Posts By Michael Taft

risingineq

The Very Real Cost of Rising Inequality

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Inequality is one of those concepts that for many people remain somewhat abstract and amorphous.  There are few that are against equality, but it has difficult gaining traction in the popular debate.  When you’re trapped in deprivation, debt, or low-pay then income or more hours of work becomes the measure of the solution.  Equality, however framed, remains detached.

It shouldn’t be.  For all of us are paying a real Euro-and-cents cost for rising inequality.  Inequality has many facets – economic, social, cultural, gender, sexual.  Let’s just look at one aspect – rising income inequality with the assistance of a valuable database:  the World Top Incomes Database.

Equality 1

In 1977, the top 10 percent income group’s share of national income was 27 percent.  By 2009 this had increased to 36 percent – a rise of 9 percentage points.  Two years into the recession saw a drop in this share as income from the speculative bubble fell faster than the national average.  However, don’t worry – Eurostat shows that since 2009 it has started rising again.  While the data isn’t directly comparable (the World Incomes Database is based on tax revenue data, while Eurostat which is based on a survey of households shows little medium-term movement), an indicative number would be that it has risen to 37 percent in 2012.

Another way of looking at this is that the lowest 90 percent saw their share of national income fall from 72.7 percent in 1977 to 63 percent in 2012 (using the indicative number).

Again, this graph is abstract.   So let’s play a little game.  What would be the impact on households if the share of the lower 90 percent had remained the same; that is, how much more money would the lower 90 percent have today if their share of the income was the same as in 1977?

The bottom 90 percent of households would have €10.975 billion more.  Nearly €11 billion spread out among approximately 1.5 million households.

  • For each household, this would mean approximately €7,400 more income

Of course, there would be differences given the variations in household types (single, couple with children, single parents, etc.).  And this is just a suggestive estimate.  But imagine the improvement in their fortune if a low-paid couple (on €30,000 per year) were receiving an extra €140 or more per week.  And compare this to the €4 weekly increase from the tax cuts, which won’t even keep pace with inflation.

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If This Isn’t an Emergency, What is?

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If five percent of the population suddenly fell ill to an unknown disease a national emergency would be called.  Government agencies and health professionals would be brought together under the direction of an emergency cabinet committee to first diagnose the disease, come up with a cure and then deliver it.

Well, we have such a disease – and it affects not five percent but 30 percent of the population. It is not unknown –   It is the economic and social disease of deprivation.  The CSO released the 2013 Survey of Income and Living Conditions and the data on deprivation is truly alarming.

Deprivation 1There are now 1.4 million who are categorised by the CSO as living in deprivation.  There are well over 400,000 children living in households suffering from multiple deprivation experiences.  Since the start of the crisis, these numbers have more than doubled. The disease is spreading.

You are classified as ‘deprived’ if you unable to afford or experience two of the following items:

 

Two pairs of strong shoes * A warm waterproof overcoat * Buy new (not second-hand) clothes * Eat meat with meat, chicken, fish (or vegetarian equivalent) every second day * Have a roast joint or its equivalent once a week * Had to go without heating during the last year through lack of money * Keep the home adequately warm * Buy presents for family or friends at least once a year * Replace any worn out furniture * Have family or friends for a drink or meal once a month * Have a morning, afternoon or evening out in the last fortnight for entertainment

This is not a welfare phenomenon.  Over 22 percent of all those experiencing deprivation are actually in the working force – well over 300,000.

Deprivation 2

The number of people experiencing in-work deprivation has more than trebled since 2008 – more than one-in-five working today.  Over a third of one-income households are in deprivation.  But a substantial number of two-income households also find their living standards marred – one-in-six.

Clearly, having a job is not necessarily a pathway out of poverty.

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elderly

The New Fiscal Enemy Within: The Elderly

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“Old people don’t need companionship. They need to be isolated and studied so that it can be determined what nutrients they have that might be extracted for our personal use.”

