Tuesday, 13 October 2015

Budget 2016: Opportunity missed to address social crisis, particularly housing, as chronic under-investment in infrastructure continued

Rory Hearne: So what do the expenditure measures announced in today’s Budget 2016 do to address Ireland’s worsening social and economic inequality? And note the CSO figures show that deprivation rates have increased from 24.5% in 2011 to 30.5% in 2013 while the Gini-Coefficient increased from 31.1% to 31.3%. Firstly, it is to be welcomed that, rather than further austerity, the government has decided to increase public spending and investment, particularly in the area of childcare, education and the extension of free GP care.

However, the increase in spending is insufficient to address the various social crises and austerity related under-investment and the indication is that this is just a once off ‘stimulus’ in an election year with government estimates showing no similar expenditure increases in coming years. The increase in spending in this Budget of €750 million should also be put in the context of the €21bn reduction in expenditure over the period of 2008 to 2014. The increase in Budget 2015 is just 1/30th (just under 4%) of the austerity cuts to spending. And that doesn’t take into account the increased demand and requirement for investment due to changing demographics and people’s needs.

So we can see that in the area of current spending while there is some welcome (partial) restoration of some areas of cuts to social welfare, particularly to lone parents, the vast majority of austerity measures remain in place. These include cuts to welfare, notably for those under 25, rent supplement, carers and disability allowance, student grants, community development and youth projects, and the increase in student fees, water and property charges etc.

In regard to investment in social and economic infrastructure the Budget presents no significant change on what was announced in the Capital Investment Plan where capital spending  will only increase by 400 million between 2016 and 2018 (from €3.7bn per annum in 2016 to 4.2bn in 2018) and reaching only €5bn in 2020. This is still only half the levels of pre-austerity investment (for example capital spending was €9 billion in 2008). The government also appears intent to pursue a neo-liberal model that is reliant on and encourages private commercial investment in public services and infrastructure through Public Private Partnerships. This is a failed model that provides huge profits to speculative finance at the expense of tax payers and poor quality services and infrastructure.

The impact of insufficient spending in capital will be felt most acutely in the area of housing. Capital expenditure on building or purchasing new social housing is only increasing by approximately €57million and the capital investment plan shows total social housing investment decreasing from €580m in 2018 to €450m in 2019. This is a third of what was being spent on social housing in 2007. Of the 110,000 social housing units in the social housing plan 75,000 are to come from an already overheated and dwindling supply of private rented accommodation. The increase in funding for emergency accommodation is welcome but will do little to address the increase in numbers becoming homeless.

Again, social housing is a good example of the size of the catch up required as a result of the lost years of austerity. Over the period of austerity, we effectively lost 25,000 social-housing units. Indeed those in housing distress (at least half a million households – most noteably those reliant on rent supplement, in emergency accommodation, in mortgage arrears, those in housing waiting lists, substandard accomodation and in light of the recent tragedy, Traveller accommodation and halting site services) are the biggest ‘loser’s’ in this Budget. It is disappointing that neither rent certainty nor an increase in rent supplement were included in this Budget.

The government is incorrectly looking to incentivise the private sector to increase ‘supply’ which is again a neoliberal economic approach that does not work. The delivery by NAMA of 20,000 housing units is being put forward as a positive measure to address supply. However, these were planned anyway and as Minister Noonan stated will be developed on a commercial basis with aim of maximising return to the taxpayer. This means they will be neither social nor affordable. The Budget should have tripled spending on social housing, removed the tax reliefs for REITs and redirected NAMA away from the vulture funds to deliver social and affordable housing on a large scale. Indeed There was no sign either of a much needed vacant and derelict buildings land tax.

It was also disappointing that the government did not use the opportunity of the Budget to declare the housing crisis as a National Emergency which could free up resources and fiscal rules to address the crisis.

The budget then fundamentally does not change the fact that Ireland has one of the lowest levels of public spending and investment in the EU at 34% of GDP against the EU average of 45%. Even using GNP we are less than 40%; still at the bottom with UK, Spain and East Europe countries). We would have to increase spending on public services, social protection and investment by over €12 billion to reach the EU average.

This low spend is projected to continue to up to 2019. Moreover, debt servicing is swallowing up around €7bn per annum, or 18% of all tax revenue a massive increase on €2bn (3.4% of tax revenue) in 2007. The recent C & AG report showed that around €2.3 billion of that is directly related to bailing out the banks and developers. This (along with closing the deficit) explains the large gap between the increase in revenue of €7.2bn (14%) between 2014 and 2016 and the increase in spending by only €2.25bn (4%).

There were and remain clear alternative approaches particularly in regard to increasing investment. We are at a current expenditure surplus (or very close to it) in this Budget. Ireland is also well within EU targets (tax revenue this year will be €2.3 billion ahead of original targets and the deficit will be 2.1 per cent, well below the 2.9 per cent required under EU Commission rules). This means that the government has an additional €800 million to invest if it stuck to, rather than over achieved, the EU rules. Next year the headline deficit will be just 1.2% of GDP.

Finally, the minimum wage increase is welcome but falls far short of the Living Wage of €11.50 per hour which is required to help lift the 350,000 people in the workforce (19.2 percent) suffering multiple deprivation experiences out of poverty.

Overall then, the Budget is unlikely to have any major impact on our unacceptable deprivation and poverty rates where 138,000 children (one out of every eight children) experience consistent poverty on a daily basis, children from the poorest households do not get treatment due to waiting list delays and Tusla reports that because of a lack of resources over one third of child protection concerns are not being responded to in the initial 24-hour period, as is required.

An equality and poverty proofing or Equality Impact Assessment of expenditure and taxation across all departments would have been very useful to engage in an overall analysis of the impact of the measures introduce in this Budget. In its absence meaningful public debate on the Budget is diminished.

A Budget for 2016 was a clear opportunity for dramatic and bold possibilities in addressing the multiple crisis and bringing us closer to achieving an ‘Ireland of Equals’. However, this Budget continues the neoliberal approach to economic policy.  Cutting taxes weakens the base for public spending and investment which is essential for sustainable social and economic recovery for all. There are major question marks over the sustainability of this model when, as is inevitable, growth rates will fall back as the international economy slows and the next global financial bubble bursts.

No comments: