive people further into poverty by forcing them to wait until 66 or even 67 to get a state pension.
OTHER
These measures give a flavour of the deep social class bias and dislike of the poor contained in Bord Snip. In addition to such measures, there are also proposals to introduce water charges, sell off Bus Eireann Expressway, abolish energy conservation programmes provided by Sustainable Ireland and allow energy companies to provide this function; reduce or eliminate many support funds for small farmers and, incredibly, abolish the state grant to local authorities so that they become entirely dependent on items such as water charges for funding.
At the core of this programme, is a strategy to ‘shrink the state’ through reducing services, selling off state land and outsourcing work to take advantage of non-union cheap labour.
In almost every other part of the world, neo-liberalism has been discredited as economic philosophy which has helped create the greatest economic crisis since the 1930s. In Ireland, however, the political elite are becoming even more virulent in their adherence to these Thatcherite dogmas. They have been emboldened by the failure of the union leaders to mount an adequate resistance. But this has also led them to go too far, and a cry is emerging from the grassroots of Irish society to proclaim: ‘enough is enough’.
STRATEGIES AND RESPONSES
Over the past two decades, the Irish elite has perfected x imposing neo-liberal measures to a fine art – while continuing to co-opt leaderships of civil society through ‘social partnership arrangements’.
The Bord Snip report is designed to allow for a continuation of this strategy in a more limited form.
The report recommends over €5 billion in cuts which represents the longer term wish-list of the elite. But the report also functions as a menu which gives them some scope to negotiate with and co-opt potential opponents. By promoting this flexibility, leaders of unions and civil society groups can be invited in ‘to the inside track’ to discuss which part of the cuts agenda can be implemented. Divisions can also be fostered between them.
The overall paradigm is therefore set – and all who accept an invitation to join the inside track must respond within the terms of the neo-liberal framework.
Evidence of these mechanisms is already clear in the response of the Labour Party and the union leaders.
The Labour leader, Eamon Gilmore has opposed reductions in social welfare but has supported the reduction of 17,000 public sector workers and ‘maybe even more’.
IMPACT leader Peter McLoone, has agreed on the need to transform the public sector to get ‘more for less’ but argues that this needs to be achieved by partnership rather than confrontation.
What is missing here is a wider rejection of the whole philosophy of attacking the public sector during this grave economic crisis. Yet there is every sign that Bord Snip will only add to the failed capitalist economics that is bringing Ireland to the verge of disaster.
AN ALTERNATIVE TO FAILED ECONOMICS
Ireland has already undergone four sets of expenditure reductions – measures announced in July 2008 and February 2009 as well as the October Budget of 2008 and the Supplementary budget of February 2009.
Yet the shocking irony is that government expenditure is still set to rise in 2009.
As Bord Snip acknowledges, ‘Upwards pressure on spending, including the rising cost of social transfers due to the increase in unemployment and rising debt service burden, have more than offset the expenditure economies already announced’.
Some translation may be helpful here: Because the last round of cuts have been so deep, Ireland has entered a deflationary spiral which has thrown more people out of work and so more is spent on social welfare payments. In addition, the bail out of the banks is adding to Ireland national debt and higher interest rates are being extracted by the global rich.
In other words, the economic agenda of cutting wages, slashing social spending and bailing out the banks is a failure because it only deepens the recession.
What is now required is a complete break form these policies by developing popular support for a series of anti-capitalist economic measures which can alleviate social suffering.
The Alternative to Bord Snip must therefore start from the fact that private capitalism has failed and is unlikely to create significant numbers of jobs in the future. Instead of cuts we need a decisive extension of the public sector to protect the living standards of the majority.
Such measures might include:
Stop the bail out of the Banks – Create a ‘Good’ state bank. The Bail out of the banks will cost an estimated €24 billion and is already pushing up interest rates on the national debt by €1 billion a year. By ending support for private banking and creating a new state banking network, billions could be saved.
Establish a public works scheme to put people back to work. We need, for example, a proper transport system; an insulation programme for houses, more primary care centres and so there is plenty of work to be done. By putting people back to work, we can reinflate the economy and take up the slack which private corporations will not fill.
Nationalise our natural resources. Take back our oil and gas fields from Shell and Exxon. Use the additional funds to promote wider state led industrial development.
Take punitive tax measure against wealthy. Confiscate their assets where necessary. At present 440 very wealthy people control €22.5 billion in assets. If it comes to a choice of slashing social welfare or taking their wealth, the needs of the majority must come first.