- Homer Simpson

The Irish Times published the highlights of a paper produced by the Department of Public Expenditure and Reform (DEPR) purporting to show the latest crisis awaiting us – the crisis of unsustainable public pensions.  DEPR produced some numbers:

  • The number of people aged 65 and over is projected to increase from 570,000 in 2013 to 855,000 in 2026.
  • Spending on the contributory and non-contributory State pension schemes already account for €4.93 billion, or 25 per cent, of the total cost of social protection services.
  • The State could have to provide annual increases in funding of nearly €200 million up to 2026 just to keep pace with the growing elderly demographic.  This means a 50 percent increase in spending on state pensions by 2026

These look like truly scarifying numbers – 50 percent increase in the number of pensioners and 50 percent increase in pension costs.   No wonder the newspaper headline read:

‘Cuts to state pensions “must be considered”

What can we do, short of setting up a kind of Hunger Game for the elderly?  Thankfully, DEPR has some ideas:

  • Cut the weekly pension by €8.50 per week
  • Scrap the €10 weekly top-up for people over the age of 80
  • Bring forward the scheduled dates for raising State pension eligibility
  • Abolish the free TV licence.
  • Means test fuel allowance for new recipients of the Department of Social Protection’s household package of benefits.
  • Abolish free travel passes for spouses and companions of the elderly

Or we could take another route:  increase PRSI contributions and/or cut back on expenditure in other areas (health, education, etc.).  Thankfully, DEPR is on top of things, laying out the painful but necessary reforms (i.e. cuts) necessary to sustain our public pension system.

What does all this add up to?  Rubbish.

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Syriza Comes to Ireland’s (and the Eurozone’s) Rescue

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Everyone in Ireland, regardless of their political orientation or party-political affiliation, should be hoping Syriza wins the upcoming Greek election and forms the next government. Why?  Because their proposals on public debt would be a major boost to Ireland and the Eurozone as a whole.   The headline to Denis Staunton’s excellent article said it best:

‘Why Ireland should support Greek plan to write down euro-zone public debt’

Leave aside your ideological predispositions.  Even Wolfgang Munchau of the Financial Times believes Syriza and Spain’s Podemos are the only parties talking sense about European debt.

Syriza is proposing a European Debt Conference – similar to the one held for Germany after World War II.  And the broad proposals they will bring to the Conference are based on this this paper written by Dimitris P. Sotiropoulos, Yiannis Milios and Spyros Lapatsiora.  In short:

  • The European Central Bank (ECB) acquires a significant part of the outstanding sovereign debt of the Eurozone countries – reducing national debt levels to 50 percent of GDP.
  • These bonds would be converted to zero coupon bonds with a 1 percent discount
  • The countries will buy back the debt when the ratio of those bonds falls to 20 percent of GDP

The impact for Ireland would be dramatic.  In one fell swoop our public debt would be more than halved – reduced from 108 percent of GDP to 50 percent.  This would cut interest payments by approximately half, saving €3.7 billion.  Imagine what we could do with that €3.7 billion every year – increase investment, improve public services, and boost social protection income (even cut taxes if that is your political perspective).  Whatever, this money would constitute a major stimulus programme for Ireland.

It would have a similar effect throughout the Eurozone.  All countries would benefit (with the exception of Estonia, Latvia and Luxembourg; their debt is already below 50 percent).  Over €4 trillion of Eurozone debt would be removed.  With the massive interest payment reductions, the Eurozone would receive a similar stimulus boost.  This would be the best way to escape the looming deflationary crisis.

The authors also hold out the prospect of a further boost, by presenting a slightly different alternative scenario to the one above:  interest payments would be suspended over the first five years and rolled up into the zero coupon bonds. Giving Ireland and the Eurozone a free pass on interest payments over the next five years would have an even more stimulatory and economically-galvanising effect.

