Brian Lenihan said that those who can pay the most will pay the most. In reality, the poor will pay – whether they can afford to or not, writes LAURA SLATTERY
THERE WERE six references to fairness in Brian Lenihan’s speech. “Everybody pays and those who can pay most will pay most,” the Minister for Finance said. But the measures he has announced do not back him up.
The Government’s own figures show that the effect of the tax changes will swipe 4.6 per cent off the net income of a single person who contributes to a private sector pension and earns a gross salary of €25,000. At a gross salary of €175,000, the net reduction is just 3.9 per cent.
Some call this “broadening the tax base”. Specifically, in this case, it is the effect of Lenihan’s new universal social charge that is the mechanism of impoverishment. Elsewhere, middle-income workers will be hit by the 10 per cent cut in tax credits and a substantial narrowing of the standard rate tax band.
Higher up the salary scale, however, marginal tax rates remain untouched. Amazingly, there are still property tax reliefs to be phased out. If you discount this anomaly, there are just two other measures that target higher income earners – the removal of PRSI and health levy relief on pension contributions and the long overdue abolition of the PRSI ceiling.
Oh, and there was the fudged cap on public sector executive pay. The €14,000 reduction in the gross salary of the soon-to-depart Taoiseach, incidentally, is in percentage terms about half the reduction that will apply to workers on the minimum wage.
A progressive property tax, it was argued, could act as a proxy for a wealth tax. However, there was no update on this front beyond the regressive €100 flat rate announced in the four-year plan. On the other hand, rent relief – a relief much cherished by those who avail of it – is being phased out over eight years in a move that will see thousands of tenants out of pocket.
Workers whose ever-decreasing salaries are now subject to higher average tax rates – while the overall cost of living fails to plummet in line with their net pay – are still the lucky ones, of course. They have not – yet – been shaken off into the abyss of the Live Register, where one-third of the claimants are classed as long-term unemployed.
Yesterday, Lenihan promised there would be 15,000 additional “labour activation” places. Yet, there are more than 80,000 people under the age of 25 on the Live Register. Elsewhere, the Government’s reinvention of the Business Expansion Scheme as the Employment and Investment Incentive is an employment creation gesture on a shoestring, with a full-year cost of just €13 million. Nobody expected anything more ambitious, as Ireland’s ready-made stimulus fund, the National Pensions Reserve Fund, had already been assigned to the busted banks.
Tellingly, none of this, not the oft-cited export-led recovery, nor the slashing of the minimum wage, will have much of an impact on Ireland’s unemployment rate, which stands at 13.5 per cent.
The Government expects it will average at 13.2 per cent in 2011 and the rate isn’t forecast to fall below 10 per cent until 2014, according to projections outlined yesterday. Even then, this forecast can be assumed to be optimistic, given the Government’s assumed rates of economic growth are somewhat rosier than those of more sober analysts.
The “lost” generation refers to more than just those who are left to fester on much reduced welfare payments while the labour market stagnates and the nation de-skills. It can also refer to the thousands who will be forced to emigrate in search of work. The ESRI last summer forecast that net emigration would be at least a cumulative 160,000 over five years. There is nothing in the Budget to suggest that this Government is either willing or able to implore them to stay.
While Lenihan did his best to make it sound like avoiding a cut in State pensions was doing older people a favour, he spared their children and grandchildren no harshness. The poor will pay, whether they can afford to or not.
The brutal cuts to public services will do the next generation no favours either. It’s not just the 33 per cent increase in the student services fee or the reduction in grant payments. Higher charges will also be applied at primary and secondary level on items such as school transport at the same time as child benefit rates are cut.
On the day that a new report showed that Ireland has dropped down the OECD’s rankings of literacy among 15-year-olds from fifth to 17th over the last decade and is now below average at maths, the Government announced a 5 per cent cut in adult literacy grants and school completion schemes.
Brian “we all partied” Lenihan invoked the word recovery 18 times in his speech. But, as the quarter of young people who are unemployed know better than anyone, a jobless recovery is no recovery at all.