Genuine reform of the public sector. Cut all salaries above €100,000. Eliminate the use of PR companies, external consultants who rip off taxpayers. Unleash the creative energies of public sector staff by cutting back on managerialism, needless paper work and encourage new form of workers control.
Develop a planned economy built on public enterprise that can re-build Ireland’s manufacturing base after the failure of private capitalism. This is the only realistic way to create jobs in the long term
AN ALTERNATIVE ECONOMIC AGENDA
The global economy has been hit by the greatest economic crisis since the 1930s and many millions of people across the world are paying dearly for the failure of capitalism.
Even within the general crisis, Ireland is faring much worse than elsewhere. In the recent past right-wing politicians told people that they should cut taxes on the rich, let wealth trickle down, and trust in ‘market forces’. As a result of this dogma, the fruits of the Celtic Tiger boom were squandered. Instead of investing in schools, hospitals, social care services and other basic infrastructure, the state looked after their rich friends.
A tight alliance of FF politicians, bankers and builders hyped up the property market driving large numbers of people into massive mortgages and high levels of debt. They turned Ireland into a tax haven for the multi-nationals and a place where you could do business with the lightest of ‘light regulation’.
Now the whole edifice has come crashing down. But instead of taking any blame for the chaos, the same wealthy elite want to offload the costs of the recession onto ordinary working people.
It is seeking to increase Irish ‘competitiveness’ at the expense of working people and so benefit from the reflationary policies being developed by other countries. While the US and some EU countries are promoting major stimulus packages to revive their economy, the Irish government is focussing on wage cuts, pension levies and social spending cuts as a major mechanism for recovery. This will further depress economic activity.
THE RESOURCES ARE THERE
People before Profit believes that the resources are there to counteract the impacts of recession on ordinary people. The availability of billions to ‘recapitalise’ the banks and to relieve them of their toxic assets shows that there is no need for any cuts in in health, education or social spending, for any wage cuts or levies.
The financial website Finfacts Ireland reported in October 2008 that “Irish investment of €13.9 billion was put into European property deals last year [2007]. In contrast, the Irish business sector does not even get a total of €200 million in venture capital investment” (www.finfacts.com).
This capital was (i) exported and (ii) put into idle property. The conscription of this capital to sustain the public finances would not suppress economic demand because this capital was never used for productive economic activity in the first place. And not all of this wealth has gone in the shares and property crash.
In a series of Irish Times articles Fintan O’Toole has highlighted the available wealth that could be tapped to pay for the crisis and for the good of society:
“Irish individuals made €41 billion in capital gains from investments in land, property and equities in the three years between 2004 and 2007. The same amount, €41 billion, was invested by Irish people in commercial property at home and abroad between 2001 and 2006. In 2006 Irish people invested €8 billion in overseas property. Even with the slowdown Irish investors put €1.5 billion into overseas property in the first quarter of 2008.
“There is a nice pyramid of money, with 330 individuals worth in excess of €30 million, a further 3,000 with a net worth of between €5 million and €30 million, and 30,000 worth between €1 million and €5 million – even when their principal residence is discounted. But this elite of the rich and super-rich is still a small one – it accounts for less than 1 per cent of the population. In 2007, this 1 per cent had an asset base of €100 billion – more than a third of national non-residential wealth
“If we date the Celtic Tiger as running between 1995 and 2007, then over that period the top 1 per cent of the population gained about €75 billion. Those people, not the sick, disabled and poor, should pick up the tab now. “(13 May 2008)
“How can we justify taking €1,300 a year from someone earning €25,000, while, on the same day as the [pension] levy was announced, Brian Lenihan told the Dáil that just one tax shelter – interest relief for landlords – cost the exchequer €1.4 billion in 2006 and 2007, the same sum as that supposed to be raised by the levy? When he also told the Dáil that he has “no plans” to change the regime for so-called tax exiles?”(10 February 2009)
On 13 January this year the Irish Times reported: “CORI director Fr Sean Healy …questioned the basis for the Government’s conclusions that €16.5 billion in cuts were needed over five years. Fr Healy said that this €16.5 billion was based on the tax-take not rising beyond 30.3 per cent of GDP by 2013. ‘This is interesting given the fact that total tax-take in 2007 was 32.5 per cent of GDP…’ Fr Healy said that if Ireland’s tax take were to rise to the EU average of 37.4 per cent of GDP most of the required adjustments would be achieved”.
