The following is the executive summary of Sinn Fein’s pre-budget submission for the 2010 calendar year.
The Fianna Fail/Green Party government has consistently underestimated the severity of this economic crisis. Its initial reaction was denial and to slander as ‘scaremongers’ anyone stating the facts. Every policy decision since has failed to halt the slide and the Department of Finance’s economic forecasts have been wholly unreliable.
The inescapable fact is that the fiscal strategy adopted by this government has not worked and was never going to work. It still has no strategy to stimulate the economy or to create jobs and its contractionary measures are driving the country into deeper recession.
The current crisis is as much one of ideas as it is of revenues.
In the upcoming Budget in December the government has clearly stated that the majority of savings will come from:
* cutting social welfare payments and cutting the public sector pay bill
* cuts in the health, education and capital building budgets
Savings in the public sector pay bill will not come from the exorbitant wages at the top. Effectively, the poor and the lower paid will pay for the mistakes of the rich and the medium and long term potential of the economy will be damaged. The OECD ranks Ireland as one of Europe’s most unequal societies. The government’s policies in this recession deepen that inequality.
Sinn Fein is fundamentally opposed to these policies because they are totally unjustified and will drive the economy further into recession. We are opposed to them because there is an alternative that will work.
It is possible to get the economy back on the road to recovery but it will require a radically different approach. We need to restore confidence at home and abroad, create jobs and address the growing deficit by raising revenue from those who can afford to pay more. The government is choosing instead to target those on low incomes and social welfare, underdeveloped regions and essential frontline public services.
A more imaginative approach is called for. We can be innovative and start really delivering on the potential of the all-Ireland economy, for example, but there has to be the political will to do so.
Government says recovery has to come from external factors: other countries coming out of recession, an upturn in export markets and a return to previous levels of inward investment. But even if all three materialise, there is no guarantee that this will replace the 14% of GDP which has been lost, or that our economy will then be placed on a sounder footing.We believe that the
first step to recovery is a fiscal policy that taxes fairly, eliminates waste, improves the efficiency of services, and encourages economic recovery. The energy and skills of those 400,000-plus people who are unemployed must be utilised to help build this recovery.
A Budget that invests in the future, creates jobs by building schools, hospitals, the renewable energy sector and business infrastructure will not only work to solve our problems in the long term, but it will also help take the pressure off now.
Sinn Fein has set out detailed proposals to raise e7.623 billion - e5.623 billion through a range of tax revenue measures based on wealth and the curtailment of wasteful spending and e2 billion from the National Pension Reserve Fund, which should be accessed in these exceptional circumstances.
It is our view that in order to move out of recession and into recovery the government needs to stimulate the economy, and it can do this while simultaneously maximising revenue intake so it does not have a negative effect on our borrowing levels. Therefore we are proposing:
* A e3.218 billion economic stimulus package with a range of measures to get Ireland back to work.
* A e723 million household stimulus package to help families in severe financial difficulty due to the cost of living.
* e3.7 billion to be taken in increased revenue that will not have a deflationary impact on the economy, but will bump up state’s coffers.
This submission shows clearly that even in these severe economic times it is possible to raise the finance required to maintain frontline public services and assist those most in need, to reduce the deficit and to delivera much needed stimulus package to create jobs and put the state on the road to economic recovery and prosperity.
* The government’s projected 2010 spending, as set out in the April 2009 emergency Budget, is e56.7 billion in current spending and almost e7 billion in capital spending. Last April it projected taking in e35 billion in tax, which, along with exchequer receipts and balances, left the state with an e18.4 billion deficit in December 2009. The projected 2009 out-turn now, (according to the ESRI’s Autumn Quarterly Economic Commentary) is for a general government deficit of e21.121 billion. Relative to GDP, this means that the deficit ratio will be 12.9 percent of GDP rather than the planned 10.75 percent of GDP. According to the latest ESRI projections, the target e4 billion overall package for 2010 will still leave the general government deficit at 12.8 percent of GDP, rather than the 10.75 percent of GDP target for 2010 that was planned in the April budget.
