Sunday, 9 October 2016

Opinion poll shows Budget 2017 should provide significant increase in investment in public services and infrastructure

Rory Hearne: Another opinion poll, this latest one from the Irish Times/Ipsos MRBI, shows that “a large majority of voters favour increasing spending on public services and welfare ahead of reducing taxes and charges”. This week’s Budget should reflect this public mood and provide a very significant increase in investment in key public services and infrastructure, particularly housing, a reversal of regressive austerity measures and outline a plan for the restructuring of the Irish economy away from failed neoliberalism towards a more social economy model of development.

According to this latest poll in the Irish Times, when offered a menu of choices between tax reductions and spending increases and asked to pick one priority, “voters overwhelmingly prefer spending increases in a variety of areas, with by far the biggest preference being for increasing spending on healthcare”. The aggregate support for tax cuts was only 19 per cent (including income tax at just 7 per cent and the reduction or abolition of the USC at 10 per cent).  While support for increased public spending was over three times that, at 72 per cent (with healthcare the highest at 29 per cent and housing and homelessness next, at 14 per cent). So this shows support for increased spending on healthcare is four times greater than that for cuts to income taxes and support for investment in housing is double that for cuts to income tax.

The most significant aspect of this poll is that it confirms a trend of the changing attitude amongst a majority of the Irish public towards our economy and the role of the state, expressed through attitudes to public services. It shows that a new popular ‘common sense’ has emerged in Ireland where a majority of people, having experienced the harsh reality of crisis, austerity and a laissez-faire economy, are demanding a more central role for the state and protective public services.

For example, an opinion poll commissioned by TASC in June 2015 showed that 70% of people felt the government should prioritise investing in public services rather than spending money to cut income taxes (this poll also found that 50% of respondents were willing to pay higher taxes to improve public services, and 63% supported an increase in the tax rate for high earners (over €100,000 per annum).

Furthermore, a recent Eurobarometer poll, showed that the issues of main concern to the public in
Ireland are housing (34%), health and social security (29%) and unemployment (32%) in contrast to tax (at just 9%). The trend in these polls, expressed also as a key message from the public in February’s General election, is that the Irish people increasingly want to see accessible and high quality universal public services (particularly health care and housing) and they see investment in these as a priority over tax cuts.

These views are even more significant when we consider the lack of comprehensive, well-funded and universal public services in Ireland and the growing drive toward privatisation and commercialisation. We have some excellent quality public services – in education, transport, areas of the health service and local authorities, and semi-state agencies such as the ESB. But many citizens also have negative experiences of long waiting times to access these services (hospitals) or are excluded from them (e.g. social and affordable housing).  This is because we have the lowest level of public expenditure as a proportion of GDP in the entire EU. We also have the lowest level of investment in infrastructure in the history of the state.

And this public opinion is being formed in spite of the mainstream media, economics and government policy continuing to promote the Celtic Tiger obsession with ‘tax cuts’ and a ‘low tax’ economy as part of a laissez-faire, neoliberal, economic policies. These espouse private market solutions, privatisation, minimising investment and underfunding of basic services, and promoting the monetisation and financialisation of public services by facilitating and supporting the 'for-profit' commercial private sector through PPPs and other mechanisms.

These policies have contributed to the multiple social and economic crises our citizens face such as rising poverty and deprivation, our housing crisis, lack of health care, unaffordable childcare, regional underdevelopment (through lack of public investment in infrastructure) and a lack of state investment in research and development and support for indigenous sustainable businesses (rather than an over reliance on foreign investment).

Budget 2017 is being introduced at a time of rising inequality in Ireland despite the so-called ‘recovery’, the legacy of the recession and austerity years (visible in 29% of the population suffering deprivation –with lone parent households, at 58.7% and children at 36.1%, most affected), a cost of living 25% above the EU average, a national housing emergency, precarious work, unemployment, and regional underdevelopment.

This Budget therefore, should reflect the public's very sensible demand for greater investment in public services, and provide a ‘new deal’ for Ireland with a large scale public investment plan, beyond anything currently being considered, such as TASC has proposed in A Time for Ambition: Ensuring prosperity through investment  

This should go considerably beyond the narrowly defined (and misleading) ‘fiscal space’.

Restrictions of budgetary discussions to what is possible within the defined ‘fiscal space’ has foreclosed the discussion of the many real and viable alternative approaches to fiscal and budgetary policy that are available to the government beyond the fiscal space. For example, we could substantially increase investment beyond the €1.2bn ‘fiscal space’ if the decision was made to retain the USC, or to introduce a wealth tax, close the tax reliefs that benefit the better off, raise employer’s PRSI, if the decision was taken to borrow for investment or use funding returning from the banks for public investment instead of debt repayments. Flexibility on EU fiscal rules could be sought (and more are likely to be achieved given the post-Brexit and European and global economic crisis -see below) to facilitate this investment, if necessary.

There is growing support at European and indeed, global, level favouring such radical public investment plans to address the twin crises of stagnant growth and rising inequality.

Just this week, this perspective was provided in the Financial Times. Firstly, a former US Treasury secretary wrote that,

"After seven years of economic over-optimism there is a growing awareness that challenges are not so much a legacy of the financial crisis as of deep structural changes in the global economy...concretely, this means rejecting austerity economics in favour of investment economics...Enhancing infrastructure investment in the public and private sector should be a fiscal policy priority...And the focus of international economic co-operation more generally needs to shift from opportunities for capital to better outcomes for labour.”

While, Wolfgang Münchau, the FT associate editor wrote:

"From an economic point of view there is nothing extreme in the argument for large investment programmes, especially after years of fiscal consolidation….the overwhelming consensus in favour of centrist libertarian economic polities is breaking down.”

Furthermore, public investment (and the necessary taxation to fund it) is not, as it is often portrayed, a ‘cost’ or ‘unaffordable’ as it provides many multiples of return on its investment (through various multipliers particularly in areas of housing, childcare, etc).

Public services such as health care, education, and welfare, along with public investment in infrastructure such as housing, water, and transport play a vital role in addressing inequality in society and are a key mechanism by which to achieve sustainable and socially inclusive economic development.

This Budget should, therefore, be used as an opportunity to change our dominant economic and fiscal policy which is worsening economic inequality and move it closer to that of countries such as Sweden and Denmark, that have substantially higher levels of investment in public services, and, as a result, have more stable economic growth, are much more equal and have less social problems.

Dr Rory Hearne is a Senior Policy Analyst with TASC and co-author of Cherishing All Equally 2016: Economic Inequality in Ireland

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