Analysis and Critique of the Irish Government's Budget 2001 Download Pdf

Introduction

Poorest People Betrayed as Budget Favours the Better Off, Increases the Divisions in Society and Fails to Honour PPF Commitments

The poorest people in Irish society have been betrayed by Budget 2001. With sufficient resources available to enable it to eliminate income poverty among both adults and children Government chose instead to give these resources in superabundance to those who were already better off. As a result this Government's legacy after four Budgets is to have substantially widened the rich/poor gap - which was already the worst in the EU.

Budget 2001 has increased the divisions in Irish society. It widened the rich/poor gap. It failed to treat the poorest in society fairly in its compensating people for inflation. It continued the present Government's distinguishing between the 'deserving' and 'undeserving' poor. It even created divisions among those most in need as it helped some of these at the expense of others.

Some examples will serve to illustrate how much the rich/poor gap has been widened. In 2001 single people who are long-term unemployed will be £8 a week better off, those with £15,000 will be £26.50 a week better off while those on £40,000 a year will be £64 a week better off in 2001.

In 2001 couples who are long-term unemployed will be £15 a week better off. Couples with one income earning £15,000 will be £28 a week better off while those on £40,000 will be £57 a week better off.

Likewise, in the coming year couples with two incomes earning a total of £15,000 will be £31 a week better off while those with two incomes totalling £40,000 will be £81 a week better off.

Instead of giving priority to building an inclusive society where everyone is respected and has sufficient resources to live life with dignity, Government chose, instead, to further solidify the social exclusion being experienced by the poorest people in Irish society. Those who needed most were the people who fared worst.

The Government has also failed, under two headings, to honour the commitments contained in the Programme for Prosperity and Fairness (PPF). The PPF contains commitments

• To provide real improvements in the standards of living of the poorest people in Irish society, and
• To allocate additional resources that become available "in a balanced way to accelerate progress towards the priority objectives of the PPF including social inclusiion".

Neither of these commitments has been honoured in Budget 2001. This failure to honour commitments in PPF for the poorest people in Irish society has serious implications for the future of the national agreement and the commitments it contains on social inclusion.

A recent public opinion poll showed that Irish people wanted the rich/poor gap reduced. When political leadership was required so that everyone would benefit from the country's new-found prosperity and be treated with fairness, this Government chose, instead, to refuse to hear the cry of the poor.

Sustainability Social, Economic and Cultural

The search for a humane, sustainable model of development has gained momentum in recent times. After years of belief that markets and market forces would produce a better life for everyone, major problems and unintended side effects have raised questions and doubts. There is a growing awareness that sustainability must be a constant factor in all development whether social, economic or environmental.

If social exclusion is to be eliminated then policies must be sustainable. Consequently, CORI Justice Commission has proposed the following objective in the area of sustainability: To ensure that all development is socially, economically and environmentally sustainable.

Central to any model of development which has sustainability at its core must be a realisation of the need to move away from money-measured growth, as the principal economic target and measure of success, towards sustainability in terms of real-life social, environmental and economic variables.

Already, within mainstream decision making this realisation has begun to have some impact. This can be seen, for example, in the growing realisation that environmental taxation should be recognised as a key policy instrument in dealing with environmental concerns. Recent voicing of public concern in the area of genetically modified food is another example.

In the context of income and social welfare policy, the recent work on basic income undertaken under Partnership 2000 is a further example of the same search for policies that will be sustainable into the future. The growing demand for the recognition of unpaid work being done in the society is yet another example. As can be seen from these examples, however, there is a long way to go before Ireland or the EU can claim to have placed sustainability at the centre of their development models.

CORI Justice Commission has proposed that Government take the following policy initiatives, among others, to promote social, economic and environmental sustainability:

• Develop ‘satellite’ national accounts that include the costs of all environmental damage and resource consumption and all unpaid work.
• Sustainability-proof all public policy initiatives and provision.
• Restructure the tax system in favour of environmentally benign development.
• Terminate subsidies and other public expenditure programmes that encourage unsustainable development.
• Introduce public purchasing policies that encourage contractors to adopt sustainable practices
• Resource the development of indicators to measure economic, social and environmental performance and progress.
• Encourage demand reduction policies in areas such as transport and energy and tackle the implications of such reductions

The expansion of markets tends to penalise altruism and care. Both individuals and institutions have
been free-riding on the caring labour that mainly women provide. Whether women will continue to
provide such labour without fair remuneration is another matter” Human Development Report 1999 page 79

A Question of Choices

A Question of Choices: Reduce the Top Tax Rate or Increase the Lowest Social Welfare Payments

Government’s priorities in making choices in Budget 2001 are best illustrated by examining two decisions it made.

Firstly, it reduced the top tax rate by 2%. This will benefit only the wealthiest in Irish society, those who already pay tax at the top rate. The cost of reducing this top tax rate will be £163 million in a full year.

Secondly, Government decided to raise social welfare for the poorest in Irish society by only £8 a week instead of the £14 required to meet PPF commitments and the unexpected rise in inflation. The cost of raising the payments to all those on social assistance by the extra £6 needed to bring the payments up to £14 and meet these requirements would be less than £150 million.

This means that the poorest in Irish society could have had their social welfare payments raised by £14 a week for a single person and £24 a week for a couple for less than it cost to reduce the top tax rate and provide an additional tax bonanza for the wealthiest people in Ireland.

This was the choice that Government made. It is both unjust and unfair.

Healthcare System Requires Urgent and Radical Reform

The healthcare budget has received a huge increase to £5.3 billion. In two years this budget has increased by close to 38%. In his Budget speech the Minister for Finance pointed out that 80,000 people are employed in the health services – an increase of 21,000 since 1990. However, from the consumer’s point of view there is no appreciable improvement in the service.

There are about 30,000 people on healthcare waiting lists. There is much anecdotal evidence of the Third World conditions prevailing in outpatient and in accident and emergency departments.

Very serious questions need to be addressed about the management and evaluation of these services. While the Minister awaits the recommendations of the ‘Comprehensive Value for Money Audit’, one can only hope that this audit will not only provide recommendations of a ‘management information system’ but will address the overall healthcare system.

Poor people get sick more often and die younger than those in the higher socio-economic groups.
Poverty directly affects the incidence of ill health and it limits access to affordable health.

