Budget 2012 is a Budget of Choices


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This is an article by Patrick Nulty, the recently elected Labour TD which was published yesterday in the Mail on Sunday.

Even though we are stuck with the EU-IMF bail-out, the Minister for Finance has made it clear that the Government is free to choose between different tax, spending and investment policies. We may have to reach certain targets, but we are free to choose the path.

It is important, therefore, to choose in a way that promotes growth, job creation and living standards.

What a government chooses also reflects its social values. For instance, a government can choose to implement a tax measure that penalises low and average-income earners (such as VAT increases). Or it can choose to reduce tax reliefs that primarily benefit those on high incomes (such as property reliefs). The Troika doesn’t care which measure is used – but it should matter to us.

There is certainly one choice we should make – and the sooner the better. We should stop pursuing Fianna Fáil’s failed austerity programme. Austerity will not grow our economy, it will not create jobs, it will not increase living standards – and, therefore, it will not repair our broken public finances.

Imagine if this happened in your own home… your income is cut, you lose your job, your living standards fall: how are you going to repay your debts? Your debt will rise. Unfortunately, in hundreds of thousands of homes throughout the country, people don’t have to imagine this happening. It already has. The same logic holds for government finances.

That’s why, after three years of horrendous spending cuts and tax increases on low and average- income earners, the deficit still remains almost untouched, while our national debt levels are still rising.

There were economists and commentators up and down the country who warned the last government that if they cut public spending and hit people with tax rises, it would result in low growth, high unemployment and high debt.

They have been proven right.

Those who argued for cuts, cuts, cuts have been proven wrong, wrong, wrong.

Cutting public services, imposing more taxes on ordinary households, cutting investment into the economy – this is just continuing Fianna Fáil’s failed strategy. It will continue to fail – and continue to drive people into deeper despair.

So if we need to grow the economy, create jobs and raise people’s living standards, how do we this? Is there an alternative? Can the Government make better choices than the last one?

Yes. A number of bodies such as Tasc, Social Justice Ireland and Ictu have put forward well researched and well thought-out proposals that would be far more effective in promoting growth and reducing the deficit.

First, Budget 2012 should be driven by increasing taxation on high-income groups. These three organisations propose a series of measures that can raise billions from the wealthy – much more than the Government needs next year to meet its targets.

Savings made through public sector reform can now be reinvested back into improving public services and the living standards of pensioners, the unemployed and the low-paid.

And the great advantage of this approach is that those on high incomes don’t reduce their spending by any significant amount, so consumer spending – and the jobs depending on that spending – is maintained. This is a choice the Government can make – ensuring that those who can afford it shoulder the burden of this crisis.

Second, with taxes on high- income groups making up the entire budget, there is no need to cut overall spending. This doesn’t mean we should tolerate waste and bad practices in the public sector.

But what it does mean is that savings made through public sector reform can now be reinvested back into improving public services and the living standards of pensioners, the unemployed and the low-paid.

For instance, if we can make savings of €500m in greater public sector efficiencies, this can be used to re-open hospital wards, increase the number of special needs assistants, enhance local services and restore cuts to social protection payments. And since this is done out of savings, there is no extra cost to taxpayers.

Third, we need to increase our investment levels. Investment increases growth, employment and productivity in the economy. How can we pay for this? The Government has admitted that it holds over €15bn in cash and assets – in the National Pensions Reserve Fund and bank accounts.

Lets make it clear to the The European Central Bank – the Irish people did not create these debts.

Let’s start using that money to repair the leaks in our schools’ roofs and in our water system; let’s start retrofitting houses so that people can be warmer and save money at the same time; let’s start rolling out a state-of-the-art broadband system; and let’s start housing the homeless and those on waiting lists.

This investment will generate income in the future as the economy’s productivity improves.

It’s win-win – jobs today, growth tomorrow.

And there’s one more choice we can make. We can stop paying for Anglo Irish Bank debts. Over the next 20 years, the Irish people are expected to pay over €80bn in Anglo debts and interest payments.

That’s over €23,000 for every adult. As we are cutting public services and the incomes of the most vulnerable, we will be paying out an average of €4bn a year for Anglo’s debts.  There is only one word for this: insanity.

As these payments are not part of the EU-IMF deal, we should sit down with the ECB and our own Central Bank and make it clear – the Irish people did not create these debts and, therefore, are not responsible for them.

We were elected to ensure that only those who can afford it should carry the burden, to ensure that public services were reformed and enhanced, that low-income groups – whether in work, unemployed or living on pensions – were protected and supported.

We should stay seated at that table until the Government hammers out an acceptable deal with the ECB. And until that deal is struck we should suspend promissory note payments and stop paying unsecured bondholders. No government in the EU would accept this burden; there is no reason why ours should.

In the by-election I campaigned on these and similar policies. These are the policies that the Labour Party campaigned on in the last election. That is why I was elected, along with all the other Labour TDs.

We were elected to ensure that only those who can afford it should carry the burden, to ensure that public services were reformed and enhanced, that low-income groups – whether in work, unemployed or living on pensions – were protected and supported.

These are the values and principles that the Labour Party brings to the Government.

As I canvassed homes in Corduff, Castleknock, Mulhuddart, Swords and other areas last month, the stark reality of austerity was clear to see.

Families who have seen incomes fall due to job losses, wage reductions, the Universal Social Charge and benefit cuts are not in a better position to pay back debts – if anything, the debts increase. The same thing holds for Government finances.

Now is the time for Labour to draw upon its supporters’ experience in the real, rather than the speculative, economy and demand the introduction of policies that are fair – and put people back to work.

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Donagh is the editor of Irish Left Review. Contact Donagh through email: dublinopinionAtgmail.com

2 Responses

  1. CMK

    November 29, 2011 1:02 pm

    Nice article, Patrick. Now, you’re saying this budget is one of choices, to tax or to cut etc. etc. So, Patrick, you have a choice too. Are you going to vote for the budget? Or are you going to maintain your utterly bankrupt Jesuitical hair-splitting of opposing government policy in principle,and penning articles like this, but voting for it nonetheless. Either take a stand, vote against the budget, be expelled from the parliamentary Labour Party or shut the f**k up, draw your salary and hope for a junior ministry in a couple of years time. Things are too serious to have a poser speaking out of both sides of his mouth. I repeat: vote against the budget or keep your mouth shut. No-one needs to hear your opinions. There are better informed and more sincere critics of government policy not a crocodile tear blubbing Labour TD who won’t take a stand. Vote against the budget and then come back with an article, you might be taken a bit more seriously.

  2. LeftAtTheCross

    November 29, 2011 8:06 pm

    That’s it entirely, opposition on principle is not enough, opposition in practice is what is important now.