Sinéad Pentony: The Finance Bill will bring the measures announced as part of Budget 2011 into law in the coming days. As the effects of these measures begin to be felt by families, business and the wider economy, it is worth restating the impact they will have, and comparing the Irish solutions to the crisis, to what is happening over at the World Economic Forum in Davos.
Budget 2011 measures represent a €6 billion adjustment that will reduce incomes at all levels through changes in taxation (€2.1 billion), with a disproportionate impact on low paid workers. Spending cuts on public services and social transfers (€2.2 billion) will see a further erosion of public services and push more people into poverty, while the capital spending budget cut ( €1.75 billion) will have a direct impact on our competitiveness and economic growth.
Cumulatively, the extreme austerity measures will result in:
• even more demand being taken out of a weak and fragile economy;
• businesses being put under increasing pressure as they struggle to remain viable;
• the jobs crisis continuing and the rate of emigration gathering pace;
• growing inequality - as more families and vulnerable groups are pushed into poverty because they no longer have an adequate income to meet their basic needs.
The absence of an investment strategy to stimulate growth and demand will make it increasingly difficult to address the deficit. The passing of the Finance Bill into law represents more of the same failed policy choices, and they will not address the fiscal and economic crises.
Meanwhile, over in Davos, the World Economic Forum is having its annual gathering of international business leaders, politicians, intellectuals and journalists to discuss the most pressing issues facing the world. The Forum is not normally associated with ‘progressive’ ideas but over the last number of days they have been talking about inequality, jobless growth and youth unemployment, amongst other things, as they grapple with finding solutions to the global financial, economic and fiscal crises.
Fears over jobless recovery and youth unemployment have prompted joint actions between the trade unions and Davos leaders to develop a coherent plan for G20 nations. Job creation coupled with the need to address the issue of growing income and wealth inequalities have been put forward as key parts of the solution. Some of the suggestions include the need to increase the wage share of national income; the creation of a universal safety net to protect workers who lose their jobs; and active labour market policies to create work, amongst others. Action is also needed to ensure the proceeds of growth are distributed more equally and concentrations of wealth are eliminated.
The passing of the Finance Bill into law will copperfasten measures that will do the exact opposite of the solutions being discussed in Davos. Ireland seems to be determined to cut its own idiosyncratic path.
The reduction in social transfer levels and the minimum wage will create a more unequal distribution of wealth, while the absence of any major job initiatives means the most promising job path for Ireland’s unemployed will continue to be the airline ticket out of the country.