Sinéad Pentony: In a submission to the Oireachtas Committee on Jobs, Social Protection and Education, TASC has looked at a number of key questions.
The submission provides an overview of unemployment, which clearly illustrates the scale of the crisis and who is being most affected. There are clear inequalities in the labour market within and between generations. Those previously unemployed in craft and related areas represent over one third of those who are on the live register and this group is more likely to have lower levels of education and skills. Almost one third of young people are unemployed. The reasons for this include a lack of jobs, low levels of education and training coupled with limited work experience and the fact that young people are more likely to lose their jobs in economic downturns.
The submission also considers the measures that Government is taking to address the problem, which includes reform of labour market activation policy – Pathways to Work, and the Government’s Action Plan for Jobs. These measures include some long over-due reforms, but they will not address the unemployment crisis, as it is primarily a demand-side problem – the demand for labour is less than the available supply of labour and addressing this issue requires a targeted programme of investment and economic growth.
Finally, the submission considers the issue of youth unemployment and puts forward a number of recommendations that include improving the quality of existing policies aimed at providing young people with valuable work experience and training; assessing the feasibility of providing a ‘Youth Job Guarantee’; assisting young people to become entrepreneurs; and targeted education and training initiatives aimed at young people with no formal qualifications.
Showing posts with label Sinead Pentony. Show all posts
Showing posts with label Sinead Pentony. Show all posts
Tuesday, 22 May 2012
Friday, 2 March 2012
Pathways to Work - can it deliver?
Sinéad Pentony: Pathways to Work was launched last week and it sets out to achieve some much needed reform in relation to labour market activation measures. The ambition “is to develop a new approach to engagement with people who are unemployed which meets international best practice”. Plans to increase the level of engagement with people who are unemployed and greater targeting of activation places are essential ingredients of an effective active labour market policy. Pathways also includes measures aimed at ‘incentivising’ unemployed people to take up employment opportunities and incentives for employers to take on unemployed people. The final element focuses on reforming institutions to deliver services to people who are unemployed. But can it deliver?
Pathways to Work rightly draws on international best practice which has increased levels of engagement with unemployed people as a central plank in its active labour market measures and this measure will be rolled out through the National Employment and Entitlement Service (NEES). This will take time, resources and institutional reform if it is going to achieve the objective of a work-focused welfare payment and effective and targeted service delivery.
Unfortunately, it appears that increased levels of engagement will only target those who are newly unemployed and in a number of pilot areas, in the first instance. This means that the vast majority of people currently on the live register will not benefit from an improved service. There are also plans to target activation measures at approximately 15,000-20,000 people who are long term unemployed per year, up until 2015. Again, the scale of the interventions planned for the long-term unemployed is not sufficient to deal with the scale of the problem, with over 180,000 classed as being on the Live Register for more than one year.
To get an idea of the scale of investment as a percentage of GDP by countries which have highly developed active labour market measures - in Ireland (2009) we spent 0.87 per cent of GDP on active labour market measures, while countries such as Denmark and Sweden spent 1.62 per cent and 1.13 per cent, respectively. This spending also needs to be put in the context of the fact we have many more people unemployed and long-term unemployed than these countries.
International best practice is drawn from countries that have highly developed activation measures. Nordic labour policy fosters the human capital of the population, while at the same time deploying activation mechanisms which also include an obligation to work. The services provided place a strong emphasis on quality – and the occupational and skill requirements with regard to the staff are high. Regular evaluations and examinations of their knowledge are the norm.
The institutional reform required in Ireland cannot be underestimated. If Pathways to Work is going to achieve best practice, this will require a different set of skills and capacities within the NEES, which may not currently exist. The ESRI report on Activation in Ireland shows how far we need to go in providing the types of training that are needed to improve people’s prospects of re-entering the labour market. The report highlights the pre-dominance of general and low skill training activity, which is unlikely to have strong positive impacts on employment prospects. The research also found that training provision is out of sync with the educational profile of unemployed people and that it does not address the structural employment among former construction workers. Finally, the report calls for a radical restructuring of training provision.
If the NEES is focused on providing a quality service where people are supported through individual progression plans, there should be very little need for ‘sanctions’ to be applied because the vast majority of people are desperate to find a job. However, there is a danger that rolling out such a service in the absence of building the institutional capacity and the capacity of those delivering the service may result in the over-use of ‘sanctions’ on those who are considered to be ‘not engaging’ with the service because there is little/no emphasis put on finding out why a person may not be engaging with the service or if there are aspects of the service that are not meeting the needs of the service user.
Another element of Pathways to Work is ‘incentivisation’ – of those who are unemployed to take up jobs, along with incentives for employers to take on unemployed workers. In the case of employers there are a range of measures that reduce the cost of employing people, which make sense in times of recession and high unemployment.
