By Finghin Kelly
Budget 2021 has been heralded as the biggest in the state’s history.
After a decade of austerity and balanced budgets, this does represent a certain turn away from those policies. This is in line with capitalist governments around the world who are boosting state spending in order to save capitalism – not just from the effects of Covid-19, but from one of the largest recessions in the history of their system.
The capitalist class are nervous about the situation facing them. They are going into this crisis in a much weaker position than the ‘Great Recession’ of 2008-2009. The political and social instability created by the pandemic and the recession has created a real nervousness amongst the ruling class. The support for traditional capitalist political parties is being undermined because of their association with the regime of neoliberalism and austerity.
One may think that this change in approach represents some kind of ‘left turn’, however, it is important to dig beneath the headlines and look at things in their historical context to see the real nature of this budget. The increases will see government spending as a percentage of GDP hit about 25%. This is while the EU average is around 44%. In 1980, Irish government spending was at 53.7% and in 2000 it was at 31%.
These increases in spending come on the back of a generation of neo-liberal policies that have starved public services of funding. The degree to which public services were unprepared for the challenges of Covid and of the present recession have been laid bare in recent months.
Much of the increase in expenditure will not have a real, material impact on the living standards of working-class people as it is not aimed at major investment in public services and directly created jobs by the state. In fact, many measures in the budget (as we outline below) are forms of “corporate welfare”, with various schemes and tax reductions being brought forward to the benefit of business, with few to no strings attached.
Who will pay?
The increases in spending have been financed by government borrowing, which was greatly assisted by measures such as the ECB’s €1.35 trillion ‘pandemic bond’ purchasing programme and historically low interest rates on government debt.
This has allowed the government to raise funds with relative ease. However, they are storing up problems for the future for themselves, as invariably this money will have to be paid back at potentially higher rates if the profiteering of the financial markets dictates that.
This is a weak basis for them to expand public spending. Next year, or in subsequent years, they may not face the same conditions. If the increases in spending are not backed up with concurrent economic growth, the logic of capitalism is such that they will come under pressure to cut services or raise taxes – and make working class people pay for this crisis.
In the days prior to the budget, Tánaiste and Fine Gael leader Leo Varadkar was quick to raise how this would need to be funded, by pointing out the pandemic is “cost[ing] us about €10,000 each – that’s €50 billion”, and went on to compare it to the last economic crisis where the state bailed out the banks.
Socialists do not accept the narrow logic of this system which insists that we can’t go after the enormous sums of wealth and profits that have been amassed by the super-rich and big business.
A Swiss bank, UBS, released a study that showed that, globally, billionaires have increased their wealth by 27.5% between April and July this year – this was at the height of the first wave of the pandemic which saw millions plunged into poverty and precarity.
Ireland is not immune from this trend. The latest ‘Rich List’, published by the Irish Independent, shows that the richest 10 people in Ireland have a net wealth of €53 billion. Most on this list increased their wealth by 10%-15% in the previous year! The richest 1% of the population have more wealth than the bottom 50% combined, with the richest 5% holding a third of all household wealth.
These figures, combined with examples such as the €13 billion (plus interest) Apple tax, shows that there are more than enough resources to ensure the needs and aspirations of working-class people in Ireland and globally can be met. However, the government has made a virtue out of leaving this wealth untouched.
In his budget speech, Minister for Finance Pascal Donohoe went out of his way to recommit to maintaining the 12.5% corporate tax rate, as well as the loophole specifically designed to allow multinationals to avoid tax – the ‘knowledge box’ – which will be extended! None of the myriad of corporate tax loopholes will be closed off. These loopholes see billions being handed to big business and ensure that the effective corporation tax rate is 5.7%, and not even the meagre 12.5%!
The Socialist Party stands for a closing of these loopholes and for a doubling of the corporation tax rate. If the tax take was doubled, it would see approximately €20 billion extra being raised – the cost of this year’s deficit!
The reliance on low corporation tax and being a tax haven economy is a failed approach to economic development – it has failed to create a viable manufacturing base in the economy with secure jobs. According to the IMF, two thirds of the Foreign Direct Investment (FDI) that supposedly comes into Ireland is fictitious in nature. We need to break with this model and organise the economy based on our real needs and those of our planet. We need a socialist plan of investment and public ownership of the key sectors of the economy. That would provide secure, well paid jobs, increase living standards, and would transition to a carbon neutral economy.
Many of the budget headlines have highlighted the increases in the health budget. This sounds like an impressive increase in investment. However, on closer inspection, you can see how inadequate it is.
The Irish health service has been starved of investment since the 1980s. This is shown in the fact that the number of beds per capita in the state has been in constant decline since the 1980s – it is now a third of what it was in 1988!
The number of ICU beds – which are crucial in this pandemic – is extremely low. Going into this crisis, the figure stood at 6.5 per 100,000, while in Germany the figure is 38.7. The HSE themselves in 2019 said 579 would be needed. However, the budget just brings capacity up from 280 beds to 321.