Initiatives for Elderly People Most Welcome

We welcome the Government’s recognition and appreciation of “the part played by the workers of yesterday in laying the foundation for so much of our economic success”. We were glad to hear the Minister for Finance acknowledge this reality in his Budget speech.

The increases in income support through pensions in recent years, which has been followed through in Budget 2001 was greatly needed and is most welcome.

Access to a medical card will remove much anxiety about anticipated healthcare costs. In this context we urge Government to extend access to medical cards to all pensioners over 65 years of age.

There are other issues affecting the quality of life of elderly such as public transport and a range of other services. Accessible public transport will also improve the quality of life and mobility for our senior members.

The extension of the fuel allowance by three weeks is welcome. However, most elderly people need some heat all the year round not just for 29 weeks. Consequently, we believe this allowance should be available throughout the year.

Overall, CORI Justice Commission welcomes the Budget’s support for older people and believes this thrust in Government policy should be maintained.

Government's Expenditure for 2001

Note that figures may not add due to rounding.

(a) Of the £2,109 million cost of servicing the National Debt in 2001, £1,709 will be met from the Exchequer and £400m will be met by reducing the assets of the Capital Services Redemption Account.

Government’s Revenue for 2001

Government’s Revenue for 20

Who benefited?

It is clear that the major beneficiaries were better off people, particularly couples with two incomes totalling £40,000 and more.

In seeking to discover how much better off people will be in 2001 it is essential that wage increases be included as well as tax cuts and social welfare increases. Unemployed people gain nothing from the tax reductions or wage increases. Consequently, when assessing their position it is essential that pay increases be included in the calculations. We have included the PPF wage increases so that legitimate comparisons can be made. The numbers on the chart are the gains over a full year.

Chart 1 shows how much better off different groups will be in 2001. The chart shows the impact on single people, and on couples with one and two incomes.

Single people who are long-term unemployed will be £8 a week better off, those with £15,000 will be £26.50 a week better off while those on £40,000 a year will be £64 a week better off in 2001.

Couples who are long-term unemployed will be £15 a week better off. Couples with one income earning £15,000 will be £28 a week better off while those on £40,000 will be £57 a week better off.

Couples with two incomes earning a total of £15,000 will be £31 a week better off while those with two incomes totalling £40,000 will be £81 a week better off.

This is a recipe for widening the rich/poor gap. It is totally unacceptable in the context of a national agreement which claims to promote fairness. It is deeply unjust to give £8 a week to the poorest in Irish society while giving £64 a week to single people on £40,000.

The Minister for Finance claimed his Budget would lead to a fairer society. This claim is obviously false.

How much better off are people under this Government?

Chart 2 illustrates how much people’s take-home incomes have increased since this Government came to power. It covers the last four Budgets and includes both pay increases and tax reductions as well as social welfare increases.

The outcome shows a dramatic widening of the rich/poor gap as each of the four Budgets gave substantially more to those who were better off than to those who were the poorest in Irish society.

Single people who are long-term unemployed are £18 a week better off, those with £15,000 a year are £78 a week better off while those on £40,000 are £166 a week better off.

After four Budgets couples who are long-term unemployed are £32 a week better. Couples with one income earning £15,000 are £77 a week better off while those on £40,000 are £157 a week better off.

Over the same period couples with two incomes earning a total of £15,000 a year are £85 a year better off while those with two incomes totalling £40,000 are £210 a week better off.

During this Government’s period in office a long-term unemployed couple are £32 a week better off while a couple with two incomes totalling £40,000 are £210 a week better off. This distribution of resources is neither fair nor just.

The Widening Rich/Poor Gap

While this year’s Budget took some positive directions, for example in its initiatives for the elderly and for children, its most notable feature is how much it has widened the rich/poor gap. The cumulative impact of this Government’s four Budgets illustrates this feature even more starkly.

The actual widening of the rich/poor gap is much worse, however, than the figures outlined above illustrate. In our analysis we have NOT included the impact of recent changes in corporation tax, in residential property tax, in capital acquisitions tax and capital gains tax, all of which have had the effect of further increasing the take-home incomes of property owners and shareholders in companies.

This widening rich/poor gap is deeply dividing Irish society. This has major implications for social cohesion in the future.

This widening of the rich/poor gap is not an accidental development – nor is it inevitable. It is the result of decisions made to allocate resources in particular ways. It also results from the failure of Government to come to grips with the fact that the present tax and welfare systems are part of the problem, in that they tend to produce these widening gaps.

A recent MRBI/Irish Times poll showed that the widening rich/poor gap was one of the top three issues Irish people felt should be the priority concerns of the next General Election. Their concern is not mirrored in this year’s Budget or in this Government’s actions on this issue.

Social Welfare: Social Insurance increases April 2001

SOCIAL WELFARE: Social Assistance increases April 2001

Taxation

Our Budget Submission Asked That

• Tax credits be made refundable.
• Tax credits be increased substantially.
• Family Income Supplement (FIS) be made part of the tax system
• Individualisation in the tax system be pursued in a fair and equitable manner.
• Changes in the income tax system benefit those on low to middle income as much as they benefit the better off in cash terms.
• The windfall tax gains accruing to the corporate sector arising from the reduction of the corporation tax rate to 12.5% be recouped.
• The distribution of all changes in indirect taxes discriminate positively in favour of those with lower incomes
• All discretionary tax expenditures be standard rated.
• The budget move towards developing sustainability taxes, land rent tax, and Tobin type tax.
• The goal of having Ireland’s total tax take set at the EU average tax take level be accepted.

The Budget

Income Tax

Exemption Limits

Notes:
1. Equivalent value of standard rated allowances as tax credits, I.e. £5,500 @ 20% = £1,100.00
2. The tax band of £40,000 available to married couples with two incomes is transferable between spouses up to a maximum of £29,000 for any one spouse.
3. The Marginal Relief tax rate remains at 40% (It continues to apply until such time as it is more beneficial for the taxpayer to be assessed under the normal taxation system).

Taxation: PRSI and LEVIES

Notes
1. The (non-cumulative) allowance for employees’ PRSI (excluding levies) was £100 per week in 2000-2001.
2. A lower rate for employers of 8.5% applies below £280 per week.
3. £20 per week (non-cumulative) allowances for Class S1 PRSI has been abolished.