In 2006 the top 1% of the Irish population enjoyed around €100 billion worth of assets.. and owned 20% of the nation’s wealth, according to the Bank of Ireland Private Banking report, Wealth of Nations, 2007. Even if, like the world’s billionaires in general, this elite lost a third of its wealth in the slump, that would still leave over €60 billion to harness in relieving the public financial deficit.
“…the 1,447 people (0.06% of all income earners) who earned more than €1 million each last year, collectively earned 3.4% of all income. In real figure terms, this small cohort of people earned €3.459 billion in 2008, an average of €2.39 million each (Colm Keena, Irish Times, 5th March 2009).
If, due to the emergency, these 1,447 people were to surrender all but €390,000 of this income each for one year the Exchequer would get €2 million from each on average. Or €2.8 billion from them all, instead of the €1.2 billion estimated as paid.
The Corrib gas field was worth up to an estimated €8 billion in 2005. It and the associated fields in the Slyne/Erris basin off the North West coast are worth up to an estimated €50 billion. Yet no royalties are received from the find and development costs can be written off against tax. In 1992 corporation tax on oil and gas companies was reduced from 50% to 25% (Fiosrú, Centre for Public Inquiry, November 2005).
So we propose the following set of measures.
THE BANKS
Nationalise the banks and create a state banking system. Organise the credit system to eliminate financial speculation and to support job creation. Hedge funds, futures, credit default swaps, contracts for difference, and all financial gambling ‘products’ should be banned, as well as bankers’ bonuses for inflating paper profits.
Ireland has a extravagant financial sector, which has been used to support property speculation on a vast scale. Bail-outs, recapitalisation, and nationalisation designed to help the wealthy will cost the country billions into the future and is already reducing Ireland’s international credit rating and pushing up
the cost of lending.
Instead of propping up entities which are effectively bankrupt because of property speculation, the state should take the banks into public ownership and re-organise the goals of the financial system.
Instead of a policy of light regulation and support for speculation, a state-run credit system must be available for public projects, job creation, affordable and sustainable mortgages for first-time house buyers and for small and medium business with genuine cash flow difficulties.
A publicly controlled banking system should be administered by elected representatives of the Irish people, representatives of employees of the banking industry, and trained financial experts employed on
public sector pay scales for the benefit of ordinary people.
Full control of the banking system will also give the state access to the landbanks of insolvent developers who cannot pay back their debts. The state can then embark on a proper housing programme based on real planning, rather than the type of chaotic greed-driven development we have witnessed for over a decade.
Repossession of the homes should be prohibited for the duration of the economic crisis.
All commercial property vacant for more than six months, and vacant third and fourth houses, should be employed for the homeless, for schools and for medical, childcare and community facilities for the duration of the economic crisis.
THE CONSTRUCTION INDUSTRY
Create a State Construction Agency and embark on key infrastructural projects to create jobs and stimulate the economy.
Fourteen percent of the Irish workforce is employed in construction. This is an unusually high figure due to the distortion of the Irish economy through property speculation. A reduction of this figure must occur gradually through an extensive reskilling programme.
But the Irish economy needs a major stimulus package now and a state construction agency should be set up to overcome the crisis in the building industry.
The agency should be formed by the consolidation of those construction companies who have been effectively bankrupted by the economic crisis and by the creation of local authority direct building units.
With the creation of this state construction company, the government needs to embark on a major public works programme. Such are already evident in Japan where seven million workers were employed during their decade-long recession, and in the US where President Obama has launched a massive stimulus package to re-build US infrastructure.
People before Profit believes that a public works programme should be administered directly by this state construction company. The record of the private construction companies in ripping off public funds is appalling. Using ‘cost plus’ contracts, private builders are responsible for major overruns in state projects. The National Roads authority, for example, experienced a cost overrun of €10 billion in 2004 because of these practices.
Infrastructural development projects for a public works programme should include:
A fully integrated rail and transport network for major cities. Carbon emissions in Ireland are currently 27 percent over the Kyoto baseline 1990 levels even though its EU permitted levels were supposed to be 13 percent. The Irish government has been forced to buy carbon credits to offset this surplus which is estimated to cost €900 million over five years. As transport is one of the major causes of carbon emissions, the development of a public transport system will reduce costs in the long run.
A housing insulation programme to reduce energy usage.
National networks of state regulated, publicly owned or franchised crèches, care homes for the elderly, and of sheltered accommodation for whose who need it.
A network of primary health care centres with developed preventative medicine systems, thus reducing reliance on hospitals.