In the case of ‘incentivising’ unemployed people, a number of reforms are planned to streamline working age payments, child income support and disability allowances. These reforms include moving lone parents onto working age payments over time. However, the main barrier preventing lone parents from accessing education and training opportunities and/or employment opportunities is the provision of affordable childcare and afterschool care, and the absence of jobs with flexible arrangements. So, what will happen to lone parents who are expected to be ‘available for work’ but are unable to take up education/training opportunities or employment because of the absence of flexible arrangements and affordable child/afterschool care? Will they be sanctioned?
Other changes include increasing the USC threshold to €10,036, which is welcomed but the benefits of this are likely to be offset by reducing the social welfare week from 6 to 5 days. In general, the last number of years have seen cuts in direct and indirect social welfare payments, which is having a devastating impact on low income households. This is reflected in growing numbers of families at risk of poverty and experiencing poverty along with growing income inequality as evidenced by the latest SILC statistics. The recently published report on A Minimum Income Standard for Ireland also clearly demonstrates that many households in situations of reliance on social welfare or the national minimum wage live on an insufficient income. It is essential that reform of tax and welfare measures should not be equated with cuts, but that reform results in the better targeting of resources and supports at those who need them the most. Only then will we see a reversal of the current poverty and inequality trends.
The final element of Pathways to Work is institutional reform, which has been mentioned above. This includes plans to introduce ‘payment by results’, whereby the private sector is contracted to provide activation services for long-term unemployed. The report cites experience in the UK and Australia, asserting that it has “proven effective in supporting the unemployed to secure employment”. This system is operating less than a year in the UK and there are no independent evaluations available at this point in time.
However, the UK National Audit Office recently published a report on the introduction of the Work Programme in the UK, which examines ‘payment by results’. Some of the findings include “a significant risk that ministers’ assumptions about the numbers who can be found jobs may be over-optimistic”. The contractual arrangements with private providers are also questioned because of the programme’s demanding targets which “may encourage providers to target easier-to-help claimants while not helping others... and reduce the level of service provided in order to reduce costs...” There are also issues identified in relation to private providers operating in areas of high unemployment and how “they may struggle to meet nationally set targets”. The Report clearly articulates a whole host of other ‘risks’ associated with the Programme, which highlight the complexities behind what can often appear straightforward ‘payment by results measures’, which can actually result in diminished services and 'cherry picking' people who are easier to place in employment.
The Report also identifies the future state of the economy as a key indicator of success and this means the availability of jobs. While Pathways to Work will hopefully deliver some much needed reform, its success will depend on whether or not the economy is growing and creating jobs. Unemployment is primarily a ‘demand-side’ problem which needs demand-side solutions, and central to this is investment, along with measures that protect low incomes, which maintain aggregate demand in the domestic economy.
Pathways to Work rightly draws on international best practice which has increased levels of engagement with unemployed people as a central plank in its active labour market measures and this measure will be rolled out through the National Employment and Entitlement Service (NEES). This will take time, resources and institutional reform if it is going to achieve the objective of a work-focused welfare payment and effective and targeted service delivery.
Unfortunately, it appears that increased levels of engagement will only target those who are newly unemployed and in a number of pilot areas, in the first instance. This means that the vast majority of people currently on the live register will not benefit from an improved service. There are also plans to target activation measures at approximately 15,000-20,000 people who are long term unemployed per year, up until 2015. Again, the scale of the interventions planned for the long-term unemployed is not sufficient to deal with the scale of the problem, with over 180,000 classed as being on the Live Register for more than one year.
To get an idea of the scale of investment as a percentage of GDP by countries which have highly developed active labour market measures - in Ireland (2009) we spent 0.87 per cent of GDP on active labour market measures, while countries such as Denmark and Sweden spent 1.62 per cent and 1.13 per cent, respectively. This spending also needs to be put in the context of the fact we have many more people unemployed and long-term unemployed than these countries.
International best practice is drawn from countries that have highly developed activation measures. Nordic labour policy fosters the human capital of the population, while at the same time deploying activation mechanisms which also include an obligation to work. The services provided place a strong emphasis on quality – and the occupational and skill requirements with regard to the staff are high. Regular evaluations and examinations of their knowledge are the norm.
The institutional reform required in Ireland cannot be underestimated. If Pathways to Work is going to achieve best practice, this will require a different set of skills and capacities within the NEES, which may not currently exist. The ESRI report on Activation in Ireland shows how far we need to go in providing the types of training that are needed to improve people’s prospects of re-entering the labour market. The report highlights the pre-dominance of general and low skill training activity, which is unlikely to have strong positive impacts on employment prospects. The research also found that training provision is out of sync with the educational profile of unemployed people and that it does not address the structural employment among former construction workers. Finally, the report calls for a radical restructuring of training provision.