PRSI and levies are chargeable on income from all sources excluding benefit in kind. No deductions from income are allowed, except contributions to approved employee pension schemes and capital allowances.

OTHER INCOME TAX CHANGES

• From 1 January 2002 mortgage interest relief will be granted at source by the mortgage provider and will be netted off the monthly mortgage repayment. [Full year cost £6m] Tax relief in respect of Medical Insurance will be treated in the same way from April 2001. [Full year cost £6.7m]
• Introduction of ‘Rent a Room’ scheme exempting rental income of less than £6,000 from tax where a room [or rooms] in a person’s principal residence is let. [Full year cost £2m]
• Ceiling on amount of rent in respect of which tax relief claimed increased for those under 55 to £1,000 single and £2,000 married. For widowed persons, irrespective of age, it is being equalised with that claimed by married couples. [Full year cost £7m]
• Increase in specified rates for preferential home loans to 6% and other loans to 12%. [Full year cost £0.2m]
• Rate of Withholding Tax, DIRT and Life Assurance-Linked Investment reduced to 20%
• Special exemption from Unemployment Benefit Taxation for systematic short-time workers to continue [Full year cost £1.0m]
• New tax relief for trade union subscriptions of £100 at standard rate giving a tax credit of £20 per annum. [Full year cost £9.5m]
• Stamp duty on life assurance policies abolished where policies taken out on or after 1 January 2001. [Full year cost £20m]
• The same tax rate will apply to the proceeds of specific foreign investments as to their Irish equivalent.
• Existing tax reliefs on third level education fees to be merged and standardised, current restrictions removed and relief extended to include college fees in US and other countries not currently covered.
• Medical expenses relief to be widened allowing taxpayer to claim directly in respect of designated relatives and no income limit will apply. Restriction on relief in respect of maternity care is also to be removed. [Full year cost £1.5m]
• The employment of carer allowance is being increased to £10,000. [Full year cost £0.1m]
• Contributions to permanent health benefits paid by PAYE taxpayers will move to ‘net pay’ basis. [Full year cost £2.6m]
• Income tax relief on refuse collection charges to be increased to £150 per annum from April 2001. [Full year cost £0.2]
• Business Expansion Scheme and Seed Capital Scheme are being renewed until 31 December 2001
• The number of days on voyages to or from foreign ports necessary to claim Seafarers Allowance reduced to 161 days. [Full year cost £1m].

CORPORATION TAX

• Standard rate of Corporation Tax for trading income reduced to 20%. [Full year cost £194m]
• Corporation Tax at reduced rate of 12.5% extended to those companies whose trading income does not exceed £200 ,000. [Full year cost £20.30m]
• No change in Credit Union exemption in Corporation Tax.
• CAPITAL ALLOWANCES AND CAPITAL ACQUISITIONS TAX (CAT)
  Capital Allowance for business cars increased by £500 [Full year cost £6m]
• For the purposes of CAT foster children will be treated as natural, adopted and step children.
• Probate tax abolished in respect of deaths occurring on or after 6 December 2000. [Full year cost £30]

CAPITAL GAINS TAX (CGT), STAMP DUTY AND VAT

• CGT and Stamp Duty will no longer apply to the transfer of a site, where the market value does not exceed £200,000, from a parent to a child for the child’s principle private residence.
• Existing farmer stock relief schemes are being extended for a further two years. [Full year cost £1.50m]
• The time period for the reinvestment of the proceeds of CPO for roll-over relief for CGT purposes extended.
• Standard rate of VAT reduced to 20% from midnight 3 11 November, 2006 . [Full year cost £191m]
• Farmers VAT Flat Rate increased to 4.3% [Full year cost £2.83m]
• As Ireland reaches an EU standard of living, people expect to have EU levels of services and infrastructure. However, we pay a substantially lower percentage of national income in tax and social contributions. Do people really believe we can attain EU levels of services and infrastructure without an average EU level of tax and social contributions?

DIRT AND CREDIT UNIONS

• Credit Union members liable to pay 20% DIRT on their deposit interest income.
• In the case of Credit Union dividends three options are provided for one of which introduces medium-term savings where exemptions will apply for the first £375 per annum in dividends in the case of 3-year savings and the first £500 in the case of 5-year savings.

INDIRECT TAXES

• Reduced excise duty on unleaded petrol of 2p per litre. [Full year cost £38.8m]
• Excise duty on road diesel reduced by 6p per litre. [Full year cost £123.5m]
• Increased excise duty on cigarettes by 2.6p per packet of 20 from 3 11 November, 2006 to offset reduction in VAT. [Full year yield £7.4m]
• Revision of current arrangements regarding the payment of excise duty on alcohols for the month of December only.
• VRT refund of 50% in respect of ‘hybrid’ motor vehicles.

Taxation: Our Response

• The tax changes introduced today continue to ensure that those who already have the most gain the most!
• We are disappointed that the tax credits were not increased substantially and made refundable.
• We welcome the increases in the various additional personal allowances.
• We welcome the abolition of the contribution ceiling for Employer PRSI.
• Major problems, however, still remain to be addressed if low-paid employees and social welfare recipients, who make up at least 40% of the population, are to be treated fairly. The need to integrate the tax and social welfare systems grows ever more obvious.
• The CORI Justice Commission has long supported the individualisation of the tax system. However, the process of individualisation followed by government is deeply flawed and unfair.
• The cost to the exchequer of the government’s approach to individualisation is well in excess of half a billion pounds. Almost all of this money has gone, or will go, to the richest 30 per cent of the population. A much fairer process would have been the introduction of a Basic Income System that would have treated all people fairly and ensured that a windfall of this nature did not accrue to the best off in this society.
• The income tax changes [other than the personal allowances, rates and bands] represent nothing more than tinkering at the edges, with no real substenance for those in need.
• When one factors in the gains of this individualisation process together with the reduction in the top rate we have a deeply unfair outcome with the major benefits going to those who were better off to begin with.
• The corporate sector continues to benefit disproportionately as it continues to be the major beneficiary in the distribution of the new resources of the Celtic Tiger.
• The reduction of 1% in the rate of VAT is on the face of it small enough not to contribute significantly to over-heating the economy, but as there is little guarantee of it actually being passed on to the consumer it is equally unlikely to have the positive impact envisaged on the CPI.
• Both mortgage interest relief and relief in respect of medical insurance have been taken out of the income tax system. However, other discretionary taxes continue to be inherently unfair as they give more relief to those paying tax at the top rate of tax than those on the standard rate, and no relief whatsoever to those whose incomes are too low to pay tax.

