The €2 Billion Start

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unitelogobigToday, Unite has published its 2016 pre-budget submission.  You can read the full submission here and the summary here.  In short, it calls for a €4.8 billion budget package comprising a €1.9 billion increase in expenditure on public services and social protection, a €550 million increase in public investment and focused tax reductions on the low paid (e.g. reform of the PRSI step-effect, refundable tax credits and indexation) worth €220 million.  This is to be paid for by tax increases on wealth and capital, along with increases in the social wage (employers’ PRSI) and the fiscal space allowed under the EU fiscal rules.

However, I want to focus on one particular proposal in the submission:  the temporary, once-off investment programme of €2 billion for social housing; in particular, focusing on the homeless and households with special needs.

This has been discussed previously on this blog.  Back in April 2014 I suggested that instead of the Government spending €7.1 billion on paying down debt, it should invest half of this into a special once-off investment programme in social housing.  The actual turnout for 2014 was €5 billion used to pay down debt.  At that time I wrote:

‘Let’s start with the conclusion: if by this time next year if there are people still homeless, it’s because the Government made a policy choice.  And the policy choice was to tolerate homelessness.’

Back in May 2014 Fr. Peter McVerry warned of a ‘tsunami of homelessness’:

‘In all the years I have been working with homeless people; it has never been so bad. We are, even I would say, beyond crisis at this stage.’

16 months later the situation has become worse.

A comprehensive housing programme, one that addresses the myriad of issues such as homelessness, local authority waiting lists, rising rents and limited supply, house prices, planning, land prices – this is a big, big subject and is not amenable to sound-bite policies.  It will require joined-up strategies, long-term thinking and the intellectual courage to go beyond the ‘housing as just another market good’ thinking that dominates policy-making.

However, with winter coming on and more people becoming homeless, sleeping rough and / or living in wholly inadequate accommodation, we need short-term stop-gap remedies.  That’s the thinking behind Unite’s proposal for a €2 billion once-off investment programme – to address this immediate crisis.

There are any number of options open to the Government in using this €2 billion:  fast-tracking refurbishment, acquisitions of short-term tenancies, conversion of idle buildings, extensions of current emergency accommodation, etc.  The key is that accommodation can be brought on stream quickly and efficiently.  One hopes that it is not too late.

Where would the €2 billion come from?  The Government has already identified the source in its Spring Statement published back in April of this year.  They expect to get back €2 billion of bailout money from AIB and PTSB (technically, they are the redemption of contingent convertible capital notes).  The Government intends to pay down debt with this money.  So the proposal is to use this money, instead, on providing accommodation for the current and anticipated homeless.

If this money was used for the homeless instead of debt-reduction, what would this mean for overall debt levels?  Very little; fractional. The Government expects the debt to GDP ratio to be 100.3 percent of GDP in 2016.  Using the AIB and PTSB payback for an emergency housing programme would be equivalent to a headline 1 percent of GDP and less when the economic impact is factored in (higher employment, rising tax revenue, falling unemployment costs).  So for less than 1 percent of debt we could ensure people have a place to stay this winter.

Would this violate the EU fiscal rules?  Highly unlikely.  The EU rules are concerned with reducing the structural deficit.  As this proposal is for a once-off expenditure, this wouldn’t impact on the downward trajectory of the structural deficit.  In any event, the EU rules allow for expenditure on ‘emergencies’, without specifying what constitutes an emergency.  Therefore, to underscore both the once-off and urgent nature of this expenditure the Oireachtas could declare a ‘homeless emergency’.  There should be no issue with that – this declaration would only describe what is actually happening.

But let’s not get hung-up on deficits and debt-GDP ratios.  When it came to bailing out banks, emergency payments were made.   Now we need to bailout people’s urgent housing needs.  Logically, that also requires an emergency payment.  The Government could start that process next week, leveraging the anticipated payments in 2016 (indeed, there are media reports that AIB may be repaying €3.5 billion to the state in preference shares; there is certainly no issue about resource-availability to the Government).

The €2 billion is not intended as a long-term solution.  It is intended to address an urgent short-term issue.  However, it would bring some relief and provide the Government with space to draw up more long-term ambitious plans to not only permanently eliminate homelessness but address the issues of waiting lists, rents, housing affordability, etc.

One thing is certain – we have the money to do it.  If the Government doesn’t, it will, as I wrote last year, be a policy choice.

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