If the NEES is focused on providing a quality service where people are supported through individual progression plans, there should be very little need for ‘sanctions’ to be applied because the vast majority of people are desperate to find a job. However, there is a danger that rolling out such a service in the absence of building the institutional capacity and the capacity of those delivering the service may result in the over-use of ‘sanctions’ on those who are considered to be ‘not engaging’ with the service because there is little/no emphasis put on finding out why a person may not be engaging with the service or if there are aspects of the service that are not meeting the needs of the service user.
Another element of Pathways to Work is ‘incentivisation’ – of those who are unemployed to take up jobs, along with incentives for employers to take on unemployed workers. In the case of employers there are a range of measures that reduce the cost of employing people, which make sense in times of recession and high unemployment.
In the case of ‘incentivising’ unemployed people, a number of reforms are planned to streamline working age payments, child income support and disability allowances. These reforms include moving lone parents onto working age payments over time. However, the main barrier preventing lone parents from accessing education and training opportunities and/or employment opportunities is the provision of affordable childcare and afterschool care, and the absence of jobs with flexible arrangements. So, what will happen to lone parents who are expected to be ‘available for work’ but are unable to take up education/training opportunities or employment because of the absence of flexible arrangements and affordable child/afterschool care? Will they be sanctioned?
Other changes include increasing the USC threshold to €10,036, which is welcomed but the benefits of this are likely to be offset by reducing the social welfare week from 6 to 5 days. In general, the last number of years have seen cuts in direct and indirect social welfare payments, which is having a devastating impact on low income households. This is reflected in growing numbers of families at risk of poverty and experiencing poverty along with growing income inequality as evidenced by the latest SILC statistics. The recently published report on A Minimum Income Standard for Ireland also clearly demonstrates that many households in situations of reliance on social welfare or the national minimum wage live on an insufficient income. It is essential that reform of tax and welfare measures should not be equated with cuts, but that reform results in the better targeting of resources and supports at those who need them the most. Only then will we see a reversal of the current poverty and inequality trends.
The final element of Pathways to Work is institutional reform, which has been mentioned above. This includes plans to introduce ‘payment by results’, whereby the private sector is contracted to provide activation services for long-term unemployed. The report cites experience in the UK and Australia, asserting that it has “proven effective in supporting the unemployed to secure employment”. This system is operating less than a year in the UK and there are no independent evaluations available at this point in time.
However, the UK National Audit Office recently published a report on the introduction of the Work Programme in the UK, which examines ‘payment by results’. Some of the findings include “a significant risk that ministers’ assumptions about the numbers who can be found jobs may be over-optimistic”. The contractual arrangements with private providers are also questioned because of the programme’s demanding targets which “may encourage providers to target easier-to-help claimants while not helping others... and reduce the level of service provided in order to reduce costs...” There are also issues identified in relation to private providers operating in areas of high unemployment and how “they may struggle to meet nationally set targets”. The Report clearly articulates a whole host of other ‘risks’ associated with the Programme, which highlight the complexities behind what can often appear straightforward ‘payment by results measures’, which can actually result in diminished services and 'cherry picking' people who are easier to place in employment.
The Report also identifies the future state of the economy as a key indicator of success and this means the availability of jobs. While Pathways to Work will hopefully deliver some much needed reform, its success will depend on whether or not the economy is growing and creating jobs. Unemployment is primarily a ‘demand-side’ problem which needs demand-side solutions, and central to this is investment, along with measures that protect low incomes, which maintain aggregate demand in the domestic economy.
Wednesday, 22 February 2012
The false economy of selling state assets to fund job creation
Sinéad Pentony: Today’s announcement provides us with some more details on the government’s thinking in relation to the role of state assets in our economy. The position has become more nuanced in some regards, as the sale of the ESB appears to the off the table (with the exception of some power generators) along with the sale of Bord Gais’s transmission and distribution systems. However, privatisation remains a clear policy focus for the government and a bitter pill is being sweetened with the promise of the proceeds of privatisation being used to fund job creation. But this is false economy.
We are hearing a lot about supporting job creation at the moment. Last week it was the Action Plan for Jobs, this week the sale of state assets will be used to support job creation and tomorrow the government will launch its Pathways to Work - the Government Policy Statement on Labour Market Activation.
Last week's TASC report on the Strategic Role of State Assets, along with today’s statement, clearly articulate the trade-off between short term and longer term investment priorities, with the latter increasing the capacity of the economy to grow and compete with other advanced knowledge-based economies. So the sale of strategic assets is a critical issue because it could actually cost us jobs in the medium-long term if we don’t have the infrastructure that facilitates and supports the functions of a dynamic advanced economy competing globally.
