The Workers’ Party

2011 Pre-Budget Submission

December 2010

The Workers’ Party48 North Great George’s Street,Dublin 1www.workerspartyireland.net

Introduction:

The finalisation of the IMF/ECB/European Commission intervention in the Irish economy over the weekend 27th/28th November signalled, both nationally and internationally, the most catastrophic failure of Irish capitalism and the Irish government since the foundation of this state.

The political pantomime that unfolded over the period Saturday November 13th to Sunday November 21st showed the Irish government totally floundering as the international powerbrokers eventually called time on them, and insisted we withdraw from the international bond markets and take funding from them within their timeframe and on their conditions. We had the ridiculous spectacle of the European Commission, the ECB and the IMF all chiming in unison “Oh yes we will” and the Irish cabinet more and more desperately replying: “Oh no we won’t”.

It must be stated at the outset however that the intervention of the IMF/ECB/European Commission, and the €85 billion deal which they constructed, is not primarily for the benefit of either Irish capitalism or the Irish government even though, inter alia, it may be of benefit to both. The purpose of the intervention was to safeguard major European banks which have lent huge sums to Irish banks and to safeguard the Euro which is such a key building block of this phase of their European project. Ireland was seen as the weak link in the Euro chain and we were to be given our medicine whether we liked it or not.

The IMF/ECB/European Commission intervention is often described in the media and political discourse as a bailout. We believe that this term is seriously misleading in that it tends to indicate that we have been given a helping-hand, given something for nothing. The reality is completely different. We will get, at most €68.5 billion in loans on the most stringent terms and at penal rates of interest. The political programme which has been imposed on our government will be reviewed every three months and only after we have solidified the IMF/ECB/EU Commission will be able to draw down any monies.

The 2011 Budget, to be introduced by the Minister for Finance Brian Lenihan TD on behalf of the Fianna Fáil/ Green Party/ PD remnant coalition on December 7th, will be the harshest and most economically depressing budgets in the history of the state.

We now know for certain that €6 billion will be taken out of the economy in 2011, mostly in the form of swingeing cuts in wages, benefits and services. Workers, pensioners, job seekers, carers, young graduates will all pay a cruel and debilitating cost to remedy the economic and banking crisis into which an untouchable elite has dumbed us. At this time the veracity of the words of the great United Irishman leader, Henry Joy McCracken, that: “The rich always betray the poor” are once again demonstrated. What is also true, of which McCracken was also equally and painfully aware, is that the rich will always find a willing servant to do their bidding no matter what the cost to the greater good or the needs of the overwhelming mass of the people.

The Workers’ Party rejects as fundamentally flawed the parameters under which this budget is being framed. There is no objective rationale for the selection of 2014 as the date by which Ireland must conform to the rules of the Eurozone growth and stability pact. Indeed the selection of a target which is unachievable, and seen as unachievable by the outside world,

will do more damage to both the Irish and Eurozone economy than had we originally set 2015 or 2016 as the date when we should arrive at this magical 3% ratio. In this regard we also ask why the 3% ratio is seen as sacrosanct when we and other smaller countries are in breach, but was blithely ignored when France and Germany were in flagrant breach?

The original imposition of the 2014 deadline, the 3% objective, and the supervisory visit of Commissioner Rehn are all clear examples of the increasing dominance of the European Union over our domestic affairs. We have highlighted the dangers of this situation for many years and especially highlighted them during the debates on the Maastricht and subsequent Treaties. Our sovereignty is clearly being eroded but the “sharing of sovereignty with our EU partners” is but another myth. Our sovereignty has been surrendered to a totally undemocratic ECB, which has no regard for the interests of the Irish people, and to a German-French power axis which is driving and controlling the EU project.

The debate surrounding the framing of the budget is deeply ideological. Despite the populist “we are all in this together” rhetoric so beloved by this government and repeated ad nauseum by the right-wing media the reality is much different. A very small elite benefitted inordinately from the property and banking bubble of the so called Celtic Tiger. It was the actions of this elite which pushed the cost of housing out of the reach of families, pushed private sector rents to stratospheric levels, and fed the developer led frenzy of the 1999 – 2007 period. Now the Irish people are being penalised for this mess and are facing a massive clean-up bill while the elite escape scot free and in many cases are free to enhance their ill-gotten fortunes. The government deliberately distorts this reality and attempts to convince the people that all our previous wealth has vanished into some kind of banking black hole and that these people are sitting in their attic flats shivering from the winter cold. Even the revelations from the monster white elephant NAMA tells us that some of our “broke” builders are on a €4,000 per week allowance. In 20 days they have more money than a pensioner has to survive for a full year.