There have been advances in how Covid-19 is treated, resulting in fewer people needing ICU treatment. However, this will not be enough to hold off an ICU crisis. The day before the budget, just 33 ICU beds were free across the state – only 1 was free in Cork! Approximately 10-15% of hospitalised cases will need ICU treatment, meaning the Irish health service is on the cusp of a major ICU crisis if the increase in hospitalisations continue. Yet the budget only sees them add a small number of beds to the system.
In the context of a growing mental health crisis in our society, it is also outrageous that a mere €38 million was allocated to funding on services for those impacted by it.
We need to utilise the resources of our society to fund the necessary additional beds in our hospitals and hiring of staff to tackle the major risks to our physical and mental health because of this pandemic. This should be linked to the nationalisation of private hospitals and the creation of a one-tier national health service that is free at the point of use.
One of the key features of the budget was a plethora of hand-outs and supports to business. They take a variety of different forms, from direct payments to businesses impacted by Covid-19 restrictions, VAT reductions, moratoriums on paying taxes, loan supports and wage subsidy schemes.
The key plank to these handouts is the Covid Restriction Support Scheme (CRSS), which will see up to €5,000 per week being paid to businesses impacted by Covid. All they need to do is to self-declare that they have a turnover 20% less than last year.
Billions will be handed over to businesses, even to those who remain profitable or have reserves of cash. These payments will be without any guarantees about maintaining jobs, or even to top up the wage of their workers, recognise unions, or paying a living wage.
The reduction in VAT for the hospitality and tourism sector will also produce a windfall for businesses in this country, again with little benefit for workers. According to economist and researcher for SIPTU Michael Taft, in a tweet on the day of the budget:
“The last time VAT was cut, employers saw their profits rise by 167 percent while hospitality workers wages rose by only 4 percent. Employers took subsidies, boycotted the Joint Labour Committee, and depressed wages.”
The economic crisis has thrown hundreds of thousands into unemployment, 14.7% are officially unemployed when you include those on the PUP payment. Among the under 25s, this skyrockets to 36.5%!
Young people have been to the fore in suffering from unemployment in this crisis. The hospitality and tourism sectors, where nearly a third of workers are under 25, have been hit hard and will be the first to be hit if and when there are further restrictions imposed. The government are nervous about the instability that this can create for them and have been quick to trumpet the creation of thousands of extra places in retaining schemes, apprenticeships and further education.
As with much of this budget, the devil is in the detail. One of these programmes – Skillsconnect – is a mirror image of the hated and discredited JobBridge programme that the government was forced into abolishing. It will see young people who are unemployed being given a top-up of €26 per week in return for working 24 hours – this works out at €1.08 an hour, far worse than even the JobBridge scheme!
Many of the programmes are run by Skillnet Ireland. This is an agency that has a majority of its board made up by employers’ representatives, one of whom is Ian Talbot of Chambers Ireland, who was a big fan of JobBridge, stating that the scheme “will provide businesses who are currently unable to offer employment opportunities the support they need to maintain and grow their business”. He is also on record as opposing the increase in the minimum wage to €8.65 in 2011. By putting such figures at the heart of government training programmes, the government are clearly intent on using training programmes to drive down pay and conditions across the economy in a race to the bottom.
We need real training programmes and education. All fees should be abolished, grants brought up to a living level and any work experience should be fully paid at rates negotiated by trade unions.
Those who are paying huge and unaffordable rents, who are homeless or who can’t buy a home will be disappointed by this budget.
There has been no change in the government’s approach. €500 million was allocated to the building of 9,500 public housing homes, but this is not new. The amount is modest, will do nothing for the vast majority of people who are on housing waiting lists and will not make housing more affordable or accessible. This is underlined with the other scheme they have put forward, the ‘Help to Buy’ scheme, which may assist some to buy a home, however, it is primarily about giving a market to developers and for the banks to increase their profits.
What is needed is a break with the logic of the market. We need a massive programme of direct-build, local authority housing to rent and buy, combined with massive rent reductions and freezes.
Committees of the rich
James Connolly once said that, “Governments in capitalist society are but committees of the rich to manage the affairs of the capitalist class”. This Fianna Fáil/Fine Gael/Green government are no friends of workers – it is a government that Connolly would be familiar with.
This budget is not a shift away from pro-capitalist and anti-worker policies. It is handing billions to businesses to get them through the worst part of this crisis and to provide stability for their system, while – parallel to this corporate welfare – they are driving down workers’ rights.
When they feel they can or have to, they will attempt to make workers pay for the crisis through cuts, taxes and impositions on living standards. Already, mass unemployment and an undermining of our living standards are becoming the order of the day as far as capitalism in Ireland and globally is concerned. Workers and young people, backed by the potential power and resources of the trade union movement, must organise now to ensure that this is met with firm resistance.
Such a resistance must be linked with a socialist alternative to this decaying capitalist system. Join the Socialist Party and help ensure that such a strong socialist movement is built.