Time to move away from tax cuts and invest in people and services


The Budget defines the basis on which the next election will be fought. The Government will talk about the past, Labour will talk about the future.

The Government will try to argue that it created the economic boom which many of us are enjoying and only it can sustain it.

Even with 7 per cent inflation, over four times the figure it inherited from the previous administration, the Government will describe itself as a model of prudence and caution.

Despite the growing evidence on our streets, the Government will argue that it has placed as much emphasis on social cohesion during its term in office as it has on reducing taxes.

It will argue that its tax reform has been top down rather than bottom up. It will rely not only on the Budget just passed, but of similar bounty in the future.

None of it will be true.

Highlighting one's perceived achievements has obvious attractions for any outgoing government. It is certainly an approach to which my party fell victim in 1997. As such, I am happy to see the Taoiseach embrace it. Eaten bread is soon forgotten.

The last thing this Government will do is accept that this country is entering a new era with a demand for radical new thinking. The problems are different, the solutions must be also. The old mantras will not do.

Take the labour market for example. A fundamental shift is under way as Ireland moves from being a relatively low-wage economy to a high-wage economy. This is something to be welcomed.

Similarly, a humane and sensible immigration policy, like that advocated by the Labour Party, is not just an expression of our social values, it is an economic necessity.

I don't want to repeat the claims made by others like CORI (the Conference of Religious of Ireland) or the Society of St Vincent de Paul that this Budget was hugely divisive. That is a fact. The real winners from this Budget, and all of Mr McCreevy's budgets, are those who are already in the top 20 per cent of income earners.

Yes, relatively speaking, everyone else also benefited. With £4 billion, how could they not? Yet on tax alone, at least two-thirds of resources were spent on people doing better than the average worker.

Labour advocated spending about half of the money the Government spent, and we would have taken more people out of the tax net than the Government did on Budget day.

As preparations begin for the inauguration of a new Republican US president, it is ironic to see the trickle-down economics of the most celebrated Republican president in recent years, Ronald Reagan, back in vogue in Ireland. The Taoiseach has also taken to talking about self-financing tax cuts. It would appear that his and Bill Clinton's shared vision goes no further than the peace process.

Labour has dared to suggest that it is time to alter our priorities away from continuously reducing tax towards investment in people and services.

For doing so we have been attacked by the Government and the Taoiseach. No lie has been too big, no distortion too grotesque. We have been accused of betraying low- and middle-income earners subject to excessive taxation.

Betraying those on low and middle incomes is an area where this Government has a particular expertise. The truth is that the tax changes which Labour has been advocating for three years now would have benefited this group of tax payers to a far greater extent than the Government's policies.

We've been accused of raiding the pension fund established by the Government. Another lie. What we've done is to suggest that a quarter of the government's annual allocation to the fund should be discretionary. It should be left to the government of the day to address issues like poverty among the elderly.

Labour believes this is a Government afraid of debating the future and unable to look beyond its next electoral hurdle. For 10 years, social partnership has been based on a trade-off between wage growth and tax reductions. The question is how long can this continue?

How much further and for how much longer can we reduce taxes?

Is the Government in favour of the 16 per cent and 33 per cent scenario advocated by the Attorney General? Will it campaign on this basis at the next election? Will it spell out the winners and losers in such a scenario?

Does it believe social partnership can be sustained on this basis? The reality is that we cannot, and should not, plan our future based solely on the performance of the last three years.

It is time to plan the next boom, not to seek to sustain this one at excessive levels.

We know for instance that there is already a supply-side crisis in the economy.

On childcare, for example, the only Budget response is to stimulate further demand.

And childcare is not alone. Isn't it time to radically reappraise why our health system discriminates between those who can afford to pay and those who cannot?

Isn't it time to address why our schools remain so badly equipped, why care for the elderly is so expensive, why our public transport system is so inadequate?

Should we not be determined to end the growing inequality which is demeaning our society and which this Government has accelerated since coming to office?

Social partnership, if it is to be something more than simple industrial relations, has to be about a vision for society.

We've worked hard for 10 years to get where we are today. But where do we want to be 10 years from now? What kind of society do we want to become?

These are critical questions. Sustained investment in people and their lives, not just because they need and deserve it but also to support flexibility in the workplace, is the only viable response.

On that basis the Budget falls way short.

Ruairi Quinn is leader of the Labour Party and a former minister for finance