ICTU General Secretary David Begg has warned that a continuation of the current austerity programme could “literally destroy the Irish economy and kill off any prospects of recovery for many, many years.”Speaking at the launch of the Congress pre-Budget Submission, Mr Begg said austerity had delivered nothing but higher unemployment and a bigger deficit.
“We have tried austerity and it just hasn’t worked – it has just made matters worse. There have been three deflationary budgets that have taken €14.5 billion out of the economy and the result is clear: unemployment has almost trebled, the deficit is actually bigger than when we started and the cost of borrowing is at record levels.
“How could that be interpreted as anything other than failure?”
Mr Begg said the period of adjustment had to be extended to 2017. He described the target of reducing the deficit to 3% of GDP by 2014 as arbitrary and artificial. He said there was no impediment to extending the adjustment period, either at a national or an EU level.
He said that we needed to focus on jobs and growth and that the Congress submission contained a number of innovative proposals in that regard. These include:
1. New Ideas on Public Investment
Money from the National Pension Reserve Fund should be utilised to invest in addressing infrastructural deficits and the jobs crisis. Over time, this could rise to €6 billion that would be invested in Ireland’s future, rather than in bank subsidies or foreign equities.
• Introduce amending legislation to provide for investment in Sovereign Bonds by Pension schemes as called for by Congress, IBEC, IAPF etc.
• Encourage PRSAs to invest in the state pension scheme. If 20% invested next year, this would provide around €1 billion.
• Increase the interest on the National Solidarity Bond (an idea originated by Congress) and hypothecate the investment into designated projects and market it as such.
• The key role of state enterprises in our recovery must include the establishment of a State Holding Company as a new, commercially-focused structure.
• Start auto-enrollment in the state pension fund immediately, which will result in substantial flows of funds to the Exchequer.
2. Contribution from the Corporate Sector
Extend the income levy to corporate profits, in this time of national crisis, until the 3% budget deficit target is reached. Only companies making a profit would pay.
Multinationals could also defer repatriation of a portion of their profits and set up a fund to invest in new or existing Irish-based enterprises and infrastructure. Such a fund could amount to billions of euro and could make a significant contribution towards economic renewal and development.
3. Banks & Bondholders
Government must act in the interests of its people, not the markets. It must force down the value of all bondholders’ holdings - which they risked in private banks - to 10% of their nominal value. This could see a saving of up to €24 billion for taxpayers.
4. Tax Measures
The tax system is rife with exemptions and reliefs and their combined impact narrows the tax base. Unless there is a proven benefit to the taxpayer, they must be closed.
A rise in the general rate of DIRT to 30% would raise an additional €75million.
The minimum tax for high earners - using avoidance schemes - should be increased to 35% and the threshold reduced to €100,000. There should be a limit on earnings for pension purposes of €100,000.
The beneficiaries of capital gains are better placed to meet tax liabilities than those on minimum wage. In the U.S., capital gains are taxed as income with lower discounted rates on long-term gains. We should do likewise.
A (temporary) wealth tax on wealth above €2 million, wealth being defined as current value of all assets, including the excess of €1m in the value of
private houses.
The minimum funding standard must be eased to help occupational pension schemes which are under great stress, with most defined benefit schemes in deficit.
5. Social Welfare
No further cuts to social welfare rates. We should reform social welfare rules which
discourage employment: allow people who work reduced hours more than three days in the week to be able to claim jobseekers benefit for the time they are not working.
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