Impact of the Budget
Madam, – The only important question is which hard-nosed business people and perceptive advisors will Fine Gael and Labour be bringing to the renegotiation of the reparations package. – Yours, etc,
A chara, – The vast majority of the people of Ireland have higher than the average number of legs. This is statistically true. If, out of a population of one million, 100 people have just one leg, and nobody has more than two, then the total number of legs is 1,999,900. The average number of legs per person is 1.999. So 999,900 people have a higher than average, and 100 lower than average. This statistic, however accurate, is not terribly useful: it is a disembodied statistic. To help us know what to do, we need to “embody” the individual cases.
Similarly, if a group of people have their incomes hit very hard, say with a reduction of 75 per cent, this could seem quite unfair. However, if those individuals are directors of a bank, and they have their salaries reduced from €2 million per annum to €500,000, the owners of the bank may well be inclined to consider that those salaries should be reduced significantly more, even though this would be quite out of line with cuts across the rest of the population.
The circumstances in the cases in question are very relevant. If the average income of a group is €500,000, all may seem well; if there are two people in the group, where one has an income of €1 million, and the second has zero income, this changes how we must judge the situation.
Tim Callan, Claire Keane and John Walsh of ESRI (Opinion, December 9th) are clearly well qualified. Their statistics show that the richest one fifth of families take a 9.9 per cent reduction in disposable income 2009-2011. The poorest one fifth take a 3 per cent reduction. The heading to their article reads: “Budgetary adjustments to crisis have hit richest hardest”, and they comment: “This (the budgetary response to the crisis) has been strongly progressive.” Are they claiming that the richest one fifth are doing more than their share?
How useful are their statistics? We need to look more closely at the circumstances. I want to ask the three ESRI researchers for some more information. From what base – what level of income – have the richest one fifth taken their cut of 9.9 per cent? From what base have the poorest one fifth taken theirs? The average Disposable Household Income in 2009 was €880.78 per week (CSO data). How do the two groups relate to that?
It may seem reasonable to say that the first group are taking 10 steps backwards, and the second group take only three. However, if the first group are standing on a broad, level plain, and the second group are standing just one step from the edge of a cliff, we may need to reassess our evaluation.
Social Justice Ireland (Analysis and Critique of Budget 2011, page 10) has a chart showing that the increase in net weekly pay 1986 to 2011 for a government minister is €1,034.67. The net weekly increase in the same period in the average industrial wage is €343.93. The net weekly increase for a single person receiving unemployment benefit is €135.84. Progressive? – Yours, etc,
Madam, – I think it is disgraceful that the Government is cutting invalidity pension, the carer’s benefit and the blind pension, particularly as there were alternatives. The main one is to increase income tax rates.
Increasing tax rates seems anathema to most economists – they say it is a tax on jobs and are never asked to justify it.
Dan O’Brien (Budget supplement, December 8th) is very concerned about the increase in income tax for 2011 by reducing the tax credits and the bands, for economic reasons. He says a “doubling of a given tax rate, for instance, will not result in a doubling of the revenue generated”. Well if it resulted in a 50 per cent increase, would that not be a good return?
If higher and middle earners were taxed at a higher rate it would probably mean that they will just save less and will continue to spend as much as before.
People on social welfare on the other hand spend almost all of their income, so reducing their benefit has a negative effect on the economy. Also, reducing the tax credits and the bands means that the lower paid will be harder hit proportionately than top earners. – Yours, etc,