An emergency social housing and schools building programme to clear the decades-long waiting list for accommodation. The programme should include the use of vacant building stock to accommodate the homeless.
A proper re-cycling industry financed through direct taxation, particularly of wealth.
STRATEGIC INDUSTRY
Develop new strategic industries, which take Ireland’s industrial development forward.
Given the failure of private capital to invest and the calamitous decline of manufacturing to only 13 percent of the workforce, these new industries will be predominantly state led.
These new strategic industries might include:
A generic pharmaceutical industry to contribute to the global replacement of big Pharma.
Pioneering forms of technology to support a shift to preventative medicine
Support for agricultural co-operatives which have pioneered the development of organic food.
The operation of closed factories by their workforce to produce goods people really need.
TAXATION & THE PUBLIC PURSE
Increase the tax base to fund the stimulus package by drawing resources away from the Celtic Tiger elite.
The Irish tax take is the lowest in Europe with government expenditure representing 32.3 % of GDP as against 64% in Belgium or 40% in Germany.
There are now clear limits to which the Irish economy can continue to borrow. The resources for a stimulus package must therefore come from an increase in the tax base.
Over the past decade state policy led to an erosion of the tax base as the political elite followed an aggressive neo-liberal model. The principal beneficiaries were a wealthy elite who increased their income by a staggering €41 billion in the last years of the boom. These layers benefited from huge state subsidies. Property-based tax subsidies, for example, meant the loss of taxes worth €500 million in 2006.
These subsidies to the wealthy must now be clawed back to fund the stimulus package necessary for the rest of society. Measures to do so should include:
Tax all income and profits equally as sought by the Irish Congress of Trade Unions.
Emergency legislation to close the tax fugitive rule which allows the wealthy to abscond from paying taxes (There were 5,803 of them in 2008).
Remove all property based tax incentives.
Tax all income over €100,000 at a surcharge rate of 70 percent. Index that figure to the real rate of inflation so that PAYE workers stay out of that surcharge rate in future.
Eliminate all tax subsidies on private pension funds for those on incomes over €100,000. The gross cost of tax relief on private pensions is €3.2 billion which goes mostly to the top 20% of earners.
Restore capital gains tax to 40 percent.
Remove inheritance tax allowances on all large business and large farms.
Introduce a special 3% wealth levy on all income-producing assets and houses except the family home, for those earning more than twice the average industrial wage.
Remove the €100 million (in 2007) subsidy for fee-paying schools.
Charge the full price of public hospital care to the private Health insurance companies and drop tax relief (at a potential cost of €400 million) for private co-location hospitals.
Re-direct Irish taxation policy away from regressive indirect taxes by cutting VAT rates and withdrawing stealth taxes and service charges.
Move away from Ireland’s status as the Atlantic tax haven by supporting European- wide moves to increase tax on corporations.
In the immediate term, close off tax loopholes for all firms embarking on redundancy strategies to shore up profits. For example: end tax write-offs used by the bank for leasing arrangements on machinery; bring in clawbacks for depreciation allowances; eliminate tax write-offs for past losses; tax fees earned from patents in software and pharmaceuticals; treat all dividends as a form of wealth and impose punitive taxes; ban transfer pricing.
New tax rates of 48% on incomes over €70,000 per annum and 70% over €100,000. In 2008 the 29,000 people who earned more than €200,000 paid almost €4 billion in income tax on earnings of €13 billion, an effective tax rate of 30%.. An effective tax rate of 70% would have collected €9 billion from them for the public purse.
The 20% rate should be left as is and there should be no taxing of those below €20,000 per annum.
All tax shelters, which cost an estimated €84 billion in 2004 should be closed down.
Scrap the €70 million Horse and Greyhound Fund.
THE PUBLIC SECTOR
Expand and re-orient the public sector away from a corporate agenda to serving the broader society.
Private industry in Ireland is increasingly based on a service economy and is concentrated on sectors which are most affected by the recession e.g. financial services.
We need to expand the public sector through a policy of nationalisation to make up for the failures of private capitalism:
Eircom should be taken back into public ownership to facilitate the development of a broadband infrastructure.
The ESB needs expansion rather than restriction to guarantee a secure, cheap energy supply to domestic users.
Reverse the cuts on Dublin bus and Bus Eireann. Re-introduce a comprehensive CIE rail freight service. Both these measures are necessary to reduce reliance on road transport, a major contributor to Ireland’s carbon emissions.
Public Private Partnership (PPPs) cost more and have left tenants promised redevelopment high and dry. We need direct provision rather than schemes to further enrich developers.
