Economics:The poor should not be the first casualties of an economic slowdown. The budget must ensure that, of the scarce resources available, those who have least in Irish society receive most in terms of fiscal support, writes Paul Tansey
In these more straitened economic times, channelling additional income and support to those in need is more important than personal income tax cuts or, indeed, benchmarking increases to well-paid public servants.
The proximate reason for singling out poorer households for additional income support is the recent rise in food prices. Poor households spend proportionately more of their incomes on food than richer households. As a result, poorer households are more exposed to rising food prices than their richer counterparts.
Global increases in commodity prices are now pushing up food prices in Ireland. The Consumer Price Index shows that average prices for food and non-alcoholic beverages increased by 1.4 per cent during October alone. Rising prices for basic necessities - bread, flour, milk, cheese and other dairy and bakery products - were responsible for most of last month's increase in food prices. Moreover, this is the beginning, rather than the end, of the surge in food prices.
The general reason for advocating greater State support for poorer households is the fact that poverty is still entrenched in Irish society despite the State's economic take-off. Poverty remains a blot on the Irish boom. In 2004, the proportion of Ireland's population at risk of falling into poverty was higher than in any other EU state other than Portugal and Slovakia.
Recent research indicates that four out of every five people in the State are insulated against income poverty, economic strain and subjective economic stress. Of the remaining one-fifth of the population, one-half are economically vulnerable, subsisting on relatively low incomes, finding it difficult to make ends meet and at risk of deprivation and income poverty. The other half is living in consistent poverty*.
Data from the latest EU survey on income and living conditions (EU-SILC) fleshes out these findings. They indicate that, in 2005, 18.5 per cent of the population was at risk of poverty, subsisting on less than 60 per cent of average (median) disposable income.
Moreover, at this threshold, 7 per cent were found to be in a state of consistent poverty, suffering both low incomes and basic deprivation. And the eight indicators of deprivation are basic. They include going without heating for lack of money, and the inability to afford two pairs of strong shoes or a waterproof coat.
Those most at risk of consistent poverty are households headed by a lone parent, unemployed households and the ill or disabled. Many people suffer spells of poverty at some point in their lives. They lose their jobs. They fall ill. Their marriage fails. Their business collapses. But, over time, their fortunes recover and they escape from poverty.
For others, however, poverty is virtually predestined. Poverty begets poverty. Those who lived in poor households as teenagers are four times more likely to experience consistent poverty as adults than those whose teenage years were free from financial strain. Similarly, the risks of falling into poverty are three times greater for those whose parents' education ceased at primary level compared to those whose parents took college degrees**.
Worst of all is the continuing existence of clearly delineated geographic areas of real and deep deprivation from which escape is all but impossible. In the National Development Plan (NDP) 2007-2013, the Government has identified 46 such severely disadvantaged areas, urban and provincial. Yet the public resources it has earmarked for improving the lives of the people in these areas are wholly inadequate.
Total investment under the NDP is planned at €184 billion. Of this, €1.9 billion, or just over 1 per cent of the total, has been allocated over a seven-year stretch to the Local and Community Development Programme under the Social Inclusion Priority. The Rapid (revitalisation of areas by planning, investment and development) sub-programme, potentially the most incisive measure for dealing with ingrained poverty, has been given just €67 million in funding over seven years. This level of investment is insufficient to break the repetitive cycle of poverty.
The pace of economic expansion is slowing due to the downturn in construction activity. As a result, the growth in exchequer revenues is weakening. Hence, the Government is short of spare cash. But the continued existence of these poverty black spots remains a challenge to the State's conscience.
There is a solution that would both alleviate localised concentrations of poverty while at the same time aiding a weakening construction sector. The Minister for Finance could use the December budget creatively to announce a major urban regeneration programme. Such a programme should be centred exclusively on the redevelopment of already-identified areas of poverty and disadvantage. Redevelopment activity could be triggered exclusively by tax incentives. In this case, the only cost to the Exchequer would be tax revenue foregone.
*Brian Nolan and Bertrand Maître "Economic Growth and Income Inequality: Setting the Context", Best of Times? - The Social Impact of the Celtic Tiger, IPA, 2007.
**EU-SILC Intergenerational Transmission of Poverty, CSO, August 2007.
