Opinion

We cannot afford to delay radical changes

There is a way to emerge from our troubles a better society, so let’s get on with it, writes VINCENT BROWNE

Wed Mar 04 2009 - 00:00

There is a way to emerge from our troubles a better society, so let's get on with it, writes VINCENT BROWNE

THERE IS a way out of our troubles, a way that would result in a better society after the troubles have gone. All it requires is a bit of conviction and resolve. And fairness. And it should start right away, ie in the next month, for delays will worsen our difficulties.

The guiding principles should be:

  • The relatively rich and the very rich take by far the most of the pain;
  • The mechanisms of social protection are strengthened at this time, especially to help people made unemployed, at a cost of €2 billion between now and the end of 2012;
  • There is investment in communities and unemployed people are encouraged to become involved in this without compromise to their welfare entitlements, at a cost of €1 billion;
  • The State spends €5 billion to bring into public ownership apartments, houses and commercial properties at bargain cost, some to be sold off later when market conditions improve. The preponderance of these houses and apartments are to remain in public ownership as a public resource to be rented to the public and to provide social affordable housing (this would be revenue yielding but there would be an initial substantial cost);
  • The political class and the cossetted in the public service are seen to take a major brunt of the readjustments: ministerial salaries capped at €150,000; all but six of the 20 Minister for State positions abolished; the number of Cabinet Ministers reduced to nine; all State cars removed from officeholders (perhaps with the exception of the President and Taoiseach); the Government jet sold; ministerial use of helicopters ended; all but six Oireachtas committees abolished and all attendant additional allowances abolished; TDs' pay reduced to €80,000 per annum; the Senate abolished;
  • The political system is changed radically to make it and the Government more accountable: all Bills and the annual budgets to be drafted in conjunction with Dáil committees; Ministers to be accountable and answerable to Dáil committees as well as to the Dáil itself; a procedure to be introduced preventing the application of party whips to the operation of Dáil committees under penalty of a substantial fine and, ultimately, disqualification from holding public office;
  • A new social contract is devised guaranteeing progress towards an equal society through investment in health, education, housing and other social protection measures. The aim of this is to eliminate the disparities between the social classes on mortality rates, participation in education, access to healthcare (a one-tier system), and income and wealth (nobody to earn more than eight times the national income average, ideally less);
  • The banks to be taken into public ownership in perpetuity.
  • The hole in the public finances is at least €18 billion, probably closer to €22 billion. The banks will probably cost us close to €8 billion. Add in the costs mentioned above, and the total comes to €38 billion. I suggest we seek to reduce this to €32 billion by the end of 2012.
  • Straight away, €8 billion should be taken from the public capital programme, primarily at the expense of the metro project; €18 billion should be raised through additional taxes between now and the end of 2012; and €6 billion should be raised through cuts in public expenditure.
  • I do not have the knowledge, expertise or means of calculating the yield from various tax initiatives but, in broad terms, I suggest the following measures to raise €18 billion between now and the end of 2012:
  • An increase in the income levy on everyone earning more than €80,000;
  • An increase in the existing top rate of tax to 50 per cent;
  • The introduction of a new additional tax rate on incomes of more than €100,000;
  • A tax on houses valued at more than €800,000 where the household income is more than €100,000;
  • An end of most of the tax reliefs, to include the phasing out of health insurance relief;
  • The taxing of all income earned in Ireland, irrespective of the actual or claimed residence of the recipient (to target the tax exiles).
  • On public expenditure cuts:
  • All salaries paid to people in the public service or contracted to the public service to be capped at €150,000. This would include ministers, judges, civil servants, hospital consultants, and people working in or contracted to the State agencies;
  • Everyone else in the public service earning more than €40,000 would have a cut in income of 10 per cent (this would not be in addition to the pension levy; it would replace it);
  • Further cuts in public expenditure through a scheme of voluntary redundancies; the enforcement of full flexibility in the public service so that public servants could be reassigned to other roles; the cutting of wasteful projects; and the introduction of third-level fees accompanied by means-tested scholarships and other initiatives.

These measures would yield a minimum of €6 billion between now and the end of 2012.

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Of course, any tax initiatives introduced now could be changed in the light of the report of the Commission on Taxation (I do not hold out much hope for that given the bias of its composition).

But most of all, let’s get on with it.