* This debt does not take into account NAMA. The government is putting e54 billion into NAMA but at the same time it is lecturing about fiscal prudence and the need to reduce the deficit by targeting the most vulnerable.
* In October 2009 422,500 people were on the live register. This is an increase of 179,637 in 12 months.
* Despite the difficulties facing the state the government has still failed to broaden the tax base. The total tax to GDP ratio in Ireland is 30.8%. Our tax structure by type - indirect 44%, direct 40% and social security contributions 15% - differs considerably from the structure typical of the EU as a whole (39%, 31% and 30%, respectively). Government policy of high indirect regressive taxes (affecting all in society) and low direct taxes (largely benefiting the few) needs to change. The state needs a sustainable
revenue stream. * 1,447 people, 0.06% of all earners, earned approximately e3.459 billion between them in 2008. The latest figures available show that more than 25% of the top 400 earners paid tax at a rate of less than 20%.
* The salary of CEOs of public bodies can range from e114,335 to e534,998. Most of these individuals earn more than the President of the United States, who is on a salary of e300,000. HSE Chief Executive Brendan Drumm, who is on a salary of e380,000, was recently paid a ‘performance’ bonus of e70,000.
* Disgraced former Director General of FAS Rody Molloy was given a e1 million golden handshake and allowed to keep a state car worth e20,000.
* Contrary to opinions expressed by Government ministers, the cost of living has not gone down for the majority of people. In fact a number of items, which disproportionately affect the less well off, have increased in price. The prices of the following were all up in June 2009 - Electricity (4.7%), Gas (6.5%), Bus fares (11%), Childcare (6.4%), Primary Education (7.6%), Hospital services (9.1%)
Key proposals for revenue raising and revenue savings
The following are some of Sinn Fein’s key proposals, as costed by the Department of Finance and the Commission on Taxation to reduce the Budget deficit by e3.7 billion and to finance an economic stimulus package of e3.941 billion (stimulus proposals in full Budget document)
* Introduce third tax rate of 48% on individual earnings in excess of e100,000 - Raises e355 million
* Standardise all discretionary tax reliefs - Raises e1.1 billion
* Reduce earnings cap for pension contribution tax relief to e100,000 - Raises e85 million
* Abolish all remaining property-based tax reliefs (on property development, not principal home mortgage interest relief) - Raises e43 million
* Abolish mortgage interest relief for landlords - Raises e285 million
* Increase tax on second homes to e600, to include holiday homes and rental properties only - Raises approx e120 million
* Abolish the PRSI ceiling - Raises e119.5 million
* Introduce a 1% wealth tax on all assets worth more than e1 million, excluding farmland (regardless of residency rules) - (estimated, detail in full Budget proposal) Raises e1.6 billion
* Increase DIRT by 5% - Raises e145 million * Increase Betting Duty to 10% - Raises e310 million
* Increase Capital Gains tax to 40% - Raises e190 million
* Phase out all subsidies of private practice in public hospitals and charge practioners for the use of public equipment and staff in their private practice - Saves e100 million
* Implement a new contract for all hospital consultants which would cap their starting pay at e100,000 with a maximum of e150,000 remuneration - Saves e210 million
* Cap TDs’ salaries at e75,000 and Senators’ salaries at e60,000, with a maximum cap of e100,000 and e80,000 respectively - Saves e4.8 million
* Cap ministers’ pay at e100,000 and junior ministers’ at e85,000 - Saves e2.43 million
* Remove the allowances payable to the Chairpersons, vice - Chairpersons and Whips of all Oireachtas Committees and Sub- Committees and introduce properly vouched expenses - Potential savings e1 million
* Cap the maximum salary available to public servants and semi-state bodies at approximately four times the basic entry rate, or three times the average industrial wage (cap at e100,000) - Saves e450 million