OPINION:No alternative? There is a way other than the Government's proposed slash-and-cut budget, writes ANNE COSTELLO
THERE IS no alternative. This was how former British prime minister Margaret Thatcher responded to critics who argued against her right-wing economic policies. Twenty years on and Brian Cowen is spinning the same line.
We in the Community Platform do not agree. Families on social welfare and the working poor did not create the recession and should not be made to pay for it. Cuts to social welfare and public sector wages will drive many families deeper into poverty, further depress the economy and cost the taxpayer more in the long run.
So is there a better and fairer way to reduce the Government deficit by €4 billion in the budget? There is – through a combination of ending wasteful public spending, reforming tax reliefs and increasing taxes on wealth.
In 2009, the Government spent €4 billion bailing out Anglo Irish Bank. A commitment not to invest any more in Anglo would reduce borrowing next year by the exact amount needed to tackle the deficit.
Scrapping controversial policies in healthcare would save up to three-quarters of a billion euro in 2010. Ending co-location and the subsidising of private practice in public hospitals, renegotiating the consultants’ contract and capping consultants’ pay at €150,000 per year, and compelling doctors and pharmacies to prescribe generic drugs would not only save money, but greatly assist in ending inequalities within the health system.
Similar savings could be made across a range of Government departments, reversing bad policy decisions of the current administration. This would have the combined impact of saving much-needed taxpayers’ money while making the delivery of vital public services more efficient and responsive.
In 2007, Ireland’s tax take as a percentage of gross domestic product (GDP) was fifth-lowest in the EU, only marginally above Latvia, Slovakia, Lithuania and Romania. This was when our tax receipts were at their highest.
Government repeatedly tells us that 4 per cent of taxpayers pay 48 per cent of income tax. These same taxpayers own nearly half of the State’s wealth. A recent Department of Finance survey of 439 high-earners found 10 per cent paid less than 5 per cent on income tax and 33 per cent paid less than 15 per cent. Only 11 per cent of high-earners paid more than 20 per cent of their income on tax. Not a single one of the high-earners paid more than 25 per cent of their total income in tax.
These figures are more revealing when compared with the tax paid by middle-income earners. In 2007, the effective tax rate – tax as a percentage of total income – on an annual salary of €30,000 was 8 per cent; on €40,000, it was 15 per cent; and on €50,000 it was 20 per cent.
The argument that high-earners are paying their fair share is simply not credible. Tax relief regime reform could generate up to €1 billion in 2010, through making all discretionary tax relief schemes available at the standard rate. Creating a third tax band of 48 per cent on single person incomes over €100,000 per year could raise up to half a billion in 2010. Increasing capital gains tax to 30 per cent could raise another half billion over 12 months. Other measures such as abolishing the PRSI ceiling, carbon tax, tax on land, a wealth levy and a small increase in corporation tax could all add significantly to exchequer revenues. Taken together these revenue saving and raising proposals amount to a minimum of €7 billion.
We believe there is a clear choice. The Government can seek to make those on low incomes pay for the economic crisis by cutting public sector wages, social welfare payments and vital public services. Or they can insist those most able to pay should shoulder their fair share of the burden.The question now is: which choice will the Government make?
Anne Costello works for the Community Platform, a network of some 30 non-governmental organisations in the community and voluntary sector that work to address poverty, social exclusion and inequality (www.communityplatform.ie)