Ireland is a low-tax country. However, if we insist on reducing corporation tax to
12.5% the balance required must be made up from other sectors such as PAYE payers.

CORI Justice Commission believes that the objective of tax policy should be to collect sufficient taxes to
ensure full participation in society for all, through a fair tax system in which those who have more,
pay more, while those who have less, pay less.

There is some way to go before this objective is met.

Discretionary tax expenditures are neither efficient nor fair

It has been held for a long time that discretionary tax expenditures (eg Business Expansion Scheme, pension contributions, medical expenses) are an inappropriate means of achieving policy objectives. In general, discretionary tax expenditures are neither efficient nor fair. They are not fair because they give relief to taxpayers while withholding relief from those whose incomes are too low to pay tax. In addition, most discretionary tax expenditures give more relief to taxpayers on the top rate of tax than those on the standard rate. The following example illustrates the latter point:

Example

There are two friends, sixteen years old, named Louise and Ciara. They both require orthodontic treatment costing £3,000, which their parents pay for. Louise's parents pay tax at the rate of 22%. At the end of the tax year Louise's parents receive a refund from the Revenue Commissioners of £638 ((£3000-100)x0.22). Ciara's parents are better off than Louise's; they have some income taxed at 44%. At the end of the tax year Ciara's parents receive a refund from the Revenue Commissioners of £1,276 ((£3000-£100)x0.44) in respect of the orthodontic expenditure. In this way the better off family receives twice the tax refund of the less well off family.

Changes Required

There has been some recognition that this kind of inequity is indefensible. Thus, two particular tax expenditures, mortgage interest relief and medical health insurance (VHI, BUPA), are only available at the standard tax rate. The reasoning which led to the standard-rating of these two items applies equally to all of the remaining discretionary tax expenditures. Accordingly, relief on all discretionary tax expenditures should be available at the standard rate only.

Income Distribution

Our Budget Submission Asked that the Budget

• Redress the imbalances of the last three Budgets where the major beneficiaries were the better off. Provide a fair income distribution between people on different incomes. To achieve this the combined impact of the tax and social welfare packages should favour those on low incomes such as social welfare recipients, people on fixed incomes and people in low-paid employment.
• To attain these objectives we proposed a range of specific initiatives including the following:
  • Increase social welfare payments by £14 per week for a single person and £24 per week for a couple.
  • Agree that social welfare payments be benchmarked at 50% of average household income and indexed to this each year.
  • Increase child benefit substantially and not tax it.
  • Move towards implementing a Basic Income Guarantee system
  • Poverty proof and equality proof all public policy initiatives.
  • Make tax credits refundable.
  • Increase tax credits substantially.
  • Pursue individualisation in the tax system in a fair and equitable manner.
  • Change the income tax system to benefit those on low to middle incomes as much as they benefit the better off in cash terms.
  • Recoup the windfall tax gains accruing to the corporate sector arising from the reduction of corporation tax rate to 12.5%.
  • Ensure that the distribution of all changes in indirect taxes discriminate positively in favour of those with lower incomes
  • Standard rate all discretionary tax expenditures.

The Budget

• Increased the net current spending by the DSCFA by 587m (203m of this funded by PRSI payments).
• Provided an increase of £10 per week for pensioners aged 66 and over; increase of £8 for qualified adult (under 66); increase of £9 for qualified adult (non-contributory); £15 for qualified adult aged 66 and over .
• Provided an increase of £8 per week for most other personal rates.
• Increased child benefit by £25 (1st and 2nd child) and £30 (for each subsequent child) payable from June 2001.
• Increased FIS threshold by £25.
• Increased Carers Allowance by £10 for 66 and over; £8 for under 66.
• Respite Care Grant increased from £300 to £400.
• All people aged 70 and over entitled to free Electricity Allowance, free Telephone Rental Allowance and free TV Licence.
• Increased funding for Voluntary, Community, Family and Information Services.
• Living Alone Allowance of £6 extended to people under 66.
• Current exemption of income (150,000) from the sale of a pensioner’s residence to be extended to people getting Disability Allowance.
• Fuel Allowance period to be extended by 3 weeks.
• Duration of Maternity and Adoptive Benefits to be extended by 4 weeks.
• With the exception of Child Benefit, weekly payment increases will take effect 4 weeks earlier from April 2001.

Our Response

• In the area of social welfare we welcome the increase in Old Age Pensions and Child Benefit.
• However the amount allocated to Child Benefit does not cover the cost of child care and is insufficient to enable parents on a low income to return to education or employment. The increase cannot be seen as an anti-poverty measure.
• We deplore the totally unacceptable and grossly inadequate increase of £8 in the social welfare rates which apply to people in receipt of the following:
  • Widow/Widower Contributory Pension (under 66);
  • Invalidity Pension (under 65);
  • Carers Benefit;
  • Disability/Unemployment/Health & Safety/Injury Benefit;
  • Blind Person’s Pension (under 66);
  • Deserted Wife/Pensioner’s Wife (under 66);
  • Carer’s Allowance (under 66);
  • One-Parent Family (under 66);
  • Pre-Retirement/Disability Allowance;
  • Supplementary Welfare Allow ance;
  • Unemployment Assistance
  • short and long-term;
  • Farm Assist;
• We regret:
  • that the opportunity was not taken to raise social welfare rates by a minimum of £14 per week, thereby bringing these incomes closer to approx. 50% of average household income.
  • That a more significant step towards individualisation of social welfare payments was not taken.
  • That in this budget the qualified adult social welfare payments were not sufficiently increased to reach the single adult payment rate.
  • The lack of poverty proofing of social welfare measures which would help redress imbalances for people on lower income.
  • The failure of this budget to demonstrate the vision and political courage needed to implement a Basic Income Guarantee System.
  • The failure to increase the Back to School Allowance

Examples of Income Distribution In Budget 2001

Work/Unemployment/Job Creation

Our Submission Asked That The Budget

• Seek at all times to ensure that new jobs have reasonable pay rates.
• Develop employment friendly income tax policies that ease the transition from unemployment to employment.
• Substantially increase the resources available to the Local Employment Service (LES) so that every unemployed person can have access to its services.
• Maintain the number of active labour market programme places available to long term unemployed people.
• Increase the education/training grants for participants on Community Employment, Job Initiative and Rate for the Job Programmes.
• Expedite the Social Economy Programme.
• Increase the grants to community and voluntary organisations so that they can meet commitments made in the national agreement.
• Recognise work that is not paid employment.
• Conduct an annual survey to discover the value of unpaid work.
• Adequately resource the National Committee on Volunteering.

