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Budget 2013 – austerity without end
13 December 2013
Find out just what any people will quietly submit to and you have the exact measure of the injustice and wrong which will be imposed on them. Frederick Douglass, anti-slavery campaigner.
Last week’s budget was the sixth since the onset of the financial crisis and continues the programme of austerity into a fifth year. Despite a change of government over this period the thrust of policy remains unchanged.
While the €3.5 package of cuts and taxes that make up Budget 2013 is comparable to those in previous years its impact is amplified because it comes on top of the €25 billion of austerity that has already been imposed since 2008 (equivalent to 17 per cent of GDP). By its very nature austerity becomes harsher the longer it lasts. This is why the latest budget contains measures that would have appeared unthinkable only a few years ago.
The cuts component of budget totals €2.2 billion.
Public sector pay
The largest chunk of this will come from reducing the public sector pay bill by €1 billion over the next year to be followed by similar reductions annually until 2015. The Government is seeking to extend the Croke Park agreement which has already yielded savings of €1 billion and reduced staff numbers by over 30,000.
The balance of the cuts is to be made up through deep cuts to social welfare.
The health budget will be cut again with €5 million being taken out of the HSE child and family services. There will also be an increase in prescription charge which will see families paying up to €144 a month before the State will cover the cost.
Child benefit is being cut for the third time since 2008. The monthly payments will be cut by between €10 and €20 per child, depending on how many are in the family. The rate will fall to €130 a month for first-born children. A family with two children getting the benefit will be down €240 a year - bringing to €864 the amount they will have lost in total since 2008. But back-to-school allowances will also be cut by up to 33 per cent per child, with the rate for primary pupils down from €150 to €100 and the rate for secondary pupils down from €250 to €200. As a result of changes in the budget the average family (two children) will lose an additional €540 a year.
There are cuts to home help services, respite care and to housing modification grants given to home carers who care for disabled/elderly relatives in their own homes. Overall, the annual payment to carers is down from €1700 to €1375
The duration of jobseeker's benefit is to be reduced by three months: effectively a cut of 25 per cent for those claiming it over that time.
The lower rate of USC for the over-70s will be abolished. They will also be hit with cuts to their homecare package of telephone, electricity and gas allowances.
Alongside current spend capital expenditure
is also facing cuts with another €500 million being taken out of the
budget in 2013. Cuts in this area have been particularly severe
over the past number of years with spend on capital projects falling by
two thirds (down from €10 billion in 2008 to under €3.5 billion
in 2013). They have served to compound the more general problem
of collapsing investment and the negative consequences for economic growth
that follow. Ireland is now projected to have by far
the lowest level of capital investment of any country in the EU for the
The taxation component of budget totals €1.3 billion.
The most significant new tax is the property tax which will cost the average householder €300 a year when it comes into full operation in 2014. This tax will apply to all households. The only concession is an option for the unemployed, people in mortgage distress and some pensioners to defer paying the tax until they or their estate sells their homes. While the tax is coming in at an initially low level - 0.18% of the value of a home up to 1m euros and 0.25 per cent on the balance of any property over and above that – the ability of councils to vary rates by 15 per cent above the national rate indicates the potential for the tax to rise substantially in the future. It will also be difficult for people to avoid the property tax as the Government has introduced new powers for tax authorities that enable deductions from wages and benefits. This obviously has implications for any anti-austerity campaigns based on the tactic of non-payment.
Another feature of the tax side of the budget is the taxation of benefits and the removal of tax allowances.
Pay Related Social Insurance (PRSI)
The PRSI allowance is to be abolished while PRSI will be extended to other forms of income. From next year all income from €1 up will have PRSI applied at 4 per cent. The change will mean that most PAYE workers will pay an extra €264 per year. For working families this will mean an additional cost of €5 per week.
These tax changes are particularly regressive as they result in those on lower incomes paying the same those on higher incomes. So workers earning €25,000 per year will see their PRSI payments increase by 36 per cent (€264.16) while people earning €175,000 per year will see their PRSI payments increase by 3.9 per cent (€264.16).