But an expanded public sector needs to tackle serious internal problems that have grown as a result of imposing a managerialist ethos from the business world and a new bureaucratisation that replaces commitment with paper work.
Managerialism – the growth in employment of new layers of management – is a direct product of the replacement of a ‘trust ethos’ for professionals with business techniques which try to ‘benchmark’ performances of one unit against another. These techniques lead to the development of artificial quantitative measures known as ‘key performance indicators’, more paper work and, ironically, greater bureaucratisation. Number crunching becomes the measure of ‘performance’, not quality of service. The morale of public sector staff has been undermined through constant attacks on public sector efficiency; through the continual pressure to use outside contractors; and through a deliberate holding back of the creative energies of public sector staff.
This situation needs to be changed by:
Cutting the pay of managerial layers in the public sectors who receive salaries of €150,000 plus. Recruiting people with a commitment to the public sector and a value system that is motivated by an ethos of serving people.
Reducing the dense layers of management in institutions like the HSE and Fás and redeploying these staff to more useful work.
Ending the practice of managerial ‘performance bonuses’ which are modelled on the CEOs of the business world.
Ending the reliance on user stealth charges (indirect taxes) as a key mechanism for funding public services
Encouraging a social rather than a customer ethos that respects our public services and the people who provide and use them.
Building on the commitment of nurses, teachers and public servants to their jobs by creating an institutional structure with:
a) regular monthly staff meetings where workers are genuinely allowed to propose changes which deliver better quality services without threats to their own living standards;
b) the election of staff representatives to coordinating bodies made up of wider constituencies of elected representatives to oversee the workings of the public sector. Instead of staffing agencies with figures drawn from the corporate sector give the elected representatives of the staff a forty percent representation and share the remaining representation between state officials and representatives of genuine services user groups.
ENERGY
Take Ireland’s natural resources into public control and use them to build upstream industries and develop a more efficient energy system.
The World Bank has rated Ireland as one of the top seven countries that offer ‘very favourable’ terms for energy exploration tax rate has been cut to 25 percent; there is no requirement for bulk discount selling of gas to the Irish people; there are large write-offs for exploration costs. The licence for the Dunquinn Prospect was sold for a mere €11,000 plus an annual rental income of €27 a square kilometre. It is estimated, for example, that Tony O’Reilly will gain more than €1.4 billion from having control of this field and forging an alliance with Exxon Mobil.
The rights to ownership – whatever their legal basis – conflict with the needs of the Irish people for jobs and cheaper and more efficient energy, so we need to take natural resources into public ownership.
Gas and energy reserves must be immediately taken into state ownership to preserve energy security.
Surplus from this industry should be used to foster the creation of alternative energy sources such as wind, wave and biomass energy.
PUBLIC SERVICE CUTS
The savage public service cuts should be reversed immediately.
The Health and Education cuts and embargos, actual and proposed, should be dropped.
Equal access to hospital services irrespective of income and place of residence; no public hospital closures or downgrades.
A fully funded, adequately staffed and life-long Public Health Service available to all.
Investment in public hospital beds instead of co-location tax breaks and land grants to for-profit hospitals.
A primary care system, based on public service and not-for-profit principles, to allow people receive excellent care in their homes and communities.
Reduce primary school class sizes; reverse the ’special needs’ and English language cuts.
No to the re-introduction of third level fees.
There should be no social welfare cuts disguised in tougher entitlement conditions.
Restore the full subsidy to community crèches.
THE RIGHT TO WORK
An active policy to promote the right to work and to prevent a return to the scourge of unemployment.
On the basis of current policies, unemployment is set to rise to fifteen or sixteen percent in the coming year and will stay persistently high for years to come. Such levels of unemployment are totally unacceptable.
The working week needs to be cut to 35 hours while preserving existingl pay rates in order to create extra jobs.
No business declaring profits should be allowed to declare redundancies during the current economic crisis. Workers who occupy their workplaces to save jobs should be fully supported
Workers must have a first call as creditors in bankruptcy. Change the law to give workers a guarantee of their pensions.
Firms which seek to move elsewhere to benefit from cheaper labour costs, must be required to pay back all state grants and tax subsidies. These funds should be used to publicly fund forms of alternative employment for those declared redundant.
Develop a proper social economy that values work which some label as ‘unproductive’ because it does not generate profit. A social economy could employ thousands on care work, on developing community activities, on ending the isolation of the elderly and a host of other necessary human activities. Reverse the cuts in Community employment Schemes and expand these schemes that perform valuable services and help generate a real community spirit.
