Sir, – While the Government might celebrate our most recent “pat on the back” from the troika, it should react seriously to recent statistics that revealed the dire health of our domestic economy and the impact on households.
First, the CSO’s estimates for the first quarter of this year show declines for both GDP (-1.1 per cent) and GNP (-1.3 per cent) compared with the fourth quarter of 2011. Second, the research published by the Irish League of Credit Unions (ILCU) highlighted that there has been an increase in just three months by 180,000 in the number of adults that have less than €100 a month to spend after bills are paid. When you add this to the CSO’s recent figures which show that unemployment has risen from 14.7 per cent to 14.9 per cent of the workforce, the third successive monthly increase, it is clear that current government responses are either inadequate or wrong. The next budget will be the sixth austerity budget in a row.
The evidence from Ireland and internationally shows clearly that this approach is not working. Economists such as Nobel Prize-winning Paul Krugman argue that austerity depresses the economy as economic analysis shows that reducing the income of lower income households dampens domestic demand. The Government’s current plans to reduce spending by at least €1 billion and raise taxes on lower and middle income households in the budget is likely, therefore, to prolong the recession, mass unemployment.
There are alternative, viable, policies that could deliver recovery. Aspects to a plan B could include: a significant stimulus investment in job creation by setting up a strategic investment bank as outlined in the Programme for Government to invest funds from the National Pension Reserve Fund in infrastructure development; and raising significant finance from taxing higher incomes and wealth rather than lower income households that have suffered disproportionately from austerity budgets.
Despite the claims to the contrary, there are alternatives that economically make sense and share the burden more equally. It is vital that there is enough time to debate publicly these alternatives before decisions are made about the budget. The country is in too much of a crisis to have the debate about the budget restricted to Government ministers and economists who have given such poor advice up to now. Other voices are required to be heard – communities, voluntary groups, small businesses, youth, environmental groups. The social costs of another austerity budget of welfare cuts and an absence of a real jobs investment plan are too high. – Yours, etc,