The choices which the public are being softened up to accept also clearly demonstrate the ideological nature of this budget project. The government is seriously floating cutting welfare and pension payments but refusing to contemplate a wealth tax. The government is putting the inevitability of water charges and property taxes into the public domain while refusing to discuss a third income tax band and refusing to treat earned and unearned income on the same basis for tax purposes. The government is telling patients that things will get worse in the public health system while at the same time hiding and denying the massive taxpayer subsidy to private medicine and the private pensions industry.

Key Principles for progress:

The key principles underlying the Workers’ Party budget submission are:

• Job Creation• Social Protection• The creation of a fair and equitable tax system• The development and maintenance of modern public services• The development and strengthening of our physical infrastructure.

JOB CREATION:

It is the unequivocal view of the Workers Party that shrinking the Irish economy will not solve our present problems of debt to GDP ratio, and indeed there is widespread evidence to the contrary. It is must surely be self-evident, even to this government, that, as a first step, to increase the workforce / reduce the dole queue by 100,000 would have many and massive beneficial effects on our economic situation. It would immediately cut 25% from “dole” payments, increase income tax by a minimum 5%, increase domestic demand (thereby safeguarding existing jobs, and perhaps even leading to the creation of new jobs), and increase state revenue from consumer taxes like VAT and Excise duties. It would also have the effect of providing a major confidence boost which is, in itself, a trigger for further economic growth. To eliminate unemployment completely is of course our goal.

The Workers Party believes the key to job creation lies in the development and strengthening of out publicly owned companies, the commercial semi-state sector. On a national basis some of the largest indigenous companies are publicly owned. The performance of these companies has, over the last two decades, been remarkably consistent. They employ about 40,000 directly and many more indirectly. They have a turnover of around €10 billion and generate profits in the region of €500 million annually. They also pay, on a varying basis, a dividend to the state. The ESB alone, for example, has paid in excess of €800 million to the state in dividends in the period 2000 – 2008.

There have been many calls from different right-wing parties and pressure groups for the sale of our commercial state companies. The EU/IMF have made it crystal clear that any money realised by such sales must be used to reduce Ireland’s international debt and cannot be put to any other use within the economy. However, and ironically, the IMF deal does not impose any restrictions on organic, internally funded, growth by these companies. This is exactly what we have proposed on many occasions and this is what is set out in the section below.

In our recent our submission to the Review Group on State Assets and Liabilities, the Workers Party set out clearly how our publicly owned companies can spearhead job growth and economic regeneration. One of the key benefits of such a strategy is that it can be achieved without any direct state aid and is therefore off the books in the debate on how we conform to the Eurozone rules. The reason that this expansion can be achieved without state aid is because these companies are economically sufficiently large and robust to be able to borrow in their own right. Collectively of course these companies have real economic muscle and borrowing power. As the ICTU states: “The establishment of a State holding company (SHC) – a new governance structure for commercial State companies, – would free up capital for re-investment within these companies, give them clearer objectives and a developmental role here and internationally.Further, the SHC could be used to leverage their considerable assets for borrowing, outside the strictures of the EU’s growth and stability pact. This would generate a major investment stimulus programme in real jobs”.

The Workers Party proposes that the optimum benefit from our publicly owned companies can be obtained through sectoral grouping. As we state in our earlier submission all the energy companies, Bord Gáis, ESB, Eirgrid; Bord na Móna would concentrate on developing

a secure energy supply and furthermore would concentrate on building an export industry in energy and energy related services.

Coillte and Bord na Móna, as jointly the owners of approximately 10% of the land of the country, are uniquely placed to take the lead in a vast array of ventures to drive the rural economy which is presently stagnating to the point of collapse. The location of our bogs and forests give the two companies unique locations for the development of wind-energy. The development of bio-mass crops, which are a sustainable product and reduce our dependence on imports and aid our balance of payments, is a further sphere where cooperation between these companies would yield major benefits.

We must also link these land-bank resources, the resources of our national parks, inland waterways, and disused canal tow-paths, to create a completely new tourist resource for the country. Such a nationally integrated resource could, in the first instance help Ireland capture a larger Irish spend. In the second instance it would greatly enhance our appeal to that audience which is not dependent on sunshine and artificially shimmering beaches.