In the context of the departure of jobs in multinational firms, not a single public sector job loss, compulsory or voluntary, should be tolerated by the trade unions.
Large companies facing insolvency should be kept going just as the banks were kept going.
THE KNOWLEDGE ECONOMY
Create the real foundations for a ‘knowledge economy’ by investing in education and creating new openings for ‘second chance’ learners.
The Irish government claims that the long term answer to the collapse of the Celtic Tiger lies in moving up the value chain and creating a knowledge economy or a ‘smart economy’ based on innovation. These concepts are vague and are drawn from fashionable forms of development theory but the desire of the population to create a research driven scientific culture is real.
However, the current state strategy is woefully inadequate and misplaced. It has failed to invest in proper educational equipment for our young, with only 7% of second level schools having a laboratory attendant to help teenagers do science experiments. It has looked for shortcuts by seeking to attract international ‘superstar’ academics to lead research teams staffed overwhelmingly by employees who are kept on precarious roll-over contracts. Much of the research is being tailor-made to the immediate profit-driven needs of multi-national corporations.
To counteract this short-term strategy we propose the following:
Expansion of a reformed Fás to re-skill redundant workers on Pay-Related benefits Rates.
All third level institutions to ensure a target rate of twenty five percent intake from mature students to help re-skill the workforce. Universities to be re-organised to end elitist forms of governance and to open them to representatives of the people while guaranteeing academic freedom.
Abolition of fees for part-time or night courses. oppose the return of fees to the third level sector generally.
Proper long-term investment in community-based adult education and training infrastructure and programmes.
PAYE workers to be allowed build up Return to Education credits guaranteeing free access to education via FETAC and entry access to third level institutions.
Investment in science through a school laboratory programme and the creation of a full time research cohort in third level institutions and research centres.
Adoption of a policy opposing intellectual property rules which impedes the progress of science by giving ownership of knowledge to individuals who seek fees for its use.
REGULATION
Break from the policy of ‘light regulation’, which has helped deepen the economic crisis. Impose strict regulation to ensure that private business conforms of measures to alleviate the crisis.
Sean Fitzpatrick, the chair of Anglo-Irish bank was one of the key business spokespersons for the ‘principles-based’ approach to regulation. In practice, this led to a form of self-regulation of business supported by friendly regulatory agencies staffed by former corporate representatives.
We propose that there be:
Majority representation on all regulatory agencies of voluntary organisations of civil society such as the trade unions, user bodies, communities, and representatives of the poor.
A whistleblowers charter to protect workers who reveal corporate crimes and misdemeanours.
Expansion in the number of inspectors in agencies such as the Health and Safety Authority, the labour Inspectorate, and the office of Director of Corporate enforcement.
Large-scale random audits of major corporations to ensure compliance.
PENSIONS
Protect workers’ pensions from the ravages of Casino Capitalism.
Nearly half the value of Irish pension funds has been written off as a result of speculation and workers face the terrifying prospect of a loss of benefits.
We propose that there be:
A pension protection fund created through a levy on employers.
Mandatory pension contributions by all employers to their employee pension schemes.
An EU ban on investment of pensions in hedge funds and other forms of speculation.
Development of a special state bonds to receive pension investment and to repay future generation.
End the crazy investment of the National Pensions Reserve Fund in unstable markets and save millions. In the first nine months of last year alone, the fund lost €2.5 billion – more than the entire €1.7 billion the state put into it last year !
EQUALITY & MULTICULTURALISM
Develop Ireland as a genuinely egalitarian and multi-cultural society that respects human rights and values the contribution of all.
In recessions, right-wing politicians tend to focus on those least able to defend their interests. The dismantling or downgrading of independent structures put in place to strengthen and protect equality, justice and human rights for all in Ireland has been a particularly nasty feature of recessionary panic-driven government.
Among many vulnerable groups, migrant populations are particularly vulnerable to being scapegoated as the ‘cause’ of a failing economic system. Migrants are neither the cause of growing unemployment nor the main factor in the attempt to reduce wages. Problems start from state practices which restrict the human and legal rights of migrants, forcing them to seek low paying jobs.
We propose the following:
All workers to be treated equally for social welfare.
The organisation of all workers into trade unions and the legal right to union recognition.
Legislation for equal employment rights for agency workers
As a base-line step towards ending discrimination, reinstate full independence and proper funding to the Equality Authority, the Human Rights Commission, Combat Poverty Agency and the National Consultative Committee on Racism and Interculturalism.
