Budget betrayed poor and ignored PPF obligations
Budget 2001 did many good things and benefited many people. However, it was not socially inclusive or progressive, as claimed by Government Chief Whip Mr Seamus Brennan in his Irish Times article on this page last week. Neither was it as compassionate as Mr Brennan would have us believe.
In fact, Budget 2001 betrayed the poorest people in Irish society, widened the rich/poor gap substantially and failed to honour the commitments contained in the Programme for Prosperity and Fairness (PPF).
The organisations in the community and voluntary pillar of social pillars (of which CORI, the Conference of Religious of Ireland, is one) have raised serious questions concerning the fairness of the Budget. At their recent meeting, these organisations agreed unanimously: "Budget 2001 has failed to distribute the benefits of growth fairly, and has betrayed and abused the good faith in which the Community and Voluntary Pillar entered into the Social Partnership process."
The Government portrayed the £8 increase in the lowest social welfare rates for single people as bordering on the spectacular. The increase might fit that description when compared with the derisory increase of £4 in the last Budget, but it is totally inadequate to meet the Government's PPF commitments.
PPF contains commitments:
To bring about a fairer and more inclusive Ireland;
To improve the living standards of all social welfare recipients;
To increase social welfare rates in real terms;
To make substantial progress towards a target of £100 per week for the lowest rates; and
To give high priority to increasing social welfare rates further if economic growth was greater than 5.6 per cent. (The growth rate is 8.6 per cent for 2000 and forecast to be 6 per cent for 2001.)
At the plenary meeting of the social partners and Government last July, the Taoiseach agreed the poorest would have to be given priority in Budget 2001.
The commitment in PPF is to increase welfare rates in real terms. In practice, this means the percentage increase should exceed the percentage rise in the takehome income of those on the average industrial wage. Couples with one salary have seen their takehome income rise by more than 24 per cent over the period 2000 and 2001. Single people have seen theirs rise by 31 per cent.
The lowest social welfare rate for a single person in 1999 was £72 a week. An increase of more than 24 per cent over the two-year period would require the rate to rise by £18. It was raised by £4 in 2000. A further £14 a week was required in Budget 2001 to meet the PPF commitment. The Government gave an increase of £8.
It is difficult to understand why the Government failed to raise the rates by the required £14 a week. The growth rate has substantially exceeded the central forecast on which the PPF agreement was based. PPF specifically commits Government, in such a situation, to ensure that "achieving increased rates will be a high priority".
Likewise, inflation is substantially ahead of the central PPF forecast. Trade unions have agreed substantial additional increases to compensate their members for this inflation and both Government and the employers have accepted these increases. Inflation affects the poorest in society even more severely than it affects any other sector. Consequently, this inflation situation means the £100 target for welfare rates contained in PPF would have to be exceeded.
To raise all social assistance payments by the additional £6 required would have cost an additional £150 million a year. The Government could have funded this increase in one of two ways. It could have chosen not to reduce the top tax rate by 2 per cent. This reduction will cost the Exchequer £163 million - less than was required to meet the PPF commitment on welfare rates.
However, if Government wanted to reduce the top tax rate, it could have simply allocated an additional £150 million from the substantial Exchequer surplus. It would have made little difference in the overall scheme of things but it would have made a dramatic difference to the poor.
The most notable feature of the Budget is how much it has widened the rich/poor gap. In 2001 a single person with a gross income of £40,000 will be £64 a week better off after tax, compared to the social welfare increase of £8. Over the four Budgets of this Government a couple on £40,000 are £210 a week better off after tax, compared with the long-term unemployed couple who are £32 a week better off.
The widening of the rich/poor gap is much worse, however, than these figures suggest. I have not included the impact of recent Budgets on corporation tax, on residential property tax, on capital acquisitions tax and capital gains tax.
This widening rich/poor gap is deeply divisive. It is the result of decisions to allocate resources in particular ways. With all the resources available, Budget 2001 was the best opportunity any Irish Government has had to get to grips with the State's extensive poverty. The Government's Budget choices did not give the necessary priority to tackling this issue.
A recent Irish Times/MRBI poll showed the widening rich/poor gap was one of the top three issues Irish people felt should be the priority concerns of the next general election. Which makes Government's failure all the more surprising.
The Government should rectify the deep wrong that has been done to the poorest people among us. When this is done, and only then, can the Government claim that Budget 2001 is compassionate, radical and progressive.
Father Sean Healy is director of CORI's Justice Commission. CORI was one of the organisations that negotiated and signed the last two national agreements, Partner- ship 2000 and the Programme for Prosperity and Fairness