In every part of our country there are families facing the reality of a two-tiered, deeply unfair recovery. The way to assess this budget is not how many headlines it gets but how much it helps those who are being left behind. No matter what way you look at it the budget has failed this test.
Yesterday the government delivered the first of two election budgets. It had no social economic vision, purely a political one of electoral survival. The most leaked and most spun budget in Irish history contained no objective other than trying to dig the government out of its current deep hole. It included a collection of measures designed to try to take the edge out of many of the worst decisions of the past three years.
We have already been through three budgets and a so-called ‘Jobs Budget’ presented by this government. The same pattern keeps repeating itself. The initial hype of ministers and the cheers of Fine Gael and Labour backbenchers haveultimatelybeen replaced by an angry public reaction. This year will be no different.
Ministers have become expert at hiding the pain and hyping the positives. In many cases figures presented as generous allocations have actually represented deep service cuts or, at best, the maintenance of existing policies.
As we listen to government speeches praising themselves and talking about how much they have delivered we should remember what they said before.
Last year’s budget produced tables showing every type of family except those on over €150,000 maintaining the same disposable income. These were reproduced in all parts of the media and hailed by the government as a turning point. But people soon saw that their disposable incomes kept going down. Property tax was doubled and a raft of other charges took effect.
It was this exact day last year when the then Minister for Health issued a statement saying that the government’s generosity would mean that services would improve this year. 200,000 families were to get a GP card, mental health services were to expand and there was to be a minor, not very significant, change in medical cards.
We all know how that turned out.
The basic preparation of the annual budget has indeed been reformed, but not in the way ministers claim. It has been reformed by politicising every element of its presentation.
If you look beyond the empty rhetoric you see that the defining characteristic of this government’s fiscal policy has been a decisive shift to a more regressive approach. The incomes of low and middle-income families and the services they rely on have been targeted. As Labour rightly predicted, every little cut has hurt. Today, the core regressive and unfair approach of the government remains intact.
Yet every Budget of the last three years has been introduced with the claim that it was fair and protected vulnerable groups. We heard it again yesterday and it is as untrue this year as it has ever been. The biggest winners, by some distance, are those on well above average incomes. Where a person on €200,000 gets four times what is given to a minimum wage worker it is many things, but fair is not one of them.
This is a budget dominated by immediate political concerns. Because of this it is yet again a budget which supports no vision for the future of the services like health and education which people rely on; no vision for respecting the ability to pay when levying charges; no vision for improving the quality and number of jobs available in all parts of the country; no vision for reversing the destruction of rural services; no vision for tackling a deep and growing two-tiered economy where some are getting ahead and many are left behind.
In the first line of his speech yesterday Minister Noonan said “when the Government took office in March 2011 we set out a plan”. This is, of course, absolutely untrue. The government did nothing of the sort. There was no new budget for a year and there was no major change in any fiscal target. There was no new plan.
The only significant new policy was to end the approach of the previous government’s budgets which were tough but highly progressive. This is not an empty political charge; it has been borne out by every independent study on the budgets of the last seven years.
By making budgets more unfair, by refusing to be more responsive, and by focusing on headlines rather than the long-term, Fine Gael and Labour have directly worsened the two-tiered recovery.
There is a reason why so many communities and families are not feeling the benefit of recovery – and that is Fine Gael and Labour’s decisions in government.
The dominance of media management in the presentation of this budget has gone beyond the ridiculous. Through most of this year the “relief is on the way” headlines have appeared on an almost weekly basis – adding ‘exclusive’ to the list of words devalued by this government.
Yesterday Ministers Noonan and Howlin found the time to put out scripted political videos and tweet their selection of ties, but they became the first ever ministers to deliver a budget and not have the basic courtesy to listen to the replies of opposition speakers.
A Theachtaí Dála, seo rialtas a bhfuil sé le rá faoi go bhfuil bearna ag fás i gcónaí idir an méid a deirtear agus réaltacht a ghníomhartha.