End work permits which tie workers to a particular employer
ORGANISE THE FIGHTBACK
The trade unions allied to community organisations and campaigning groups should organise a massive movement to resist the attempt to make ordinary working people pay for the crisis. There should be no talk of ’shared pain’ for already hard pressed low and middle income people.
A so-called Social Solidarity Pact now can only be based on ICTU acceptance of public spending cuts and even a modified pension levy and standing down the movement of resistance that is only beginning in the unions.
Pay rises corresponding to the national agreement should be paid as a minimum floor. Unions and shop stewards should be able to make claims when needed. Rather than wage freezes and cuts on working people there could be price and rent controls, a ban on mark-ups above 10% and the capping of professional fees.
The unemployed need to be organised again in campaigning organisations allied to the trade unions and community groups. There should be no reduction in CE and social economy jobs or in funding to community organisations.
A EUROPE-WIDE EFFORT
Measures that seek to shift the burden back on to those who caused the crisis and that seek changes to the system behind the crisis will soon run up against the fat cat authorities of the EU. The power of multinational corporations to shift factories and ‘the race to the bottom’ can only be tackled by new international grassroot alliances. So an alternative economic strategy will require a Europe-wide effort to get Europe-wide change. Links will need to be made with campaigns, trade unions, environmentalists, global justice and political organisations seeking similar changes across Europe.
The neo-liberalism of the Lisbon Treaty will only give oxygen to the neo-liberal economics that has created the crisis.
REAL CHANGE AND A NEW LEFT ALTERNATIVE
A new left political alternative is more urgent as every day passes. The People Before Profit Alliance is aiming to build that alternative and also to reach out to others on the left. Those on the radical left and independent activists need to put aside their differences and come together in campaigns, electoral alliances and a new political movement.
The crisis is by no means confined to Ireland despite the home focus of the media. The crisis is the result of an economic system which is based on a great contradiction. There is huge dependence of people on each other across the world, through the global system of production, for the goods needed to maintain our livelihoods.
Yet control lies in the hands of privileged groups who compete, speculate, gamble with funny money and exploit the rest of us. There is only one answer to that: to struggle to take control of the means of creating wealth into the hands of all the people, so that cooperation to produce things we need replaces competition for profit.
Only then can consumption and investment be kept in line with each other so as to stop crises of overproduction. Only then will we end the absurdity of poverty in the midst of plenty, of people having to consume less because too much is produced. Only then can we put democratic planning in the place of frenzied gambling with people’s houses, jobs and debts.
April Budget: An attack on PAYE workers to support banks
The April budget is the worst attack on PAYE workers ever. It will force most people to work between three and four weeks for free to help the government subsidise the banks.
The government projection is to raise an extra €1.8 billion in taxes this year but 81 percent of this will come from PAYE workers.
Only a mere €26 million is raised through increases in Capital Gains or Capital Acquisition Tax. There are no cutbacks on special tax breaks for the pensions of company directors. There is no change is the status of tax exiles who, despite their claims to ‘patriotism’, claim to reside outside Ireland for part of the year to avoid paying taxes here.
The 440 ‘high worth’ tax fugitives who are worth an estimated €30 million each will not contribute a penny. The wealthiest of them all – Denis O Brien, who is reputedly worth €2.2 billion – will sleep easily in his bed.
The purpose of this budget is to hit income – not capital. The government claimed this was for ‘technical reasons’. But there were no ‘technical reasons’ when they rushed in legislation to impose a pension levy on public sector workers – even though it led to a change in payroll systems in the middle of the year. It was a political choice to hit PAYE workers – not a ‘technical necessity’.
The main groups who will suffer are lower and middle PAYE workers.
A single worker on a gross wage of €30,000 a year will lose €900 a year or €17.30 a week.
A single worker on €40,000, who is just over the average industrial wage, will lose €1,200 or €23 a week. Last October, this same worker lost €400 in another levy and so their total loss in levies is now €1,600. If they had the misfortune to be a worker in the public sector they were hit by an additional pension levy of €2,103 or €40 a week.
These figures refer only to the reduction in the gross wages and do not take into account the normal taxes that workers pay. Yet despite these shocking attacks, there was no levy on wealth. Companies who benefit from one of the lowest corporation profit tax rates in Europe were not even asked for a 2 percent levy on profit.
Only PAYE income was seriously hit.