This year the Department of Agriculture, Fisheries and Food published the report “Food Harvest 2020 - A vision for Irish agri-food and fisheries”. The land banks publicly owned by these two companies, under the direction of Teagasc, could and should be utilised for revitalising our horticulture; spearheading crop development; and examining new growing methods.

Across the world we can see the benefits to those economies that properly utilise their natural resources, whether these resources consist of mineral deposits, hydro-carbon reserves, rich coastal waters, or good farm land. Ireland has never properly used our natural resources. For the last 50 years, since the discovery of rich mineral deposits in Tynagh, Co Galway or Silvermines, Co Tipperary, the history of government in this area has been of sell-out, sell off or just plain giveaway. Successive government have given away untold billions of our mineral wealth and oil and gas reserves leading to the impoverishment of the state but the vast enrichment of a few individuals and multinational corporations.

Ireland needs to take charge of our own oil and gas reserves and build for the future. Therefore the Workers’ Party proposes the establishment of a State Energy Company. The basis of this already exists in the ESB, Bord Gáis and Bord na Móna. If Norway and Venezuela can harness their countries’ respective natural resources for the manifest benefit of their people then there is nothing to stop Ireland doing likewise, other than the reluctance / resistance of the government, and the opposition of vested interests. Long term sustainable jobs would be created; our balance of payments would be greatly improved; and, more importantly, downstream industries of refining and processing will occur.

We believe that this change in direction by the government policy is desperately urgent. In the next few months the government will be issuing exploration licences for major sections of our Atlantic coastal waters. It would be tantamount to national economic sabotage if a further tranche of these invaluable resources are handed over to the multinational oil conglomerates under the same give-away contracts as was done with Kinsale and, more recently and criminally, with the Corrib gas reserves off the Mayo coast. It is not the function of the Irish government to enrich multinational oil companies and impoverish our own people no matter what the personal inducements or political pressure.

The National Pension Reserve Fund (NPRF) allows the government a mechanism to invest in an entire range of projects, on a commercial basis, without in any way impinging on our debt to GDP ratio. We are aware that this fund is going to be reduced by at least a half under the bank recapitalisation deal imposed on Ireland by the EU/IMF. However, the state, directly or through a specialised agency, could be involved in an entire range of innovation in technology, energy or whatever. The only important criteria is that there is a genuine investment with a structured and credible plan for repayment of capital and interest. Many of our universities now have technology and innovation hubs either on or off campus. Bringing forward the projects developed in these hubs to production and genuine job creation is one of the obvious areas for this investment. A fund of €2 billion annually for the next 3-4 years would greatly help job creation and end the brain drain which as such a remarkable and depressing feature of every decade up to and including the 1980s and indeed the early 1990s.

Social Protection

One of the marks of a civilised society is how it treats the weakest and most vulnerable in society. Our history in this regard, littered as it is with shameful episodes from the institutional abuse of children in care; to Victorian conditions in some of the large mental institutions and ranging to the continuing HSE / nursing home scandal is clearly appalling.

Over the last decades some progress has been recorded. Our treatment of lone-parents families, of people with learning disabilities; of the mentally ill, of older people had significantly improved. Our old age pension, while still teetering on the poverty line had significantly improved. The child benefit payment was also of significant importance to those otherwise on very low incomes.

Two years ago this government attempted a full frontal assault on the rights of older people when they attempted a very crude means test mechanism for medical cards. The overwhelming public rejection of this plan, allied to the very public mobilisation of thousands of pensioners, forced the government into a policy u-turn at that stage.

Since then the government has been continuing its assault on those dependent on state payments, especially the unemployed. One of the few luxuries of the welfare system, the bonus week or double week at Christmas was withdrawn. In effect this is a 2% annual cut in income. Job seekers allowance for young people up to the age of 23 has been severely curtailed. Optical and dental benefits available under social insurance payments and medical cards have been abolished. The maximum age for receiving child benefit has been reduced by one year, an effective 5.5% cut.

Two very clear facts must be made clear about our welfare system. It is not possible to live a full and dignified life on €210 per week. Any reduction in welfare or pension payments will have life threatening consequences for many people, especially elderly and ill people. In fact SJI estimate that already, the existing pension / SW weekly income is marginally below the poverty rate.

There is a very specific cost of living index for those living on state payments. This index centres on the cost of food, clothing and heating. These costs have not reduced. It is also a well documented fact that the spend distribution of those on the lowest income is always 100% of income and in the vast majority of cases that spend is entirely local.