Tá an méid ollmhór de gheallúintí briste atá ag fás go leanúnach le trí bliana anuas fós ann. An rud a chonaiceamar sa cháinaisnéis seo ná rialtas scanraithe roimh an bpobal. Go bunúsach, ní thuigeann siad conas a bheith fírinneach agus oscailte le muintir na tíre seo.
Tá an Rialtas ag iarraidh a thabhairt le fios go bhfuil siad ag laghdú cánacha ach an fhírinne ná go mbeidh an t-airgead a thógfar ar ais ón mbuiséad clainne an bhliain seo chugainn ag méadú. Tá an rialtas ag iarraidh an dubh a chur ina gheal ar an bpobal go bhfuilid ag feabhsú seirbhísí nuair a bheidh na córais sláinte, oideachais agus leasa shóisialaigh ag streachailt arís an bhliain seo chugainn.
A Cynical Budget
This is by any measure a cynical, short-term and political budget. One of the most cynical parts of it isthe claim to have delivered a fair tax system.
Key statistics which help make year-to-year comparisons have been removed from the Budget material. In their place a new infographic has been presented. It is headlined with the claim that tax and USC are highly progressive in Ireland. The entire basis of this claim is found in measures which were in law before Fine Gael and Labour came to office. In fact those parties actually voted against the very measures they are now trying to claim credit for.
In relation to the Universal Social Charge, it is new level of political cynicism to produce documents praising its progressivity when you not only voted against it; you campaigned against it in a general election.
The same type of approach is to be found in nearly every part of this budget.
A Fiscal Advisory Council was established to help direct policy, yet there is now a 100% record of its recommendations being ignored. We have even been refused the chance to debate its recommendations.
The publication of the Budget figures has been politicised in an unprecedented manner. Instead of showing the changes in services from year to year the government has presented absolute levels – and in this way presents cutbacks as if they were good news.
In a small example copied in every Department’s allocation, the Budget claims that recovery is being supported because Science Foundation Ireland will support 3,000 researchers. It removes the figures which show that it used to support 20% more.
Basic income distribution tables which were formally produced by Ministers in different governments are now absent – even though they must exist as the Department of Finance licenses the software which can produce these tables in minutes.
The day after the Budget there are many basic things we still do not know about its impact on vital supports and services – and this is exactly what the government wants. It wants to make claims but hide the contradictory evidence for as long as possible.
Unsurprisingly, ministers have also heightened their attacks on the opposition.
Ministers are entirely right when they attack Sinn Fein’s claims that everything tough can be abolished and huge resources can be available without hitting ordinary families. It’s just not credible. It’s dishonest and it’s about exploiting problems not solving them.
But to be fair to Sinn Fein, they are simply following the same model of dishonest opposition patented by Fine Gael and Labour before the last election.
For this budget and each of the last three, Fianna Fáil’s spokespeople, Deputies McGrath and Fleming have, together with colleagues, prepared and published detailed alternative proposals. Not only has everything been costed, everything has stood up to scrutiny. We have not blindly opposed government proposals, but we have led the way in exposing the hidden costs and real impacts of its many bad decisions.
We have not run away from the budgets we implemented in government. We took genuinely tough decisions which the government left in place. It has actually included these measures in international presentations about how Ireland turned itself around. In these presentations the graphs are allowed show the facts that nearly two thirds of the vital changes were brought into law by Fianna Fáil and that these changes hit the wealthiest the hardest. At home this truth is never acknowledged.
In the last three years there have been many hard choices to be made, but there have still been choices. The impact of this government’s budget decisions has been so divisive and damaging not because they had no choices, but because they made bad ones.
No amount of spin or manipulating the baselines on tables will get away from this because it is reflected in the reality of what people experience every day.
One of the many striking things in this government’s record is that it has never produced a detailed analysis of how it wants to develop the long-term capacity and growth of the economy. We have seen many short-term projections, all of which have been wrong, but no plan or vision for the longer term.