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makingendsmeet

The Era of Making Ends Meet

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2015 will be all about making ends meet; or rather, not making ends meet.  Gone are the drama days of the last few years – NAMA, bondholder debt, collapsing employment and output, bailouts and Troikas (unless the EU decision-makers are determined to accelerate the European deflationary spiral; then we could have drama aplenty).  It’s not that these issues have gone away – but they are now embedded, hidden, in what can be called a ‘new normal’.  And this means we are entering into an excruciating and potentially protracted period of grinding things out; day by day.

So many commentators talk about the economy in recovery but ‘people not feeling it yet’.  I suggest there is a better way of looking at it.  The boulder has fallen down the hill – that’s what the gravity of recession will do; that, and austerity pushing it down faster.  Now people are pushing the boulder back uphill – it’s a big boulder and it’s a big hill.  And people are supposed to be ‘feeling it’?  They are supposed to be grateful?  Hmm.

We have discussed other indicators – deprivation, food poverty.  These are harsh benchmarks that affect a significant proportion of the population.  But there is another indicator, referred to as ‘soft’, which gives a more representative picture of this phase we are entering:  making ends meet.  It is called soft because it is not calculated on the basis of percentages of the median wage (relative poverty) or even a survey of people’s concrete experience (deprivation indicators).  It is based on asking people ‘are you having difficulty making ends meet’ – a highly subjective question that doesn’t define ‘difficulty’ or ‘ends’.  It is left to people to determine that.

The EU asks such a question in the annual Survey of Income Living Conditions.  They break it down by degrees:

  • Households making ends meet with great difficulty
  • Households making ends meet with difficulty
  • Households making ends meet with some difficulty

This is the result:

Making Ends Meet 1

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A Mini-Tax-Cutting Budget? Abolish the USC? Can It Get Any Worse?

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Christmas comes early for employers, high-income groups and right-wing ideologues.  The Sunday Times (behind a paywall) reports on demands from Government backbenchers to introduce a mini-budget in an attempt to salvage the Government’s fortunes.  And what would be the centre-piece of such an initiative?  The race is on between Fine Gael and Labour backbenchers over who can make the most outrageous tax cutting promises, including the notion that the Universal Social Charge (USC) be abolished.    Ho-ho-ho.

Let’s first deal with the idea of abolishing the USC.  Who would be the greatest beneficiary?

USC 1

As seen, someone on the minimum wage would get a boost of 2.2 percent in net take-home pay from the abolition of USC.  This rises to over 10 percent for those on €100,000 and it gets even more lucrative for those on very high incomes.  Abolishing the USC would be highly regressive – benefitting those on the highest incomes the most.

But this doesn’t tell the full story as the above refers to headline tax rates.  High income groups can hire an army of accountants to avoid paying large amounts of income tax, inheritance and gift taxes, capital gains tax – exploiting a huge array of reliefs and allowances and other legal tax reduction strategies.  However, that army is defeated when it comes to USC.  There is no getting out of paying it.  So, if anything the benefit to high income groups would be disproportionately higher than the chart above.

Let’s put this in Euros and cents.

USC 2

Someone on the minimum wage would get €7 per week; at the higher end they would get over €350 per week (that’s right, a €16,000 annual tax cut).  From my own, admittedly back-of-the-excel-sheet, calculation, over 46 percent of USC revenue comes from those earning €70,000 or above.  Less than 10 percent of USC revenue comes from those earning less than €30,000.  Guess who wins out in that tax-cut auction.

To be fair, some proponents of abolishing the USC claim that alternative means of getting revenue from high income groups can be introduced.  This is simply not realistic.  USC collects over €4 billion per year.  That’s over one-third of what income tax takes in.  How could you make it up?