AN ATTACK ON THE POOR
The overall aim of this government is to cut wages levels. To do this, it needs to reduce social welfare payments and cut the minimum wage. This budget started the attack on social welfare.
Before the budget was announced, Fianna Fail and the Greens sent out signals that they would not touch social welfare payments. But in fact, they reduced these payments by 2% through the simple device of abolishing the Christmas bonus. Pensioners, the unemployed, and those of disability will suffer from this miserable attack. Many will be forced to go to money lenders to pay for the presents and festivities over Christmas.
The government also attacked the young by halving their benefits. The aim is to force them to emigrate or work for slave wages.
Rent supplement is also being cut, forcing the poor to pay more in top up rents to private landlords.
In a deliberate attempt to stir up racism, Mary Hanafin suggested that all ‘non-nationals’ will have to use a passport to collect social welfare. She claimed that her department had carried out research which indicated higher levels of fraud.
But this research was based with interviews with ten times more migrants than the Irish unemployed- even though they only represent one fifth of the total. Despite this deliberate distortion, there was an equal level of dole ‘fraud’ for both categories.
AN ATTACK ON FAMILIES AND CHILDREN
The budget has abolished the Early Childcare Supplement of €996 per year. Like the medical cards for the over 70s, this was introduced both as an election manoeuvre by Fianna Fail and as an alternative to publicly funded crèches.
However, where more than one third of Irish parents rely on relatives for child care and where crèche costs are among the most expensive in Europe, the Early Childcare Supplement relieved huge financial stress.
The Early Childcare Supplement was paid for each child up to the age of five. This has been replaced by a free pre-school scheme for children over 3 years and three months and under 4 years and six months. Children will be only entitled to free preschool provision of two hours and 15 minutes a day, five days a week over a 50 week period. Many of the older groupings would be entering school anyway.
Working parents will have to pay for any childcare care beyond this. Moreover, no extra Montessori or pre-school teachers will be hired to look after these children. So this scheme relies entirely on private childcare facilities.
As these are not subject to state control, they can set their prices at ‘market rates’ If places are taken up by the over-3s, this will lead to an increase in costs for children below the age of three and so hurt parents even more.
In the absence of a comprehensive system of state run childcare, this is a retrograde measure which adds further misery to parents.
On top of this many parents will see their mortgage relief wiped out entirely after seven years. This is in sharp contrast to landlords and investors who will only be able to claim 75% of the rental income for tax purposes – but who can continue to claim beyond seven years.
THE BANKS ARE THE BIG WINNERS
The real purpose of the budget is to siphon money off PAYE workers to help save the banks.
Irish workers have already subsidised the banks through a special insurance guarantee scheme; a €7 billion injection into AIB and Bank of Ireland; a nationalisation to save the rich in Anglo Irish Bank. But this budget brings the biggest bonanza of all.
The total bad debts of banks are now revealed to be €90 billion. These will be taken over by the state purchasing them at prices that are above what the banks would have gained by selling them to other speculators. The state will then hold bad debts, many of which will never be repaid.
After setting up its ‘bad bank’, the state will hold a fifth of all Irish bank debts – but the fifth which has the highest mixture of toxic loans or loans that are least likely to be repaid.
Conservative estimates put the cost of subsidising the banks at €20 billion. This is the total the government has pledged to raise in tax hikes and cuts over the next five years.
Even if the state took the bad debts over at a discount price of 40%, this will still double the national debt to €108 billion. The size of this debt and the worry about a default will increase the ‘at risk’ cost of borrowing. So in the immediate future, the bail out schemes for the banks will push up the cost of Irish state borrowing to about €1 billion extra a year.
On top of that the government has agreed to guarantee bank bonds – their borrowings from international speculators – for five years. It is not known how much this additional insurance scheme will cost PAYE taxpayers.
In other words, most of the money raised in levies on PAYE workers is helping to fund the bank bail outs.
WHAT WAS REALLY NEEDED
The government should have nationalised the banks and repudiated their debts. They could have allowed the existing companies to go bankrupt and introduced emergency legislation to take over their physical and financial assets.
This would have given the state control over the huge land banks for which speculators took out loans.
Direct labour units would cut out the extra costs accrued by expensive Public Private Partnership Schemes or the cost overruns practised by private construction companies.
But this government has gone in the opposite direction. The withdrawal of €5 billion from an economy through a series of budgets since October can only deepen a recession. It is deliberately following Maggie Thatcher’s strategy of allowing unemployment to rise – in order to push wages down.
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