The Budget

• Increased the budget for Community Employment by 1% to £312m
• Training for the unemployed (+29%) to £70m.
• Training for the employed (+87%) to £49m.
• The Social Economy Programme (+50%) to £15m.
• Adjusted other administration grants as follows:
  • Forfas (+19%) to £16m.
  • IDA Ireland (+16%) to £20m.
  • Enterprise Ireland (- 12%) to £55m.
• Provided £378m for the public capital programme for industry. This includes £105m for grants to industry by IDA Ireland.
• Maintained the expenditure on the science and technology development programme and the Technology Foresight programme at £86m.
• Increased the allocation for employment rights and industrial relations by 12% to £2.9m.
• Increased the budget for the Office of the Director of Consumer Affairs by 58% to £3.2m.
• Increased the grants for emigrant advisory services by 37% to £1m.

Our Response

• It is important to emphasise that unemployment has not been eliminated. The Quarterly National Household Survey (QNHS), published in late November 2000, measured unemployment at 4.3% for the second consecutive quarter. This is the first time since the QNHS measurement was introduced that unemployment has not fallen.
• Despite the fact that the number of people in the labour force increased by 70,000 in the last quarter, the number of people unemployed increased by nearly 3,000.
• It should be noted that the very welcome substantial increase in funding for training for the unemployed hides the fact that the take-up on the amount allocated for the year 2000 was substantially less (£55m) than was allocated (£64m).
• We welcome the increased allocation for the social economy programme. However, we are very disappointed that this allocation is substantially lower than the target of £41m agreed more than a year ago. There is an urgent need to expand this programme which resources a range of services and other initiatives that are not, and may never be, market viable but do provide a range of socially useful activities at community level.
• There is considerable uncertainty above the feasibility and even the desirability of moves aimed at increasing the participation rate in employment much beyond its present level of 58.9%.
• We deeply regret the Government’s failure to allow asylum seekers already in Ireland to take up employment.

Work covers more than the area of employment. Much work is done in the home and in the ommunity but its value
is not recognised because it is not paid employment. The PPF ommitment to have the value of this work assessed
should be activated immediately nd the results of that assessment should be incorporated into Government policy.

Children & Childcare

Our Submission Asked That The Budget

• Give priority to tackling child poverty.
• Increase child benefit substantially and not tax it.
• Deliver the commitments on childcare and child benefit contained in the Programme for Prosperity and Fairness.
• Ensure that all initiatives on childcare prioritise the need for quality affordable, accessible childcare for all children irrespective of the income or employment status of their parents.
• Take a universal approach which supports all parents equitably and does not further marginalise families on low incomes by directly distributing more income to the better off and so increasing the inequality between rich and poor.
• Provide the opportunity for parents o choose the most appropriate childcare environment for their children and provide for a society and economy that meets the aspirations of different lifestyle choices.
• Give priority to low income families by recognising the additional needs of children living in disadvantaged communities and the links between early child education and reduced risk of educational disadvantage in later childhood.

The Budget

• The Budget included the following measures to support parents and their children.
• Child benefit rates for first child and second child increased by £25 a month.
• Child benefit rates for third child and subsequent children increased by £30 a month.
• £104m to fund the expansion of programmes already in place and resource the following:
  • use of spare classrooms for childcare;
  • a national after-school initiative;
  • childcare employment grants;
  • childcare provision in local authority developments;
• £10m capital has been allocated over two years for the provision of fifteen civil service creches.
• £1.2m has been provided for the recruitment of additional childcare support staff, throughout the Health Board system, to operate a voluntary notification system for childminders.
• Additional funding has been allocated to FAS for the training of extra childcare workers.
• £9m has been allocated to support foster care services.

Our Response

• We welcome the substantial increases in child benefit rates as an effective measure in tackling child poverty. However, only 40% of the child benefit goes to low-income families while 60% goes to families with higher incomes.
• We welcome the increased budget allocation towards childcare provision and the variety of initiatives identified for support.
• We maintain that child benefit is the best means to help families because it does not discriminate between those families where both parents are in paid employment and those in which one parent chooses to remain at home to look after the children.
• In the childcare area Irish policy-making needs to give far greater emphasis to maximising the options available to parents and somewhat less emphasis to policies that prioritise eco`nomic growth.

“Children in disadvantaged circumstances have additional needs”

Rural Development

Our Submission Asked That The Budget

• “Decouple” all direct payments from production and introduce a direct payment in the form of a basic income for each person.
• Ensure the provision of basic infrastructure and services based more on equity and social justice, rather than on cost effectiveness and take particular account of rural disadvantage.
• Locate rual housing in the countryside. Housing lists should reflect rural need.
• Reappraise programmes to create employment for part-time farmers with a view to effectively targeting the needs of smaller farmers.
• Support policies that encourage alternative farm enterprises through the promotion of quality (including organic) food production and processing.
• Support special outreach education programmes in rural areas, particularly those where no major third level colleges are located.
• Support initiatives that will develop information systems and technologies in a manner that will enhance the viability of rural communities.

The Budget

• Increased the overall allocation to agriculture, food and rural development by 1% to £914.3m.
• £331m of this budget is funded from other sources including the EU.
• Increased the allocation to
  • Administration by 26% to £169m
  • Teagasc for general expenses by 20% to £67.5m.
  • An Bord Bia by 31% to £13.3m.
  • Organic farming by 20% to £60,000.
  • Compensatory allowances by 43% to £175m.
• Reduced the allocation to
  • Rural Environmental Protection Scheme by 13% to £180m.
  • Early retirement by 19% to £65.3m
  • LEADER and INTERREG by 84% to £3.3m.
  • Allocated £0.235m for allowances to young trainee farmers.