  • Increase the top rate of tax from 40 percent to 57 percent.  That would do the trick (though as mentioned above, those who can afford accountants would be able to get around the high marginal tax rates).
  • Abolish tax relief on pension contributions, health insurance and mortgage interest.  However this would only bring in €1.5 billion – or 37 percent of the USC loss.
  • Abolish PAYE tax relief.  This would raise €2.8 billion – still, far short of the USC loss.  And every worker above the income tax threshold would lose €1,650, wiping out gains for all low and average income earners.
  • Increase VAT to nearly 30 percent.

There are other measures such as a wealth tax which the Nevin Economic Research Institute estimates could raise €250 and €500 million.  You could toss in increases on capital income (inheritance, capital gains) but there’s a limit.  Of course, there’s a real loss here.  Instead of using the additional revenue from wealth and capital taxes to invest in social housing, education and health, we would only be clawing back a tax break that we gave to higher earners in the first place.

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Don’t Mind What’s Going On – Feel The Spin

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You’d think there would be concern among commentators about the latest GDP numbers produced by the CSO.  After all, a quarterly growth of 0.1 percent is not that far from negative growth.  Or that consumer spending has fallen in the last two quarters (an interesting contrast to all those feel good anecdotes about increased consumer confidence).  Or that the explosion in export growth doesn’t quite tally with global trends or even other numbers produced by the CSO.

But there’s a class of commentators who are determined to cheerlead regardless. Michael Hennigan gives a flavour of these – with economists talking up the ‘fastest growing economy’ in the EU.  Sure, why not.

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dec9

Tweedledum Tax Cuts vs. Tweedledee Tax Cuts

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Apparently the Government, if not having an outright row, is at least engaging in a ‘strong debate and discussion’.  What’s it about?

  • The introduction of a Living Wage and associated reforms such as abolition of zero-hour contracts and minimum wage increase?
  • A comprehensive affordable childcare network – with savings of €400 to €500 per month for families with young children?
  • Universal access to free community health services – such as GP visits, outpatient services and heavily-subsidised prescription medicine?
  • Maybe a debt-relief programme – not only for households in arrears, but also for those caught in the terrible debt spiral of money-lenders and their interest rates which can exceed 100 percent?
  • Or a guarantee of an adequate income and home-help services for all people in retirement?  Or additional supports, such as a ‘cost-of-disability’ supplement for disabled women and men – of whom 50 percent are officially described as living in material deprivation?
  • Or a major drive to reduce rents in the private rented sector – through rent freezes combined with a new public enterprise drive to directly deliver quality, affordable rental units to private tenants?
  • Is the row about any of these or something similar (like eliminating all education-related costs such as school-books, transport, ‘voluntary fees’)?

No.

It is about which tax cuts the Government should pursue.  Good grief.

Let’s call it for what this is.  First, this is a deeply disingenuous debate – ‘my-tax-cuts-are-better-than your tax cuts’.  No Government Minister, TD, or candidate should be allowed to come to the doorstep, seeking votes by claiming ‘we can cut your taxes and still deliver European-style living standards – income supports, public services, economic and social investment’.  To make such claims is either hypocritical or completely indifferent to how the real world operates.

Living Standards 1

Second, tax cuts will undermine the next government’s ability to actually improve people’s living standards – affordable childcare, affordable rents, reduced public transport fares, free and comprehensive primary health care, real free education, etc.  Let’s not forget that Irish living standards are closer to Greece’s than it is to most other EU-15 countries.  Question:  how will a couple of extra Euros close this gap?

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Now Let Us Plot the Great Social Expansion

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Are we getting into election mode? We have Government Ministers promising every tax cut possible while warning of the pestilence that will descend upon us if anyone else gets elected to office. No doubt, parties are preparing their election manifestos, poster and leaflet designs, and candidate strategies. Good luck to some of them.