Tax on maternity benefits
Maternity benefit will now be treated as taxable income. Around 48,000 women a year receive this weekly payment of between €218 and €262. Previously mothers on maternity leave did not have to pay tax on the welfare payments they receive during the six months weeks they get to spend with the new-born. Now eligible mothers will be paying an average of €833 extra each in taxation.
Other taxes announced in the budget include:
a rise in motor tax of between €50 a year and €126; a rise in
the savings tax (DIRT) of a least 33 per cent; a 10c increase in the price
of a pint and the duty on wine going up by €1. There will also be
another €250 increase in the student registration charge.
Overall, the cuts and taxes increases contained in Budget 2013 will take at least €1,000 out of the household income of an average family. Taken together with last year’s budget, the Labour-Fine Gael coalition has imposed more than €7 billion of austerity measures since coming to power in 2011. The fact that they are prepared to strike at the heart of the family (which has long been the main ideological support of the state) demonstrates their total commitment to this programme.
The contents of the budget give the lie to claims by the Labour Party that its presence in Government would mitigate the worst elements of austerity. Explicit commitments made during the general camping, such as maintaining child benefit levels, have been abandoned. Despite the much heralded wealth taxes very few of the tax measures in Budget 2013 specifically target high earners or those with significant levels of wealth.
This follows on from last year’s budget, the first after Labour’s most recent return to government, whose combination of indirect tax increases and welfare cuts imposed greater percentage losses on those with low incomes (reductions of between 2 to 2.5 per cent) as against losses of about 0.75 per cent for those on the highest incomes. According to the government’s own estimates income tax will rise by 2.4 per cent from 2011 to 2015 while taxation on capital will fall by 0.3 per cent of GDP. Over the same period the wages of public sector workers will fall by 2 per cent of GDP. This disparity shows the degree to which austerity is about a transfer of income from labour and the poor to capital and the rich.
While the Irish rich continue to be featherbedded the overriding imperative of successive budgets has been to satisfy the terms of the EU/ECB/IMF bailout for Irish banks and their international creditors. The €3.5 bn of cuts and taxes contained in the latest budget will be transferred to the financial class through the IRBC (formerly Anglo Irish Bank & Irish Nationwide). This is a substantial portion of the €5 bn that the Irish Government has committed to paying into the IRBC in 2013. However, this is merely the third instalment of repayments on a €31bn bailout loan which are set to continue for twenty years. The Irish state is also paying interest on this loan that amounts to additional €17bn over this period. In 2013 alone the interest payment is €1.9bn. Another condition of the bailout is the reduction of the state deficit to below 3 per cent by 2015. The current deficit is 8.2 per cent of GDP (almost 1 per cent higher than in 2008). Therefore if the bailout conditions are to be met, in terms of loan repayments and deficit reduction, the austerity drive will have to continue for many years.
The Government is trying to give the impression that the economy is well on the road to recovery and the worst of austerity is over. However, this is far from the reality. As we have shown above the terms on the bailout alone demand further austerity over the coming years. Also, the recovery in the Irish economy is very weak. The growth rate is likely to be much lower than the projected 1.5 per cent in 2013 and 2.5 per cent in 2014. The EU has estimated a growth rate of around 1 per cent for next year. The inevitable consequence of lower growth is an increase in the debt burden and an intensification of austerity.
If we were to judge the bailout (and its associated austerity programme) by its stated objectives of reducing debt and reviving the economy then it has been a total failure. The policy of austerity has actually made the achievement of these objectives less likely with Ireland almost certain to require further financial support beyond 2014.
Building an opposition
Where austerity has been a success is in its unstated aim of pushing the cost of the financial crisis onto the working class. In Ireland the success of this agenda has been aided greatly by the leadership of the trade union movement. They have facilitated much of the austerity programme and also indicated their willingness to continue in that role. Any serious opposition to austerity must therefore challenge the trade union leaders.
The broad front that austerity programme is progressing on demands that the resistance be similarly broad. The weakness of the anti household charge campaign demonstrates the severe limitations of concentrating all the effort into one area and relying on one tactic. We need to unite all the various ongoing campaigns (whether that be opposition to hospital closures or to welfare cuts) into a general anti austerity campaign that has its core political demand the rejection of the EU/ECB/IMF bailout. This is a massive task but it is essential if Irish workers are to resist the all out assault being waged against them.
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