Our Response

• There is still no evidence of a coherent, integrated rural development strategy nor is there any evidence that Budget decisions have been guided by any clear view of the future of rural Ireland.
• Very fundamental questions remain concerning the total amount allocated to this sector. A very large proportion of this money goes to a relatively small number of people. A fairer and more effective distribution system which would ensure the development of vibrant, sustainable, local communities could and should be devised. The present model is supporting a constant decline of rural Ireland. Growing exclusion is the lived experience of many in rural Ireland today.
• Commentators agree that major change is imminent. Negotiations on the enlargement of the EU are ongoing while negotiations on the new WTO round have begun. Both negotiations are likely to reduce subsidies. We believe that a Basic Income System would be an equitable and effective way of addressing some of these imminent problems.
• The number who can make a living from farming will reduce dramatically in the next five to ten years. Meaningful supports are needed for farmers on low incomes in their transition from farming to other or alternative sources of income.
• We welcome the supports for organic farming.
• We regret the reduction of the funding for the REPS scheme without alternative supports for the rural environment.
• We regret the reduction in support for the LEADER programmes.

CORI Justice Commission has proposed that rural development policy should be guided by the following national objective: To secure the
existence of substantial numbers of viable communities in all parts of rural Ireland where every person would have meaningful work,
adequate income and social services, and where the infrastructure needed for sustainable development would be in place.

Environment

Our Submission Asked That The Budget

• Support the protection of our water supply through a review of the Water Pollution acts, nutrient management and water pricing policies that are equitable.
• Resource the implementation of the Waste Management Act 1996.
• Resource mechanisms to ensure that the targets of 12% CO2 reduction by 2010 as agreed by the Irish Government and the European Commission.
• Resource strategies that give far greater priority to public transport.
• Resource research and a full-scale public debate on both the benefits and risks involved in genetic engineering.
• Provide substantial additional resources for the development of library services throughout the country.

The Budget

• Increased the overall allocation by £503m to £2,265.4m (29%).
• Increased spending on national roads by 26% to £620m.
• Special programme, funded in NDP, to facilitate non-national road schemes supporting residential and other developments.
• Harbour infrastructure – additional allocation of £11.5m in 2001.
• Extra £4m to An Bord Iascaigh Mhara for the development of the Sea Fisheries Board.
• Cut of 6p per litre on road diesel (just above the EU minimum level), with effect from midnight December 6th, 2000. The cost of this measure is £6.5m in 2000, £123.5m in a full year.
• The above measure (lower rate) to be applied in the future to low-sulphur diesel only, for the good of the environment.
• Cut of 2p per litre on unleaded petrol. The cost of this measure is £1.9m in 2000, £38.8m in a full year.
• Finance Bill provision of refunding of 50% VRT on new vehicles fitted with hybrid engines, to encourage the use of the new hybrid technology in motor vehicles.
• Increased :
  • Dublin transport by 27% to £33m
  • Water and sewerage services by 19% to £346m
  • Environmental Protection Agency by 12% to £14m.
  • Library service by 29% to £9.1m
  • Fire and Emergency services by 85% to £15.4m.

Our Response

• This budget has failed to promote sustainable development.
• No serious mechanisms were put in place to meet Ireland’s agreed target of 12% reduction of CO2 emissions by 2010.
• Only minimal steps were taken towards the development of an environmentally friendly public transport policy.
• No new waste recycling measures were introduced.
• No charges levied on polluters and resource users.
• We welcome the increase of 29% to the library service and the increase to the Environmental Protection Agency.
• Justice is a harmony which comes from fidelity to right relationships with God, people, institutions and the environment.

Housing & Accommodation

Our Submission Asked That The Budget

• Significantly increase the budget allocation for local authority and voluntary/non-profit housing
• Introduce a housing benefit for the private rented sector that is neutral in its effects on labour market status.
• Provide new resources for the security and management of local authority housing.
• Act on the requirement that 20% of building land be allocated for social housing.
• Actively implement and enforce the 1992 legislation with respect to the private rented sector of housing.
• Adopt a target of reducing housing waiting lists to a maximum of eighteen months.
• Give special resources and focus to tackling issues concerning accommodation for Travellers, homeless people, refugees and asylum seekers.

The Budget

• Allocated £1.1 billion for housing. This includes increased funding for regeneration of the State’s existing housing stock as well as providing for new developments.
• Capital funding is being doubled from £20m to £40m over the next five years to provide additional accommodation for homeless persons, particularly transitional accommodation to facilitate moving out of emergency accommodation.
• Within this allocation provided more than £697m for local authority and social housing. This is an increase of £250m (+58%) on the allocation for 2000.
• An additional £2m. (income from Local Authority capital receipts), bringing the total to £82m, will be available for local authority and social housing programmes.
• An additional £1.5m allocated for estate management under the Housing Management Initiative.
• Provisions of additional £6m to Local Authorities to fund increased subventions for hostel accommodation.
• As measure to encourage an increase in accommodation in the private rented sector, a tax exemption is introduced, where the gross rental income is less than £6,000 per annum. This new provision is for householders who make available rental accommodation within their own dwelling.
• A rent relief allowance for under 55s increased from £750 to £1,000 p.a. for single persons and £2,000 for married.
• £2m has been allocated under the Dept. of Health & Children for adult homelessness and £5m for child homelessness.
• Provided £1.3m (an increase of 9%) for community facilities in voluntary housing schemes.
• Increased the allocation for the Task Force on Housing Aid for the Elderly by 8% to £8.7m (Both this and the previous item are National Lottery funded).
• Proided £278m for house purchase and improvement loans (including HFA), an increase of 20%.

