FEW WOULD disagree with the broad thrust of a letter written to this newspaper by 60 academics and social activists concerning the need to invest in jobs, economic growth and social protection measures.
In fact, much of what they advocate was contained in the election manifestos of Fine Gael and the Labour Party. As Government Ministers have since discovered, however, there is a considerable gap between what they might want to do and what is allowed by the EU-IMF troika. Despite that, policy choices exist that are not covered by the terms of the bailout memorandum.
Austerity measures, the letter writers argue, are not working and threaten a period of low growth, high debt, high unemployment and deepening social injustice. An emergency budget to create jobs and sustainable growth, while increasing incomes and reducing poverty, should be introduced. Funding for this Plan B, they suggest, should come from a renegotiation of Anglo Irish Bank costs and the use of State cash and assets. So far, so uncontroversial. However, they go on to propose a redistribution of income to low and average income earners through new taxation measures on capital, property and high incomes. They also urge an end to cuts in public services, social protection and community projects.
A growing number of economists disagree with the fiscal policies urged by Germany, arguing they are self-defeating and will worsen the situation. International Monetary Fund managing director Christine Lagarde agrees and has warned against fiscal cuts that jeopardise growth. This tension between the European Union and the IMF brought good news last week. Progress was made on Anglo Irish Bank issues and members of the EU-IMF troika finally accepted that a sizable portion of the money raised from a sale of Irish State assets could be used for job creation. The latter concession will provide funding for an action plan on jobs later this month and strengthened the Government’s hand in dealing with those trade unions that oppose any privatisation.
One of the problems with the letter is that the huge disparity between Government income and expenditure is ignored when demands are made for an end to cuts in public services. Should the Croke Park areement and plans to reduce the cost and the number of public employees be shelved? Similarly, a demand for new taxation measures affecting capital, property and high incomes represents something of a scattergun approach. What is a high income? How extensive should capital and property taxes be?
Choices are indeed there to be made. Plans to introduce a property tax by 2013 are well advanced and this may include land as well as buildings. Fine Gael’s commitment not to increase income tax was predicated on meeting the terms of the EU-IMF bailout. Advancing the public good through job creation and social equity could be regarded as more compelling. The Government may not be in complete control of its own house but neither is it a lodger.