Last year there was a brief attempt to present a medium-term plan when the one inherited in March 2011 ran out. This was so unambitious and irrelevant that it is no longer referred to even by ministers.
It is amazing that in reviewing the reduction of the budget deficit the government has failed to mention any of the biggest factors. There was no mention of how the ECB’s action has reduced interest rates for every state. No mention of the technical restatement of GDP which reduced the deficit by 1.6% at a stroke. The house will remember that this restatement included putting a value of illegal activity like prostitution and including it in GDP.
This technical restatement has provided nearly €2 billion in fiscal room within agreed targets.
It appears that the last thing the government wants is an informed debate about the economy because this might get in the way of its campaign to claim credit for everything.
The return to growth has been helped by fiscal consolidation. There is no doubt about this. But fiscal consolidation is not the reason Ireland has returned to strong growth.
As the OECD has pointed out, the core growth potential of our economy is set by the skills and dedication of our people together with an infrastructure which is radically improved from twenty years ago. These did not appear overnight and to try and claim that growth has come from short-term measures is to ignore the current strength and best direction for our economy.
As the OECD has also pointed out, the specific spark for our growth has been a recovery in key markets and the major changes in EU and ECB policies.
The new international environment has been essential for growth in Ireland, so to fail to even acknowledge the threats to Ireland from a European slowdown is at best negligent. Why is ours the only government in Europe which is introducing a budget without addressing the concerns which are dominating political and economic debates in every other country?
Instead of a considered vision for the future of the economy and the society it will support – instead of an approach which learns the lessons of the past – what we have got is a series of targeted election measures designed to have an impact for no more than a year and a few months.
Just as public investment in skills and infrastructure has been central to past growth it is essential to sustained growth in the future. They were mentioned in the Budget speeches without any major initiative being announced.
We cannot understand how the government keeps refusing to publish a development plan which sets out specific objectives for future investment. They are becoming ever-more reliant on projects which address immediate political needs or were planned years ago.
The small increase in public investment announced yesterday will provide only a small stimulus to the economy and does not represent any strategic commitment. €210 million in an economy the size of Ireland’s is not a significant stimulus.
A larger and more ambitious public investment programme is required and it is possible. The most important part of this is that it would create long-term state assets which raise the growth capacity of the economy. It’s not about a short-term fix; it’s about doing something permanent to address the needs of our country.
What we got yesterday was the reannouncement of many projects which were happening anyway and new ones part-funded by allowed existing infrastructure to decay. For example, already announced projects to cater for increased school enrolments are to proceed – and this is welcome – but this is part-funded by cutting funding for minor works to maintain existing buildings.
Last year the EU agreed a series of measures to make capital funding available to member states. The Taoiseach told us it would bring billions to Ireland. It hasn’t. The refusal of the government to plan for new projects or commit to co-funding means that we are missing major opportunities.
The failure to present any analysis of long-term growth or to even plan, let alone fund, a real public investment plan is a gapping economic hole. In this case the road Minister Noonan has decided to go down is one where he has refused to bring a map.
During the recent Labour leadership election it was said that pushing Deputy Gilmore out was an essential first step to moving the government to the left. There has certainly been a move to the left in the rhetoric used to sell yesterday’s tax changes. The hard substance of these changes is nothing but a continued confirmation of the dominance of Fine Gael’s core right-wing beliefs.
Yet again the largest benefit has been given to the highest income earners. The much-trailed ‘claw-backs’ merely altered this slightly. A person on €200,000 will gain four times as much as a person on the minimum wage. You can dress that up whatever way you want but fairness it is not.
And of course for most people what they will gain from the Budget will be set against the new water charge they will begin paying in January.
Over the last three years the Tánaiste managed the incredible task of talking like a left-wing dissident in her party while implementing an almost Thatcherite welfare policy. She cut €2 billion form the weakest sections of society and told people to simply get off the couch and look after themselves.
She cut support for funeral costs and then talked about how high funeral costs were in Dublin – as if people could shop around for better value.