Our Response

• The sheer scale of housing need is not being given the priority it requires. There are more than 50,000 households in need of accommodation and more than 5,000 people are homeless.
• The scale of response required to tackle the housing crisis is nowhere near being met. In saying this we recognise that there has been a substantial increase in the number of houses built and the budget for social housing has risen dramatically over the past few years.
• It should be recognised that while there were 46,500 housing starts this year as mentioned in the Budget speech, only 2,909 of these were social housing units.
• The 58% increase for local authority and social housing budget goes some way to responding to the demands of the PPF in 2001. However, the sheer scale of the housing need has not been given the priority it required with more than 50,000 households in need of accommodation.
• It is worth noting that the budget ignores the fact that the existing 50,000 households on the waiting list is not a static figure, but has in fact been growing steadily over the years.
• It is disappointing to think that the additional £8m allocated this year for transitional housing for the homeless is included in the 58% increase in local authority housing budget rather than being additional expenditure.
• With homelessness at over 5,000 persons and growing, the scale of response is still far from adequate.
• We welcome the increase from £20m to £40m of capital funding for the provision of services for homeless persons, though this is spread over a 5-year period.
• While the “Rent A Room” measure is to be welcomed, it only makes a small contribution to demand in the private rented sector. This measure in no way comes close to addressing the needs outlined in the report on the Commission on the Private Rented Sector.
• There are no new measures to stimulate significant new investment in the private rented sector.
• There are no new initiatives to address the needs of Travellers or growing need for accommodation for refugees or asylum seekers.
• Local authority waiting lists are growing.
• Numbers of homeless people are growing.
• Rents in the private sector are increasing.
• There are no new measures or initiatives in this budget to stop this growth.

Education

Our Budget Submission Asked That The Budget

• Increase the proportion of educational expenditure that is allocated to the primary sector as a way of partially addressing the regressive nature of educational funding.
• Provide the resources necessary to achieve the NESF target of eliminating early school leaving (without a qualification) by the year 2002.
• Immediately establish the Committee on Educational Disadvantage, as outlined in Section 32 of the Education Act (1998), with sufficient resources to fulfil its brief.
• Increase the allocation of funds to the NCCA to enable it to provide for the commencement of change at Senior cycle and the incorporation of innovative practice from LCA and LCVP into the Leaving Certificate Examination.
• Revise the format of the public expenditure estimate and budget statement for Education and Science to include a separate ‘head’ with detailed ‘subheads’ for Adult and Community Education.
• Provide the resources for the immediate establishment of the National Adult Learning Council (NALC) and radically increase the funding of Adult and Community Education to facilitate the implementation of priorities identified in the recently published White Paper on Adult Education, Learning for Life.

The Budget

• Increases the overall expenditure on First Level by 13%, Second Level by 16% and Third Level by 23%.
• Fails to give meaningful information on Adult and Community Education. However, it would seem that expenditure in this area increased by less than 17% from a very small base.
• Makes provision for the significant expansion of Early School Leavers Initiatives.
• Increases the allocation at Third Level for the alleviation of disadvantage from £3.4million to £15.6 million.
• Provides £10.75million for the Disadvantaged Fund at Primary level.
• Increases funding for the NCCA by £418,000 to an estimated total of £1.5 million.
• Contains three items in the education section labeled simply “miscellaneous” which between them have increased by 380% since 1999 to an estimated £27.4million for 2001.
• Ensures that approximately 90% of current expenditure at First and Second Level goes on pay and pensions.

Our Response

• Even when allowance is made for demographic trends, the budget does not appear to be consistent with the Government’s stated commitment to give priority to First Level Education.
• The distribution of educational expenditure between First, Second and Third Level Education results in decreasing proportions of funding going to ‘First Level’ and ‘Second Level and Further Education’. This will exacerbate the already regressive nature of educational expenditure.
• We welcome the increased funding for disadvantage at all levels. However, the total amount spent under the various schemes is still relatively small and will require careful monitoring.
• The bulk of the additional teaching posts in Primary and Second Level schools should be targeted at disadvantage and should be used creatively.
• We welcome the expansion of Early School Leaver Initiatives.
• The additional finance for ‘In-Career Development’ and the NCCA is welcome. It is important that this additional funding is used to effect the kind of fundamental systemic change that is required in relation to reform of curriculum and assessment.
• The very small increase in the allocation to Adult and Community Education is totally inadequate to implement the reforms promised by the recent White Paper.
• It is particularly disappointing that our call for the immediate establishment of the NALC appears to have been ignored.

Healthcare

Our Budget Submission Asked That The Budget

• Give far greater priority to community care and restructure the healthcare budget accordingly.
• Develop and implement targets on health care and health status within the National Anti-Poverty Strategy.
• Increase the percentage of the health budget allocated to the health promotion area.
• Implement the commitment in the Programme for Prosperity and Fairness to pilot primary healthcare centres on a seven day, 24 hour basis.
• Develop day care centres for elderly people with disabilities and children (pre-school and creche)
• Develop nursing care of elderly people in their own community on the model of the hospice programme.
• Provide increased levels of community support for care of elderly people. Provide respite care for elderly people and people with disabilities.
• Resource the implementation of the Task Force Report on the heath care needs of the Travelling People.
• Provide equality of access to services within the Irish health care system.

The Budget

• Increased the gross allocation to healthcare from £4.5 billion in 2000 to £5.3 billing in 2001.
• Development of Information Systems for Health Agencies.
• Acute Services:
  • Provided £5m for cancer prevention/treatment.
  • Renal Services to have an increase of £2m.
  • Specialities including cardiology, oncology etc. increased by £12.5m.
  • £2.5m on increasing bed capacity.
• Continuing Care Programme:
  • Services for older people to receive £16m extra.
  • Extra £33m for medical card services to include all those over 70 years of age.
  • Services for persons with an Intellectual Disability and those with Autism to receive Capital funding of £40m in 2001.
• Primary Care Programme:
  • Community Drug Scheme of £5m increase.
  • To control MRSA £2m.
  • Implementation of the Commission on Nursing Report – £8.1m.
  • Non consultant hospital doctors – £80m for training and development.
  • £1m to support Insurance cover for Hepatitis C patients.
  • Travellers Health – £1m

Our Response

• Primary care measures including GMS pilot projects is a welcome development of £3m and we look forward to a strong local community involvement in the development of these projects.
• We welcome the increases in services of older persons:
  • Medical Card for all aged 70 and over from 1st July 2001.
  • Nursing Home subven- tion – this increase is very necessary but how is this to be allocated to the relevant bodies.
  • There are over 29,000 on the waiting list even though the waiting list initiative has been in operation for several years. While the budget has allocated a further £11m to this initiative it has done little to address the issue of equality within the system.
• We welcome the continued development of the disability services and the recognition of the need for capital development.
• A “comprehensive value-for-money audit of the health services” is being carried out for the Department of Health and we look forward to viewing this report. We hope that it will address the overall health care system and not just deal with peripheral issues.
• We welcome the £1m for Travellers’ Health and look forward to the full implementation of the Task Force Report.

