Congress Pre Budget Submission

17 Jul 2014

CONGRESS PROPOSES REFUNDABLE TAX CREDITS, REDUCED WATER CHARGES FOR LOWER AND MIDDLE INCOME FAMILIES AND SIGNIFICANT INVESTMENT IN SOCIAL AND AFFORDABLE HOUSING

Net adjustment of €800 million only needed to reach 3% deficit target.

Five year social housing programme urgently needed.

The Irish Congress of Trade Unions has proposed to Government that it introduce refundable tax credits and reduced water charges to help people on lower and middle incomes and that it should invest in a significant social and affordable housing programme. These proposals were contained in Congress’s pre-budget submission – A Budget for Jobs, Homes and Growth – which was launched this morning at Congress’s head office in Dublin.

In relation to the overall budgetary arithmetic, David Begg said that Congress does not accept the wisdom of a €2 billion adjustment in 2015 and also does not agree that the bulk of the adjustment should continue to fall on cuts to public spending. Mr Begg says that a better outcome can be achieved – in terms of equity, growth and employment – by pursuing the following three-point plan:

A net budgetary adjustment of €800 million based on reforms to tax expenditures, increased employers’ PRSI on incomes over €100,000, increased excise duties on tobacco, sugar, salt and saturated fat, a tax on online betting, reform of Capital Acquisitions Tax as well as the introduction of a Net Wealth Tax;
 

An increase of €400 million in social spending to be invested in social housing, improvements in the household benefits package, mental health services and various community supports;
 

An ‘off-book’ investment package – funded through the Strategic Investment Fund – a substantial proportion of which should be allocated for social housing.
 

The Executive Council of Congress is concerned by the emerging problem of social housing provision noting that its roots lie in an ill-judged withdrawal from construction by local authorities over the last 20 years. Congress is calling for a reversal of this policy and an ambitious programme to provide for all social housing needs over five years.

David Begg welcomed the announcement of a €300 billion investment package by the incoming EU President, Jean-Claude Juncker, involving funding by public-private partnerships, the EU and the European Investment Bank saying:

“There has been a private investment strike in Europe and the public sector has been unable to fill the gap because of debt. Public sector capital expenditure has all but disappeared in Ireland; certainly it is amongst the lowest levels in Europe. We urgently need to reverse this trend.”

David Begg also said that in order for Ireland to meet the 3% budget deficit target in 2015 a net adjustment of €800 million would be required in the budget. On this basis, Mr Begg said that there is no room for tax cuts in 2015 as any such cuts would have to be funded by a tax increase elsewhere.

“While there is no room for an overall cut in taxes in Budget 2015 tax reform in the shape of refundable tax credits would be beneficial on employment and equity grounds. On the other hand an increase in the standard rate tax band or a reduction in the marginal income tax rate would be a highly inefficient way of increasing aggregate demand, would not benefit the majority of PAYE taxpayers and would be regressive. Introducing refundable tax credits would cost the same as increasing the standard rate threshold for income tax by just €1,000.”

Mr Begg outlined Congress’s thinking behind this proposal.

“The current system of tax credits has a limited impact for many low-paid workers who do not earn sufficient income to use up their full tax credits. The introduction of refundable tax credits would tackle this issue as the unused portion of their tax credits would be refunded to such workers. A study undertaken for Social Justice Ireland identified that 130,000 low-paid workers and their families would benefit from refundable tax credits.”

David Begg said that Government must be very cautious in how it handles the introduction of water charges.

“Access to water is a human right. Moving from paying for water services through general taxation to a system of regressive user charges risks plunging vulnerable households into water poverty. The announced system of free allowances is by itself wholly insufficient to prevent households from falling into water poverty as well as being an inefficient and expensive policy tool.

“If water charges are to be introduced then the already announced free allowance will have to be supplemented by a system of water credits or cash transfers for lower and middle income families. Congress proposes that only those households with a gross income of at least €80,000 should have a net household water charge in 2015.”

David Begg concluded by saying that Congress’ plan for Budget 2015 would protect the most vulnerable communities and individuals in Irish society while being supportive of jobs and growth.

FOR FURTHER INFORMATION, CONTACT:

Pat Montague, Montague Communications, 087-2549123