We know what the Government parties intend to do – pursue real spending austerity as identified here. They will cut primary expenditure (excluding interest) by 9 percent, public services by 8 percent and investment by an incredible 15 percent in real terms; that is, after inflation. They will do this in pursuit of an economically reckless, socially callous and fiscally irresponsible and unnecessary goal: eliminate the deficit by 2018. In fact, they intend to run a small surplus. We have an investment crisis, a poverty crisis, an enterprise crisis (in the indigenous sector), and a public service infrastructure degraded after six years of irrational austerity. Yet the Government intends to stand idly by while it pursues budget fundamentalism.

Fiscal Space 1

However, while they have outlined what they intend to do with expenditure (cut it in real terms), they have not revealed their taxation policies. They’re projections are based on ‘no change of policy’. If they reduce taxation – and maintain their deficit elimination target – they will have to cut spending even further. But they’re hiding that little scenario.

The Government hopes to trap progressive parties and independents. They will say ‘if you want to increase expenditure, you will have to raise taxes’. They will accuse progressives of wanting to increase taxes on workers. Given that workers have suffered falling real wages while at the same time seen the effective tax rate increase by nearly 25 percent since the start of the crisis (never mind the cuts in income support such as Child Benefit) any hint of increased taxes is not likely to be met with hurrahs.

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Deprivation Nation

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Ireland is a deprivation nation.

All manner of numbers and stats regarding growth and employment numbers are thrown around which feeds into the illusion of the ‘Celtic Phoenix’.  But there is a grim reality – which doesn’t feature much in the popular debate:  we are a society riddled with high levels of poverty and deprivation.  And recent EU Commission data shows we have much higher levels than most other comparable EU countries.

We are familiar with the CSO’s deprivation measurement.  This based on people experiencing at least two of eleven deprivation experiences (unable to afford food, heating, clothes, etc.).   On this basis, they estimate that over one million people – or 28 percent of the population – experience multiple deprivation experiences and, so, are categorised as living in deprivation conditions.

The EU Commission uses two measurementsmaterial deprivation’ and ‘severe material deprivation’.  These are harsher benchmarks than what the CSO uses (they both work off the same database – the EU Survey of Income and Living Conditions).  The EU Commission use nine deprivation experiences in which people cannot afford to

  • Pay their rent, mortgage or utility bills
  • Keep their home adequately warm
  • Face unexpected expenses
  • Eat meat or proteins regularly
  • Go on holiday
  • Own a television set
  • Own a washing machine
  • Own a car
  • Own a telephone

For the EU Commission, ‘material deprivation’ measures the percentage of the population that cannot afford three of the nine items.  ‘Severe material deprivation’ measures the percentage that cannot afford four of the items.

How does Ireland compare to other EU-15 countries?

Deprivation Nation 1

This is pretty staggering.  While it is not surprising to see Greece with the highest level of material deprivation, Ireland is right up there at the top – marginally behind Italy but ahead of poorer countries like Portugal and Spain.  Material deprivation in Ireland is 58 percent higher than the EU-15 average.

  • There are over 1.1 million people in Ireland living in material deprivation – a quarter of the population.

When we turn to ‘severe’ material deprivation (remember – that is experiencing four out of the nine indicators above), we see a similar pattern.

Deprivation Nation 2

Ireland remains in third place – behind Greece and Italy – and over 33 percent above the EU-15 average.

  • There are 450,000 people in Ireland living in ‘severe’ material deprivation – or one-in-ten people.

The growth in the number of people suffering deprivation has been substantial.  Between 2007 and 2012, the numbers increased from 450,000 to over 1.1 million – doubling in the space of five years.  There is a similar pattern among those suffering from ‘severe’ material deprivation – rising from 190,000 to over 450,000 – again, more than doubling.

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Trailing Behind Europe in Employment Growth

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Here’s a quick post:  Had an interesting and informative twitter exchange with Tom Healy, Director of the Nevin Economic Research Institute and Dan O’Brien from the Sunday Independent on foot of the CSO’s release of new job numbers.

Jobs growth in the third quarter was 10,400 seasonally adjusted.  For the same period last year it was nearly 18,000 but we know there are serious flaws in 2013 employment figures given the CSO’s warnings about the impact of their revision of their sampling base.