Official Development Assistance (ODA)

Our Budget Submission Asked That The Budget

• Take substantial steps to implement the Government’s commitment to increase Official Development Assistance to the UN target of 0.7% of GNP by 2007
• Support the international campaign for the liberation of the poorest nations from the burden of the backlog of unpayable debt.
• Take a far more proactive stance on policies towards the South of the world.

The Budget

• Increased Official Development Assistance from £137m to £188m in the coming year.
• This is an increase of 37%
• The total allocation is equivalent to 0.35% of GNP in 2001, an increase from 0.31% in 2000.

Our Response

• We welcome the increase in ODA and the Government’s commitment to achieving the United Nations target of 0.07% of GNP by 2007.
• The interim target of 0.45% by 2002 should be maintained and achieved.
• Reaching the UN target by 2007 will, however, demand a faster pace of increase in the years immediately ahead.

Ireland’s Relationship with the IMF and the World Bank

The Department of Finance now publishes an annual report on Irish involvement in the IMF and World Bank. This is an important and welcome development. The report, however, is very disappointing in that much of it merely outlines the activities of the IMF and the World Bank. We raise the report and its contents here in the context of an analysis and critique of the Budget because the resources being allocated to fund our IMF and World Bank activities are financed through the Budget. The report also raised disturbing questions concerning Ireland’s approach to a range of issues that have major implications for the countries of the South of the world.

It is alarming to see the degree of unconditional support given by the government to the World Bank. According to the Report, Ireland has supported the World Bank in all of the following areas: poverty reduction, gender issues, private sector development, governance issues and corruption, military spending, post conflict initiatives and environmentally sustainable projects. This level of support does not match Irish public opinion. NGOs, such as the Debt and Development Coalition, who have done much work on these issues, are very critical of the World Bank in its policies on issues such as poverty reduction, gender and the environment. CORI Justice Commission believes this criticism of Government is well founded.

The most publicly controversial decision taken by the Government in relation to the IMF has been the decision to contribute to the Enhanced Structural Adjustment Facility (now renamed Poverty Reduction and Growth Facility). One of the justifications given by the Minister for Finance was that by paying up, Ireland could play a significant role in criticising the programme and pressing for change. There is no evidence that this has been the case. The outline of the role of Ireland's representative to the IMF does not include monitoring the implementation of the renamed Poverty Reduction and Growth facility.

It seems extraordinary that, in the light of the opposition to this particular IMF programme, that Ireland is not keeping a close eye on the programme. Given the devastating social impact of IMF programmes, the government should be asking if the IMF has made fundamental changes to the programme to ensure consistency with poverty reduction objectives. Evidence to date is that the programme's name has been changed but its work and approach have continued as before.

Another very questionable position taken by Government in this context is its opposition to cancellation of unpayable debt owed to the IMF and World Bank. A reason given is concern about countries that show no commitment to economic reform. What about Uganda which has rigorously followed IMF and World Bank programmes for over a decade? What about Tanzania and Mozambique who have done likewise? What argument can the government put forward against total cancellation of debts owed to the IMF and World Bank by these countries? The Government's position on this issue is untenable and should be changed immediately.

A final issue highlighted in the Department of Finance's report that raises serious questions is the Government's proactive role in ensuring that Irish interests are promoted at the IMF and World Bank. According to the Report the Irish representative to the World Bank "plays a significant role in the area of procurement, and in particular, in co-operation with Enterprise Ireland and the Irish Embassy in Washington, in the area of consultancy assignments at the Bank for Irish firms." Government should not see its major role in the World Bank as securing finance for Irish business. It owes accountability to the people of the Southern countries affected by the decisions supported by the Irish Government at the World Bank. Unless these decisions promote human development and social, economic and environmental sustainability, contracts won by Irish firms may do damage and the loans that pay for these contracts may simply add to the debt.

CORI Justice Commission calls for New Social Contract Against Exclusion

CORI Justice Commission calls on Government and Social Partners to develop a new Social Contract against Exclusion. This is urgently needed because the growth of the Celtic Tiger economy has failed to tackle social exclusion effectively. It is even more urgently required when one sees the thrust of Government Budget decisions over recent years. We acknowledge the major achievements in increasing employment and reducing unemployment. However, there has been far too little impact on a whole range of other social exclusion issues.

Side by side with the 'new Ireland' of the Celtic Tiger is another socially excluded Ireland. This social exclusion can be characterised in terms of a widening rich/poor gap, long-term unemployment, run-down inner-city housing estates, hidden rural poverty, early school leaving, homelessness, growing aggression and violence.

The fruits of economic transformation have not benefited all members of Irish society. The 'rising tide' of the Irish economy has failed to lift all boats. There are growing waiting lists for medical care and public housing. There is substantial educational disadvantage. There is little evidence of the Irish economic miracle in the deprived sectors of the Irish economy.

To address this failure to tackle social exclusion effectively, CORI Justice Commission is proposing the development of a new Social Contract against Exclusion. Such a contract would involve the development of basic measures in the economic, political, cultural and social fields aimed at maximising participation and eliminating social exclusion. It could be developed by Government and social partners and put into operation in the near future. It would build on commitments contained in the Programme for Prosperity and Fairness (PPF) and ensure that the resources currently available would be used in a concerted way to reverse present trends that are being worsened by inflation.

Among the policy priorities that such a new social contract might contain would be the following:

• Raise all social welfare payments to the poverty line.
• Take the minimum wage out of the tax net.
• Ensure Ireland's total tax-take moves towards the European average tax-take level.
• Integrate the tax and welfare systems, preferably through the introduction of a Basic Income system.
• Give major priority to providing social housing so that waiting lists are substantially reduced.
• Place an ongoing emphasis on preparing and enabling unemployed people to access market-place jobs.
• Develop the social economy
• Restructure the healthcare budget to give far greater priority to community care.
• Give major priority to tackling educational disadvantage.
• Change policy so that asylum seekers can take up employment and be treated with respect.

The Justice Commission’s core areas of work are:

Public policy

Enabling and Empowering

Spirituality

Partnership projects.

CORI Justice Commission has been a recognised social partner within the Community and Voluntary pillar of social partners, since 1996.

Comments, observations and suggestions on this publication and/or on the Commission’s work are always welcome.

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