July Stimulus Package – Public Investment to End Neoliberalism
Today the government announce a major package to stimulate the economy. The details will be made clear later on, but it is likely that the state will borrow in the region of €7 billion to pay for grants, tax rebates and a €2 billion credit guarantee scheme for small businesses. In addition, the government will likely maintain the temporary wage subsidy scheme (TWSS) and the pandemic unemployment payment (PUP) until next spring – although they have already reduced the PUP for part time workers and are threatening to cut it for everyone in the autumn. The context of this package is the crisis caused by Covid-19. Since March, large sections of the economy have been thrown into chaos as the coronavirus rips through the economy and the wider society. More than a million workers have received the TWSS or the PUP, with thousands more losing their jobs completely. The government clearly needed to act and People Before Profit welcome the idea of a major stimulus package to revive the economy. That said, there are important weaknesses in the government strategy that need to be identified.
Major Public Investment for ‘Care and Repair’
The most important weakness in the government plan is a slavish focus on the private sector. Decades of neoliberalism meant that Ireland entered the health emergency with significant deficits in its public and social infrastructure. For example, the state was already in the midst of a major housing and healthcare crisis with hundreds of thousands of people unable to access essential medical attention or a family home. Despite this, however, the majority of the government stimulus will go to private businesses rather than any increase in public spending. With the threat of a second wave of Covid-19 imminent and with additional crises in healthcare, housing and the environment – now is the time for a major public sector recruitment drive, alongside a capital programme to repair the damage caused by neoliberalism.
For example,
- Recruiting hospital staff is essential to deal with a second wave of Covid-19; to tackle the existing waiting lists and the increase in deferrals and missed diagnoses.
- Recruiting teachers and building capacity in the education system is crucial to re-open schools safely in the autumn.
- Recruiting childcare staff is crucial if we are to allow frontline workers the capacity to fight a second wave of Covid-19.
In our Alternative Budget we showed how to raise €11.5 billion annually for investment in housing, healthcare, the environment, rural Ireland and childcare. If these policies were implemented fully they would stimulate the economy, repair the damage caused by austerity, improve the general quality of life and begin to tackle the climate emergency. For these reasons, People Before Profit advocate a major programme of public sector ‘care and repair’ to run alongside support for workers and micro businesses – the 92% of Irish companies with less than 10 employees.
Tax the Rich Instead of Borrowing from Them
The second problem is the overwhelming emphasis on private markets for the €7 billion stimulus fund. Private borrowing is being justified on the basis of low interest rates, but government debt is already high – standing at more than 100% of the country’s Gross National Income. In 2018, Ireland’s interest payments were the fourth highest in the EU and according to the Parliamentary Budget Office other sectors of the economy are similarly indebted. These are not ideal conditions to increase state borrowing, as the Minister for Finance himself admitted when warning of “bond market vigilantes” who may push up the cost of Irish borrowing if the debt pile gets too big. Instead, the state should increase its own resources through targeted measures on the wealthiest companies, the highest earners and the richest households. In our Alternative Budget for 2020, we showed how at least €8 billion could be raised through a solidarity wealth tax, a graduated increase on incomes greater than €100,000 and by increasing the PRSI contributions of profitable companies towards the European average. These figures need some revising due to the last six months, but Ireland remains an extremely wealthy country with household wealth in excess of €800 billion. Taxing internal sources would be a more prudent and equitable way of generating funds, but this will not be part of the July Stimulus.
More Targeted Measures in the Private Sector
The upcoming stimulus will likely extend the Pandemic Unemployment Payment and the Temporary Wage Subsidy Scheme as well as formalising the SME Credit Guarantee Scheme, the Pandemic Stabilisation and Recovery Fund and a series of grants, rates waivers and tax rebates. Because their objective is to return businesses to profitability, the government will make money available to any company that loses 25% of their turnover, regardless of their current profits, past savings or future earnings potential. Our vision is different. We want to protect people’s standard of living, protect jobs and secure the viability of sole traders and micro-businesses with less than 10 employees.
For this reason, we advocate the following around the government stimulus programme
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Pandemic Unemployment Payment. The PUP has been a vital support to working families. People Before Profit fully support this programme, but we advocate extending the full amount for all workers that have been furloughed, for those in caring roles and for those currently unemployed. If the government can find €42 billion to bail out banks they can find the money to increase all social welfare payments to €350 weekly and sustain them indefinitely
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The Temporary Wage Subsidy Scheme. The TWSS has also been a vital support for workers during the pandemic. But it is important to remember that the scheme is also a direct subsidy to private sector companies that often remain profitable. Workers must still do their daily tasks while their employers get up to 85% of their salary paid by the state. People Before Profit support extending these payments until at least the spring, however there are important distinctions to be drawn between micro businesses with very little access to capital and major companies such as Ryanair, Dalata and Aer Lingus with billions in cash and major sources of private finance. People Before Profit favour a model that expects profitable businesses with more than 10 employees to pay back these public subsidies once they return to profitability. This can be done by denying them the ability to write off this year’s losses against their future corporation profit taxes.
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The SME Credit Guarantee Scheme. In order to get capital to small and medium businesses, the government have ring fenced €2 billion of taxpayers’ money to insure potential losses at three private banks – AIB, Bank of Ireland and Ulster Bank. In return, they have asked SMEs to pay an extra 0.5% on their interest rate to cover the cost of this insurance by the state. Structured in this way, SMEs pay over the odds, taxpayers pick up 80% of the SME losses, while the banks walk away with all of the profits. Instead of the current SME scheme, People Before Profit favour a public bank that would be established to provide low cost loans by cutting out profiteering. We also favour a national insurance company to reduce costs for microbusinesses and an analysis of rents to make sure landlords are playing their part in the recovery. In return, we expect these businesses to pay their taxes, support workers’ rights and to pay a living wage.
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The Pandemic Stabilisation and Recovery Fund. The government have earmarked €2 billion to go to businesses with more than 250 employees or more than €50 million in turnover. This money should be redirected to the PUP, the TWSS and to micro-businesses as low-cost loans with the pro-worker conditions outlined above attached to them as conditions.
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Grants, Tax Rebates and Waivers. Irish businesses want handouts from taxpayers despite the fact that very few of them pay any form of corporation tax. The latest figures show that 65% of Irish companies paid no corporation taxes in 2018 and that a further 30% paid an average of just €7,097. People Before Profit is not against state handouts for micro-businesses that (1) increase safety for workers and the public or (2) keep people in employment. However, any money not used for health and safety must be repaid if companies return to profit.
Conclusion
Ireland is at a crossroads. We can move forward to a more caring, equal and sustainable society or backwards into the neoliberal policy making that is causing so much damage to people’s lives and the environment. Over the last few months, the government has repeatedly insisted ‘we are all in this together’, but the reality is that decades of neoliberalism have created a deeply unequal society underpinned by vast private wealth and significant public poverty. The government stimulus package will not address any of these problems as it is designed to get back to business as normal, to increase the capacity of the private sector and get back to neoliberal policy making. Our aim is very different. We want to use the crisis as a springboard into a different set of policy priorities. The current crisis is shining a light on what is important in Irish society and posing questions about how we will organise the economy in the future. In the short term, People Before Profit favour a major stimulus that hires workers for the public service, creates a living wage and protects employment through a new deal with micro-business. But over the coming period we must also move towards an entirely different way of organising society – one that puts people and the planet before profits and big business.