There is a better way

A summary of Sinn Féin’s 26-County pre-budget submission and economic plan for recovery 2011, which was released in Dublin today.

“Ireland without its people is nothing to me. And the man who is bubbling over with love and enthusiasm for Ireland and can pass unmoved through our streets and witness all the wrong and suffering, the shame and degradation wrought upon the people of Ireland, aye, wrought by Irish men and women, and without burning to end it, is in my opinion a fraud and a liar in his heart.” - James Connolly

EXECUTIVE SUMMARY

Fianna Fáil and the Green Party have brought the country close to economic ruin. They have introduced four successive budgets, as well as emergency measures in February 2009, and everything they have done has made the situation worse.

* 450,000 people are now out of work.

* 100,000 more will have emigrated by next year.

* Tax revenues have collapsed.

* Almost €90 billion between recapitalisation and NAMA has been promised to bail out the banks.

* The interest rates being paid by the Irish government on the international bond market are three times those paid by Germany.

Fianna Fáil and the Green Party are completely out of their depth. In the budget in December they are going to go after low-income people and working families and they are going to make savage cuts to frontline public services. This is a disastrous policy that will deflate the economy further and take money from those who can least afford it. This government has decided that someone who earns €300,000 a year contributes enough but a person on the miminum wage, or someone who has lost their job and is receiving €196 a week, must survive on less. They have signed up to a four-year timeframe for deficit reduction which they know they cannot meet and which the IMF, OECD and ESRI know they won’t meet. And Fine Gael and Labour have once again followed the government’s lead – just as they did in the General Election in 2007 when they too offered to cut taxes and just as they did in the Lisbon referendum in 2009 when the promised there would be jobs if people voted yes to Lisbon.

Enough is enough. People are sick and tired of lies and what passes for politics in this State. The fact is that Fianna Fáil, the Greens, Fine Gael and Labour are all part of a cosy consensus that has brought this state to the edge of economic ruin. For all their bluster in the media they are all following the same economic strategy and it is an economic strategy that has failed dismally to date.

We are facing challenges unlike any faced before. We need new thinking and we need to face up to the corruption that has almost destroyed Ireland. There needs to be an honest debate about what we stand for as a people and what type of country we want for our children. What are the values that define us?

Sinn Féin is proposing this detailed, fully costed pre-budget submission, which is guided by a number of core values which define us as a republican party.

* In a time of economic difficulty there is a moral obligation to protect those most in need.

* People have an absolute right to a home, a decent education for their children and access to healthcare when they need it.

* The government must be accountable for its actions.

To ensure these rights are protected the government needs to raise sufficient finance and this can be done. There is still wealth in this state.

In our economic plan for recovery we are proposing:

* A €7.6 billion package spread over 3.5 years to stimulate the economy – there can be no recovery without economic growth and getting Ireland back to work.

* A six-year plan to reduce the deficit to within the Stablility and Growth Pact – beginning with an immediate €4.671 billion reduction of the deficit in 2011, which can be made if wasteful public spending is eliminated and the taxation system is overhauled. We have identified over €1 billion in wasteful spending and over €4 billion through making the tax system fairer. Our tax and savings proposals are targeted at wealth in the state – they do not tax lower earners or cut spending from vulnerable and essential services.

The government’s approach of slash and burn is not working. Increasing the amounts they slash and burn will not work. By contrast, other EU countries, which adopted measures to boost their economies in 2009, have seen their tax revenues rise and budget deficits fall. This group includes Germany, France, Spain, Belgium and the Netherlands. Spain adopted the largest package of measures to boost growth, equivalent to 2.3% of GDP in 2009, and has seen its tax revenues rise and deficit almost halve in the first 7 months of this year alone. Right now, this government has no plan to reduce the deficit – it has a plan to reduce spending. Its plan will damage the economy, not recover it.

Our multi-annual plan has the potential to reduce the deficit earlier than 2016, between the increased funds we identify from an overhaul of the tax system and the financial return of our stimulus, but we are allowing for negative impact from a myriad of factors from stimulus leakage to increased borrowing costs. 2016 is our conservative and prudent estimate.

KEY FACTS ABOUT THE IRISH ECONOMY

Government policies cause spiraling deficit

The government will begin 2011 with a deficit of €19 billion (11.9%). The government’s projected 2011 spending is just over €60 billion (€55 billion in current spending and €5.5 billion in capital spending). This deficit doesn’t include the recapitalisation plan for the banks of almost €50 billion or the off-general government balance sheet borrowing for NAMA, which it is speculated will amount to €40 billion. All of this brings the actual deficit to 32%.

Rising unemployment and emigration

In October 2010, 450,000 people were on the live register. Emigration has returned to 1989 levels and we now have the highest emigration rate in Europe based on Eurostat figures. Over the past year the government has announced the creation of hundreds of thousands of jobs but very few have actually been delivered. Unemployment has soared from 4.5% in 2007 to 13.7% in 2010, with a population falling from emigration.

Tax revenue falling dramatically

In 2009 tax revenues fell by €7.7 billion. A central part of economic recovery must be a radical overhaul of the tax system. An over-reliance on taxation from consumer spending, and cutting tax rates when they should have been maintained and used wisely, caused many of the problems being experienced today. Government policy of high indirect taxes for everyone and low direct taxes for high earners needs to change. For every €100 paid in income tax, a further €147 is paid by everyone, including children, on consumption (spending) taxes. Due to the existence of more than 130 tax exemptions and reliefs, high-income earners pay an effective rate of only 20.3 percent. We need a tax system that is fair, that is sustainable and that puts money into the economy.