So, 10,000 jobs growth; for the year it is 15,400.  This is better than a loss and going in the right direction.  But is it going fast enough?  It it well balanced across all sectors?  Is the glass half-full or half-empty.

What was interesting in the twitter exchange was how we compared to EU jobs growth.   The fact is that our jobs growth this year fares poorly with the rest of the EU. The data we have goes up to the 2nd quarter of this year.

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Make the Economy Better – Abolish Zero-Hour Contracts

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Minister Ged Nash launched an investigation into the extent of zero and low-hour contracts in the labour market.  This is most welcome – we need this information which is not available in official surveys (though it should be noted that the investigation into low-hour contracts could be extremely limited as they are only examining eight hour or less contracts – whereas low-hour contracts can go as high as 20 hours).

But what would be even more welcome would be an announcement that zero-hour contracts will be abolished.

I will refer to zero and low hours contracts as precarious contracts.  These contracts require employees to be available for a certain number of hours per week, or when required, or a combination of both – but without any guarantee of work.

Under Irish law, if the employee gets no work, then the compensation should be either 25% of the possible available hours or for 15 hours – whichever is less. If the employee gets some work, they should be compensated to bring them up to 25% of the possible available hours.   Here are a couple of examples:

  • Janet is required to be available for work for 20 hours a week.   She gets no work.  She must be paid, nonetheless, for 25 percent of the available hours – five hours (this is less than 15 hours).
  • Bob is, also, required to be available for work for 20 hours a week.  He gets four hours’ work.  Since he is entitled to five hours payment (25 percent of his work availability), he get an extra hour payment.

I don’t intend to list all the negative impact of precarious hour contracts on workers.  Suffice this piece from Paul Mills writing in the Examiner:

‘The ‘employee’ is effectively reduced to a commodity like a tin of beans on a shelf waiting until someone comes to pick him or her up. It is not sustainable and is effectively immoral.

This type of contract means that the employee has no guaranteed hours or roster but must be available for work.

Whilst the system is undoubtedly beneficial to the employer, it puts the ‘employee’ at a serious disadvantage. It means there is no sick pay, only limited holiday pay, and getting a loan or a mortgage is impossible. In fact there is no guarantee of any work, so no guarantee of any pay and all that leads from that.

It takes us back to the days when fruit pickers, dock workers, farm labourers and general workers stood at a designated corner and waited for an employer to come by in the hope of being selected to work that day.’

Well put.

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tap

The Government U-turns itself into a Home Tax

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Let’s recap.  The Government has been forced to:

  • Stop Irish Water’s access to PPS numbers
  • Provide certainty to household payments
  • Reverse the sanction of reducing water flow to a trickle for non-payers
  • Provide new statutory guarantees to keep water service under public control
  • Scrap the system of social protection subsidies and tax breaks which would still leave hundreds of thousands of people in work without financial support
  • Delay the introduction of bills
  • Increase the cap from nine months to at least four years
  • Make the roll-out of water meters redundant in the medium-term
  • Introduce new governance measures (probably when the Evira/Irish Water boards are reviewed in a few months’ time)

The Government has u-turned so much it doesn’t know which direction it is going (if there are other u-turns and cul-de-sacs please let me know).

And now the Government looks to u-turn itself back into re-introducing the household charge – that pathetic, fiscally useless, regressive tax.

It appears the Government will introduce a two-tier charge on all households connected to the public mains (approximately 80 percent of all households).  A charge for a one-person household will be capped at €176 per year; for a household with two or more adults will be capped at €276 per year.  All households can avail of a Department of Social Protection rebate of €100.

Let’s be clear about this:  this is a household charge (or a home tax if your will – since it won’t be confined to property-owners; it will apply to tenants as well).  This is no different to the household charge except that the charge is higher and differentiated by the number of adults in the household.