The overwhelming bulk of cuts – all of which Labour promised to oppose when it was campaigning – remain fully in place.
Child benefit remains €5 below the level which both Labour and Fine Gael said they would maintain. Because of the failure to give a proper credible free allowance for water charges the increase in child benefit could literally disappear as fast as a few extra flushes of the toilet each week.
The promise to protect the most vulnerable remains broken and Labour’s leadership change has not delivered any significant change in policy on vital social supports.
Many grand promises were made about childcare during and after the last election. We proposed a series on initiatives to significantly help families with childcare needs. Unfortunately the government has chosen to do the minimum possible and has pushed childcare off for another year.
Employment & Business Growth
A feature of the two-tiered recovery has been the absence of high-quality and secure employment for many. The budget does not set out a vision for tackling this.
We have always been fully supportive of inwards investment. Inward investment remained strong in the toughest parts of the recession. The areas identified as national strategic priorities a decade ago have delivered well for us, as has the investment in research which we made.
The government has provided as little detail as possible on the announced changes to corporate tax rules. We are extremely concerned that the government has moved so quickly to abandon its position that current rules are in order and that changes should only take place on a coordinated international basis.
Why have we decided to move without linking the changes to similar ones in the Netherlands and other countries which has nearly identical rules? Why has this change not been linked to a demand that the impact of bank-related be removed? Has the government formally abandoned a demand which Ministers Noonan and Howlin once said could be worth tens of billions to Ireland?
We must continue to attract and support inward investment. The failure to produce an impact analysis of the changes is at best manipulation of public opinion and at worst suggests that the government has taken a risky and ill-thought out step.
Equally we must start taking seriously the needs of small and medium sized businesses but the sector has largely been ignored in the Budget.
They employ hundreds of thousands of people and they are the foundation of the domestic economy. They have suffered deeply in recent years and they need to be a priority.
There are some changes which will benefit them, but Minister Noonan basically confirmed last night that the policy is to hope that the rising tide will eventually get around to lifting the SME boat.
The majority SMEs are run by people who are self-employed for tax purposes. Important changes which would help them, and which are affordable, have been ignored. So too has the critical issue of financing.
Legacy debt in the SME sector remains a permanent drag on them and the domestic economy. A MABS-style service for SMEs is needed immediately, as is a dedicated fund for helping SMEs.
Housing is an area where the government has finally woken up to a crisis which it has allowed develop. The rental market has been made unsustainable and core supply has been neglected. Ministers took an approach to NAMA which focused on selling off properties as quickly as possible and ignored any wider social needs.
Housing has had a Labour minister at cabinet for three and a half years but it is only that a housing plan has been published. Incredibly it is one which may directly feed a new housing bubble.
Completely abolishing the Windfall Property Tax risks a return to destructive land speculation. Combined with the halving of Part V to 10% of social housing provision; the mechanisms for providing social benefit from future development has been rolled back by the Government. All the same time, there are no measures for dealing with the problems faced by renters who will be excluded from the housing market by new central bank demands on savings.
Many of the problems faced by renters are the direct cause of the Tánaiste’s policy on restricting rent supplement. The hardest hit areas remain the major urban centres and this failure means that the most acute area for the housing crisis will not be addressed.
Minister Kelly has been very assertive in recent weeks in talking about housing in the media, while at the same time trying to keep his head down on the growing public anger about Irish Water and its crumbling justification.
When this Fine Gael idea was announced the core rationale was that it would be incredibly efficient and charges would be simple. Yesterday the government tried a last-minute rescue on the worst impact of the charges. It has failed.
It remains a highly regressive charge which does not fully respect the citizen’s ability pay – and it is now one of the most complicated charges ever introduced. Once this budget is enacted there will be four separate ways to assess the charges. Once it is collected it will be used to fund a gold-plated bureaucracy, paying executive bonuses and incurring costs which even the former Minister who set it up now admits are simply unjustifiable.