The Workers Party demands that there are no reductions in payments to pensioners, the unemployed or others living on state payments in the 2011 budget.

A fair and equitable tax system

Our tax system is palpably unfair and has been unfair for many decades. As far back as the 1970s, culminating in the massive tax marches of 1979, we and others highlighted the vast inequality within the tax system in Ireland. The central inequality in Ireland is that income is taxed while wealth is not taxed, and the secondary inequality is that within the wage earning sector the burden falls unfairly on the lower and middle income earner while the top earners have an entire slew of mechanisms to minimise their tax bill.

The value of all tax relief’s is best estimated at just under €8.5 billion per annum. While some of these reliefs are being utilised by mortgage holders on their family homes, and despite the fact that the existence of these reliefs actually added to property inflation, the reality now is that many families desperately rely on this relief to keep solvent. However the Commission on Taxation have identified over €4 billion in tax reliefs which do not apply to standard income families and individuals and are of no obvious economic interest but do allow high income people to minimise or eliminate tax payments.

If, for example, we take the TASC figure (essentially the Commission on Taxation figures updated by one year) for this area the benefit to the state of ending this would be almost €1.5billion. (See some of the figures below)

Tax Reliefs which should end - Total: 1,463{Standard Rate all pension tax reliefs 75020Abolish legacy property reliefs on non-residential property 435Abolish capital gains tax and stamp duty relief for disposal of a site to a child 38Abolish tax exemption for patent royalties 84Limiting the business relief for CAT 30Limiting the agricultural relief for CAT 100Abolish PRSI exemption for share options 18Introduce a ceiling of €75,000 on the artist’s exemption 20}

Tasc also estimate that a further €400 m could be raised by in the following fashionSocial Security: 199{Abolish the €75,000 ceiling on employee’s PRSI 120Charge PRSI on share-based remuneration & Capital Gains 79}Other tax measures: 197{Increase Capital Gains Tax to 28% 48Increase Capital Acquisitions Tax to 28% and reduce all thresholds by 25% 60Apply the 4% health levy to rental and dividend Income 89}

The Workers Party has long stated that the tax relief on private health insurance payments is, in effect, a subsidy to the private health sector. There is also a major tax relief for investment in private hospitals and private nursing homes. If these were eliminated then at least another billion Euro could be saved for the tax payers,

As the Workers Party has for many years called for an increase in the rate of Capital Gains Tax in general to the same rate as tax on earned income; and a punitive rate of CGT for

development land; we believe that the €48 million mentioned by TASC could at least be doubled.

The major ideological issue to be tackled within the budget is the issue of taxing wealth. It is remarkable (but we understand why) that Revenue or other such state bodies has never tabulated wealth. In fact for details in this area we have to rely on such diverse sources as the Irish Times / Sunday Times annual rich list, or the Bank of Ireland list produced some years ago. Of course these figures were produced, not for statistical purposes or to expose the gross divisions in society – but to boast of the successes of the illusory Celtic Tiger.

At the top level of society there is a massive concentration of wealth, income and therefore political power. This elite has never contributed to society and indeed many of this elite engage in a modern day Flight of the Earls by taking to sunnier climes for the winter and therefore avoid even the minimal tax to which they would ordinarily be liable.

We believe that there must be a wealth tax, and even at the rate of 0.25% it would generate several billion Euro per annum. However the Workers Party is not in favour of a property tax which becomes a tax on the family home. While this may have the simplicity of being a stable tax source it places the burden on exactly the same sector which is already overburdened by recent tax changes, levies, and reduction in benefits available through PRSI. It would be especially unfair to introduce such a tax at the present time when so many mortgage payers are in arrears and many respected experts are expecting this mortgage crisis to put further huge strains on our already shattered banking system

The Workers party reiterates our long standing opposition to service charges. They are in the first instance an unjust form of double taxation, and secondly have always acted as the precursor of privation of these services to the private profit Sector. Frankly, the lessons from right across the world, and specifically the lessons from our nearest neighbour should be a salutary warning of the dangers of such a path.