High salaries and perks for the boys continue

The salaries of CEOs of public bodies and semi-state bodies in this state far exceed those of their international counterparts. Many of these individuals earn more than the President of the United States (€300,000 per annum). HSE Chief Executive Cathal McGee is on a salary of €322,133. ESB chief executive Padraig McManus is the best paid semi-public CEO in the state with a salary of €458,000. Add in a bonus, a pension contribution and other benefits and McManus collects more than €654,000 per annum. In October, the ESB introduced a 5% increase in its prices and has been disconnecting more than 900 families a month who have fallen into arrears.

Cost of living still on the rise

The cost of living has not gone down for the majority of people and is in fact rising. The most notable changes in 2010 were increases in Education (+9.5%), Housing, Water, Electricity, Gas & Other Fuels (+8.5%), Transport (+1.4%), Health (+0.5%), Mortgage Interest (+25.1%) and Communications (+2.9%). The annual rate of inflation for Services was 2.3% in the year to August. (Consumer Price Index October 2010)

Economy stagnant

In October, the Central Bank revised downwards its estimate of Gross Domestic Product, the country’s overall economic output, from a growth of 0.8% in 2010 to 0.2%. It also forecast Gross National Product, the economic output without taking multinationals into account, to fall by around 1.7%, compared to a previously forecasted fall of 1%. The Bank says that any economic recovery will be unbalanced in nature, because it is driven mainly by multinational exports, as domestic demand continues to fall. At this point, even the government’s most optimistic forecasts for the economy in 2011 are broadly flat.

SINN FEIN’S KEY PROPOSALS

The following are Sinn Féin’s key proposals, as costed by the department of Finance and leading economists, to reduce the deficit by €4.671 billion in 2011 and to finance a 3.5 year economic stimulus package of €7.595 billion (€2.595 billion stimulus in 2011).

REVENUE RAISING

* Introduce a third tax rate of 48% on individual incomes in excess of three times the average industrial wage (€100,000) per annum – Raises €410 million

* Standardise all discretionary tax reliefs – Raises €1.1 billion

* Introduce an income-linked wealth tax of 1% on all assets, including property, in excess of €1 million, excluding working farmland, regardless of residency – Raises €1 billion

* Increase Capital gains Tax to 40% (15% increase) – Raises €240 million

* Increase Capital acquisitions Tax to 35% (10% increase) – Raises €96 million

* Increase DiRT to 30% (5% increase) – Raises €123 million

* Reduce the earnings cap for pension contribution tax relief to €100,000 – Raises €85 million

* Increase tax on second homes to €600 and introduce a tiered tax increase on subsequent homes: e.g. €700 for third homes, €800 for fourth and fifth homes. Examine the introduction of an income-linked waiver for individuals with second homes who cannot sell them in the current climate, are struggling to meet mortgage repayments or are in financial difficulties – Potential to raise €120 million

ABOLISH EXEMPTIONS

* Abolish mortgage interest relief for landlords – Raises €285 million (2009 figure)

* Abolish the PRsi ceiling – Raises €119 million

* Abolish PRsi exemption for share options – Raises €18 million

* Abolish the income tax exemption for share-option schemes – Raises €3 million

* Adjust PRsi on share-based remuneration & Capital Gains (TASC recommends treating all income the same and as such, PRSI should be applied) – Raises €79 million

* Abolish legacy amounts of property tax reliefs – Potential to raise €400 million per annum (costed by Commission on Taxation)

(€4.078 billion in tax measures)

PUBLIC SPENDING SAVINGS

* Cap ministerial salaries at €100,000; TDs’ salaries at €75,000; and senators’ salaries at €60,000 – saves €6 million

* Cap the maximum salary of public servants and employees in semi-state bodies at four times the entry rate (three times the average industrial salary) €100,000 – saves €350 million

* Tackle the expenses corruption by introducing properly vouched expenses and reducing what is allowable as expenses for both public representatives and senior civil servants – Potential savings €3 million

* Reduce professional fees (state-paid to solicitors, accountants, etc) by 25% – saves €200 million

* invest in school buildings and save on prefab renting – saves €24 million

* apply charges based on the full economic cost to all use of beds in public and voluntary hospitals in the state for the purposes of private medical practice – saves €305 million

* introduce measures to reduce the cost of medicines in our health system, including establishing a state company for the wholesale distribution of drugs, using lower-cost generic drugs and tackling over-prescription and wastage – saves €200 million (figure provided by Department of Health in 2009)

* End private hospital co-location scheme – Potential to save €100 million in 2011 (figure provided by department of health in 2009)

(Saves €1.188 billion)

Total raises €5.266 billion. €595 million directed to financial stimulus. Deficit reduction of €4.671 billion in 2011

STIMULUS

* Transfer €7 billion from the national Pension Reserve Fund for a state-wide investment programme (stimulus)

* €7 billion for a 3.5-year employment/infrastructure provision stimulus package. €2 billion for employment stimulus in 2011. Details discussed in document.

* €595 million financial stimulus from current spending as set out below:

- Make tax credits refundable. Cost: €140 million

- Return the additional social welfare payment at Christmas paid to pensioners, and welfare recipients Cost: €226 million

- Remove all those under the tax bracket from the government levy Cost: €55 million

- Remove the 50 cent levy on medical card prescriptions Cost: €24 million

- Ease the recruitment embargo in the public service Cost: €150 million

Sinn Féin’s multi-annual pre-budget proposal, including the deficit reduction proposal for 2011 and the stimulus package, would bring the deficit back to below the stability and Growth Pact (SGP) target of under 3% of GDP by at least 2016, with the potential to eradicate it completely that year.

Urgent Appeal