This is the first Budget since a reshuffle in which the Taoiseach’s main objective was to stop the complete implosion of the health system – or at least to stop the health system damaging the government’s electoral chances. Even though he and his colleagues cheered every step of Minister Reilly’s work in Health he was made the scapegoat and a new minister was installed. This was to be the budget where he delivered a complete change in policy. It has not happened.
The spin about the budget is that it has given the Health system an increase in funding and services will be improved. Just as last year’s spin was false so too this year’s will be exposed.
The first thing which has to be said is that there is in fact no overspend in the HSE. The government ordered a certain level of services but refused to acknowledge the cost. When the bill came they expressed surprise and condemned the HSE management. It has been a shoddy spectacle.
For next year we are told that spending will be at this year’s level. If this turns out to be true, and we may have to wait months to find out because of the way ministers now interfere in HSE statements, then what it will do is to maintain this year’s rate of decline.
Maintaining funding will not stabilise services because waiting lists are rising and the government itself says that €200 million is needed to deal with demographic changes.
Minister Varadkar’s supposed negotiating success has another large hole in it because it is based on him finding the money himself. The budget documentation says that there will be €130 million in savings and €330 million in new incomes. This translates into other service cuts and increased charges.
Everybody here knows how the urgent the needs are in the field of mental health. Yesterday we were told that relief is on the way. Unfortunately the details show that the €15 million taken from the mental health budget this year will not be restored.
This budget shows no commitment to tackling the growing crisis in the health sector. It doubles-down on the already discredited reform programme which is multiplying problems caused by low funding. It repromises initiatives which were supposed to be in place two years ago.
All the evidence is that 2015 will be another bad year for the health system.
With growing evidence of a major outbreak of the most damaging drugs in provincial centres, the refusal to act now rather than let the crisis develop will have deeply damaging long-term effects.
One of the many pre-budget leaks talked about how a major development was planned for school staffing. Instead of this what has been announced is that existing staffing ratios will be left in place. The maintenance of current policy, once something which was left to technical documents has now become a central part of budget spin.
In our alternative budget proposal we showed how the most damaging parts of the government’s education policy could be undone next year. Instead of maintaining current levels of overcrowding, there was an opportunity to cut the pupil teacher ratio and restore a desperately needed careers and guidance service.
During the summer there were many reports about how the government was going to give a new impetus to rural affairs. Yesterday we discovered that it was another broken promise.
The cumulative impact of cuts targeted at rural schools, hospitals, Gardaí and other basic public services has had a deep impact. In many places the fabric of the local community has been threatened.
In 2011 rural affairs was removed from the cabinet. It has been followed by three years of a difficult situation for rural communities being made much worse by government decisions.
It would have cost €6 million to reverse the damage to small rural schools, but it was not a priority. It would have cost a fraction of the overall budget changes to restore proper rural policing, but again it was not a priority. Rural towns need support, and again a little could have gone a long way.
The failure to invest properly in the Rural Social Scheme and putting off of national funding important farm income supports means that all farm families remain at the mercy of a mal-functioning market which is stacked against producers.
This budget has been heralded by the government as a turning point even more than the government heralded last year’s budget as a turning point.
Because of a combination of factors the government had the opportunity open to undo some of its worst decisions and shape a recovery which could be felt by all.
It had the opportunity to set out a vision for our economy and society and begin working to achieve it.
It had the opportunity to make classes smaller, reduce waiting lists, invest in infrastructure and support rural communities.
It had the opportunity to show a commitment to the future development of our public services.
Instead it decided to look to the short-term. In the first of two election budgets it has spread money around in a way that helps some but leaves many deep problems untouched.
Today the government continues to roll out its pre-packaged messages and announcements just as it did last year. But at a critical moment in defining the future of our economy, our public services and our support for families and communities the government has chosen the path of putting politics first. Because if this it will come to realise sooner rather than later that the Irish people will not fall for the spin and complacency which Fine Gael and Labour are today so proud of.