Time to concentrate on the elimination of poverty

In the brief seven-year period since 1993, our national output has increased by a phenomenal 85 per cent

In the brief seven-year period since 1993, our national output has increased by a phenomenal 85 per cent. But this leap in national prosperity has been accompanied by a very evident widening of the gap between the top and bottom ends of the Irish income scale.

Many better-off people have become very rich indeed during these years, and many workers have also secured significant improvements in their living standards.

But, at the bottom of the heap, among the disadvantaged, gains have generally been small and some social problems, such as drug dependency and homelessness, have become notably worse. The failure of our economic and political system to secure a better distribution of the recent huge increase in available resources is extremely disturbing.

While there are people who remain unconcerned about these inequities and who refuse to recognise the existence and significance of relative as well as absolute poverty, there are also many beneficiaries of our economic growth who are unhappy about the recent increase in social inequity, and who would like to see something done about it.

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By and large, despite the undoubted growth of individualism and materialism in recent decades, Irish people remain humane and socially concerned. Against this background, the question that has to be asked is why we have not been more successful in preventing the growth of social inequity during this period of unparalleled prosperity.

The first point to be made is that some of this widening gap is a virtually inevitable consequence of the kind of growth we have been experiencing. While there has been nothing to prevent us from doing more - much more - to improve the lot of those at the bottom of the heap, the big jump in the number of people with substantial wealth is an inevitable consequence of the process of rapid economic growth that has generated such a huge volume of additional resources.

To have attempted by government action to capture for the benefit of the community as a whole a major proportion of the increases in asset values and high incomes that have almost overnight created a new class of very wealthy people would have destroyed the growth process. That is a reality of the capitalist system.

So far as income tax is concerned, we cannot without risk to economic growth apply tax rates that are very much higher than in the other industrialised countries with which we are in competition - although it is certainly arguable that several recent budgetary reductions in the top tax rate could have been held back until after the implementation of more necessary cuts in taxation of people on lower incomes.

Regarding capital taxation, it is true that we could have done more, as some other industrialised countries have heavier capital taxes than ours with no visible ill-effects on their economies.

But that pass was sold in 1977 when, even before the start of the Haughey period, Fianna Fail succumbed to pressure from wealthy interests to abolish the very modest annual wealth tax that had replaced death duties three years earlier. (That 1.25 per cent wealth tax, from which principal private dwellings were exempted, applied only to assets in excess of £500,000 in today's money terms, or £1 million in the case of agricultural land.)

But even if we had gone so far as to have capital taxation levels similar to those applicable in some other industrialised countries, and even if we had also tackled the problem of windfall gains on development land, economic growth of the kind we have been experiencing would still have created great wealth for an important group of Irish entrepreneurs.

And there is a clear danger of allowing ourselves to become obsessed with envy of others' wealth to the point of distorting our vision - a danger that has been greatly enhanced by legitimate anger directed against those wealthy and well-to-do people who have allowed their greed to lead them into law-breaking by tax evasion. Instead, we should be turning our attention and our efforts to the other end of the income scale: concentrating upon the elimination of poverty.

Some may question the existence at this point of several requirements for the accomplishment of this task - on the one hand political imagination and a commitment to mobilise popular support, and on the other the administrative will and capacity to target the disadvantaged effectively.

But it is clear that we have available to us now the necessary financial resources to end avoidable poverty in the same way as the Scandinavian countries appear to have done.

For, in purchasing power terms, our GNP per head is in the process of passing out the level prevailing in Scandinavian countries, and our output per worker is already higher than Scandinavia, where there does not seem to exist the same kind of poverty that we can still see all around us in Ireland.

Moreover, in relation to our GNP, our level of public spending is now the lowest in Europe, with ample room for the application of additional resources to social purposes. We have large budgetary surpluses, so large that there has recently been talk of wiping out the whole of our national debt within a measurable period - an unnecessarily ambitious objective.

FOR the next decade or so - but almost certainly for not much longer - we are likely to have a continuing capacity for faster economic growth than our neighbours.

Consequently at this point the necessary social provision to eliminate poverty can be made out of the annual growth of resources, without any need to cut other spending or to raise taxes.

There is only one, essentially temporary, obstacle to releasing whatever resources may be required to eliminate poverty over a relatively short term of years. This is the overheating of the economy since 1997. Our growth rate has been artificially boosted by budgetary action to a dangerously high annual rate of 8 per cent a year: the Central Bank has estimated last December's budgetary boost to disposable income to have been as much as 2 per cent.

But this problem is likely to solve itself in the near future - the hard way. The slowing down of our economy that might have been beneficially accomplished by well-judged budgetary action is now likely to be achieved by the negative impact of inflation upon our competitiveness.

If our growth is in fact slowed in this way to something like 56 per cent a year, and if this reduction in competitiveness does not initiate a cycle of pay and prices chasing each other, it should then be possible without further danger of overheating to use part of our budgetary surplus to initiate a campaign to eliminate poverty.

This will not be an easy task: it will involve a lot more than simply improving social welfare payments. Much, indeed, has already been done in that area, where pressure from the trade unions has forced a reversal of the policy of linking welfare payments to prices rather than wages - a retrogressive arrangement which ensured that the incomes of the disadvantaged persistently fell behind those of the rest of the community.

The causes of persistent poverty lie much deeper than issues of income maintenance, important though those are for people without the resources to provide for their own needs. Let me name but three of the major tasks that need to be tackled in order to resolve this problem.

First, the elimination of problems of social deprivation that have arisen from the way in which past policies have created ghettoes within and on the fringes of our cities and major towns. This will need both considerable investment and skilled social engineering.

Second, the fragmentation of our social services arising from their organisation through a wide range of government departments and local government structures needs to be addressed in a fundamental way, so that those who need help will no longer have to deal with a multiplicity of service providers.

And, third, there is an urgent need for a major increase in the number of trained personnel devoted to social work.

It would be wrong to denigrate the commitment of the present Government to social reform or to ignore the efforts being made to address some of these problems. But the action currently being undertaken is not commensurate with the scale of the problem of eliminating poverty within the next 10 years. That will require a radical policy rethink.