The development and maintenance of services for the public

HEALTH: We believe that the funding for our public health system must be maintained and strengthened. We believe that there are sufficient funds for this purpose. There is waste in the health system which we want eliminated:Double jobbing consultants – they either work for the public system or get out and work in the private sector.Private beds in public hospitals – Total nonsense and should never have been allowedCo-Location (i.e. giving sites for private hospitals in the grounds of public hospitals) – it should be ended forthwith.All outstanding payments from insurance companies should be pursued with vigour.There is a layer of unnecessary and overpaid bureaucracy at the top of the HSE – it should be got rid of.End the duplication between the Dept of Finance / Dept of health / HSE.

EDUCATION: The Workers’ Party is pledged to defend the public education system. We believe that both as a basic human right, and as a necessity of a modern economy, End the subsidy to fee paying schools. Ridiculous that the same level of support given to schools given to schools with €6,000 annual fee as is given to an inner city school.

Capital building programme – properly managed. If the State is funding new schools then the state should retain ownership and the patron (in the absence of a state education system) merely lease the school as a peppercorn rent while it is used as a school. We must defend the Special Needs Provision within our schools and completely oppose the war of destruction on the SNA service throughout our education system. Rights which were hard gained as recently as ten years ago are being constricted day by day. We make the point again that it is much cheaper to keep a young person in school than in prison.

SOCIAL SERVICES: i.e. provision for the elderly; those with mental and physical disability, etc. In general, our history as a state in this regard has been deplorable. Again the advances of the last few years are being rolled back.We must demand that the Carer’s Allowance must be maintained and that the qualifying conditions not be worsened.Likewise we must demand that the access to respite – minimal though it is – be maintained.

The development and strengthening of our physical infrastructure.

The big ticket issue here is housing stock. There has been almost a complete cessation of the building of public sector housing over the last decade. (As often these houses were bought at the top of the market to be sold on as “affordable housing” or “shared ownership homes” and have now lost up to 50% of their cost price the Local Authorities are sitting on a huge loss in this area). Instead two developments have taken place. Local authorities have been forced to go to the open market to buy houses; and there is a huge placement of housing list families / individuals into private rented accommodation paid for by the state. Every two years there is a €1 billion payment from the state to private landlords.

Our demand is simple. Phase out this system over two-three years and invest this money into creating a stock of newly built public sector housing which actually adds to the wealth of the nation and gives security to both the Local Council and the tenant.

In previous documents we have already called for a scheme to upgrade and retrofit housing with insulation as both a “green” measure; a job creation measure, and as a cost-saving measure for households.

Public transport is an area that still needs major investment. A proper system would be beneficial to everybody and when it reduces the need for private transport constitutes a major saving to individuals.

School building has already been referred to. One of the scandals of the present system is the proliferation of temporary buildings throughout the country. There are so many of these that the Department of Education did not know how many existed and some years ago had to do a survey of all schools to try and estimate how many existed.

There are two scandals here. One is that most of these temporary buildings are sub standard and therefore unfair to both children and staff. The second scandal is that they are a complete waste of money. Most of them are all being rented on a yearly basis from private operated. Some schools have prefabs for the last twenty years.

Upgrade of the national water pipe system. This will be highly labour intensive.

An upgrade of our secondary road network and rural roads.

Executive Summary:

* A return to national sovereignty where the Irish people, through the Irish Parliament, we are free to construct our own budget without big brother Brussels dictating.

* As 2/3 of the budget deficit is the result of the bank bailout. We must ensure that this never happens again and demand a referendum to this effect.

* Job creation is our central demand – We cannot shrink our way out of this recession.

* The expansion of our state companies is the central plank of our jobs policy

* The nationalisation of our oil and gas and the creation of a State Energy Company is a further step to energy security and long term employment.

* The utilisation of the NPRF to act as a National Employment Investment Fund – to be administered on a commercial basis.

* No reduction in old age or disability pensions or in unemployment benefit / allowance.

* Reverse the cuts in carers’ allowances and conditions

* An equitable tax system.

* An end to the “Tax fugitive” system

* Introduction of a wealth tax

* Eliminate all non-productive tax allowances and eliminate all tax allowances that are a direct or indirect subsidy to the private sector.

* Oppose residential property tax or Service charges.

* Maintain funding to our public health and education system – end funding to private health and education.

* Completely separate the private and public health system.

* De-bureaucratise the HSE

* End the scandal of a €0.5 billion annual subsidy to private landlords – invest the money in public sector housing.

* Upgrade our private housing stock through a subsidised insulation scheme

* Modernise our water network, work to be done by local authorities and not sub-contracted out to the likes of Veolia and others.

* State supervised scheme of re-negotiated mortgage terms for family homes in negative equity and mortgage difficulty.