This has nothing to do with water, except that you just happen to use water.  The water allowances will remain in place.  But for all practical purposes the cap will be the effective charge.

The goal of conservation has been undermined.  A household that conserves water will be, for all practical purposes, charged the same as a household that leaves their en-suite Jacuzzi on all night. Theoretically, one could reduce their charge through conservation – but any reduction would amount to only a few cents per week, such is the impact of the cap.  The incentive is small to the point of near non-existent.  And this looks likely to remain in place until at least 2018 and maybe longer.

It is worth noting that the cap will act like a flat or fixed charge.  Prior to the local election the Labour Party made much play of the fact that they stopped the imposition of a fixed charge for water.  Now the Government has u-turned itself into just that – a fixed charge.

And the flat or fixed charge will be regressive.  We can see the trajectory of the cap as it impacts on household income.  This uses the data from the Household Budget Survey 2010.  The magnitude might be slightly different today but the distributional impact will be pretty much the same.

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The Government Should now Come Clean on Water Charges

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I admit I can’t let this issue go but such is the misrepresentation, partial information and deliberate obfuscation being put out in the debate that it goes beyond a narrow calculation.  It actually reveals a Government determined to hide the facts in pursuit of a policy which caused over 150,000 to demonstrate last weekend.

Yes, I’m talking about water charges – but specifically about the estimated impact on the deficit if water charges were removed.  And now Dr. Tom McDonnell over at the Nevin Economic Research Institute has done his own sums – and they mirror what I had previously calculated here.

The Government is claiming that removing the water charges would ‘cost’ €800 million (this was run out again on Morning Ireland today).  Is this correct?  No.  Let’s look at how the Government is obscuring the real numbers and see if we can find the right ones.  If this gets a little ‘number-dense’ please stay with it for it is about more than just abstract calculations; it is about how the Government is treating this issue and the public at large. All numbers are approximate and rounded.  I have produced a summary table below.

  • First, the total cost of water service provision is €1.3 billion (€700 million in current spending and €600 million in investment).
  • Second, the Government is committing €500 million from the Local Government Fund to Irish Water.  This is ‘on the books’; that is, this is counted as government expenditure.
  • Third, this leaves a saving to the Government of €800 million.

So far, pretty clear. The Gvvernment’s argument seems to stack up.  But, no, this is not the case.  Because the Government is losing €250 million in revenue.  This is the amount collected through commercial water charges on businesses  This used to Government coffers.  Now it belongs to Irish Water.

So the Government gains €800 million savings on the expenditure side but loses €250 million on the revenue side.  This leaves a saving of approximately €550 million. This is pretty much the same number that Dr. McDonnell arrives at:  €527 million.

Ok, so we have sorted that out.   The actual cost  of removing water charges would be €550 million – yes?  No, that’s not it either.  Because the Government is spending money as part of the move to water charging – spending that wouldn’t exist if there weren’t the charges.  Dr. McDonnell states that he doesn’t factor these in.  So let’s do that.  There are three expenditures:

  • First, Social Protection is increasing subsidies to the Household Benefit Package and recipients of the National Fuel Allowance scheme ‘to offset the cost of their water bills’.  This will cost €66 million.

Finally, the cost of providing free water allowanced for children is ‘on the books’; that is, it is counted as government expenditure.

‘Social transfers in kind include such items as free travel on public transport, fuel allowances and the child-based free allowance related to water charges.’

‘How much does this cost?  The Government doesn’t say.  But we can estimate.  There were approximately 1,170,000 recipients of Child Benefit.  Each one of these children should be receiving a free water allowance of 21,000 litres per year.  On the basis that this will cost €102 per child, this brings the total cost to €119 million.  But this is just an estimate so let’s be conservative and round it down to €100 million.

When we add up these costs – Social Protection subsidies, tax relief and free water allowances for children – it comes to €200 million.  This will ‘cost’ the Government.

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