Last week the Action Plan for Jobs was announced. Any initiative aimed at promoting job creation is to be welcomed, and the focus of the Plan is on improving the conditions for doing business in Ireland. While ‘bold ambitions’ are to be admired, it’s difficult to see how the target of increasing the number of people in work by 100,000 – from 1.8 million to 1.9 million jobs by 2016 - can be realised, when the next three budgets are expected to take a further €9 billion out of the economy by 2016. One can only imagine the sorry state that the country will be in, in three years time - if we continue on the current path of austerity piled on top of more austerity.
On Monday night the Frontline programme was devoted to discussing the Action Plan. One of the panellists was businesswoman Glenna Lynch whose business has been struggling since the onset of the crisis and she has been forced to let people go. When asked what she thought about the Action Plan, she said that there was very little in it for her and that the problems she faces relate to the fact that successive austerity budgets are sucking money, demand and confidence out of the economy.
Pathways to Work is being launched tomorrow, the objective of which is to “drive the introduction of measures to improve the conditions for job creation across the economy and to ensure that the creation of these jobs feeds into a reduction in unemployment”. Our labour market activation policies have long been in need of reform, and they must reflect the complexities of the labour market in a modern economy.
In general the Action Plan for Jobs and Pathways to Work can be described as ‘supply-side’ measures, aimed at creating the conditions for businesses to create jobs and for people to be in a position to the take up jobs.
But how can businesses create jobs when the demand for their goods and services is static or shrinking because of budgetary measures?
What’s needed are a series of ‘demand-side’ measures aimed at creating demand for labour, and this requires investment. But this investment should not be financed from the sale of state assets, which should rather be used to support investment in the medium term. Instead, much needed short-term investment should be financed through the €4.7billion remaining in the NPRF, along with an initiative that allows part of the €5.3 billion held by Irish pension funds to be invested in infrastructural projects.
We are hearing a lot about supporting job creation at the moment. Last week it was the Action Plan for Jobs, this week the sale of state assets will be used to support job creation and tomorrow the government will launch its Pathways to Work - the Government Policy Statement on Labour Market Activation.
Last week's TASC report on the Strategic Role of State Assets, along with today’s statement, clearly articulate the trade-off between short term and longer term investment priorities, with the latter increasing the capacity of the economy to grow and compete with other advanced knowledge-based economies. So the sale of strategic assets is a critical issue because it could actually cost us jobs in the medium-long term if we don’t have the infrastructure that facilitates and supports the functions of a dynamic advanced economy competing globally.
Last week the Action Plan for Jobs was announced. Any initiative aimed at promoting job creation is to be welcomed, and the focus of the Plan is on improving the conditions for doing business in Ireland. While ‘bold ambitions’ are to be admired, it’s difficult to see how the target of increasing the number of people in work by 100,000 – from 1.8 million to 1.9 million jobs by 2016 - can be realised, when the next three budgets are expected to take a further €9 billion out of the economy by 2016. One can only imagine the sorry state that the country will be in, in three years time - if we continue on the current path of austerity piled on top of more austerity.
On Monday night the Frontline programme was devoted to discussing the Action Plan. One of the panellists was businesswoman Glenna Lynch whose business has been struggling since the onset of the crisis and she has been forced to let people go. When asked what she thought about the Action Plan, she said that there was very little in it for her and that the problems she faces relate to the fact that successive austerity budgets are sucking money, demand and confidence out of the economy.
Pathways to Work is being launched tomorrow, the objective of which is to “drive the introduction of measures to improve the conditions for job creation across the economy and to ensure that the creation of these jobs feeds into a reduction in unemployment”. Our labour market activation policies have long been in need of reform, and they must reflect the complexities of the labour market in a modern economy.
In general the Action Plan for Jobs and Pathways to Work can be described as ‘supply-side’ measures, aimed at creating the conditions for businesses to create jobs and for people to be in a position to the take up jobs.
But how can businesses create jobs when the demand for their goods and services is static or shrinking because of budgetary measures?
What’s needed are a series of ‘demand-side’ measures aimed at creating demand for labour, and this requires investment. But this investment should not be financed from the sale of state assets, which should rather be used to support investment in the medium term. Instead, much needed short-term investment should be financed through the €4.7billion remaining in the NPRF, along with an initiative that allows part of the €5.3 billion held by Irish pension funds to be invested in infrastructural projects.
Wednesday, 7 December 2011
Day 2 - Budget 2012
Sinéad Pentony: Day two of the budget focused primarily on revenue raising measures and the introduction of measures aimed at stimulating economic growth. Let’s see how some of the big announcements on day two perform against the principles of fairness, jobs and reform.
A big part of yesterday’s announcements related to measures aimed at resuscitating the property market. Although every successful advanced economy has a functioning property market that makes an important contribution to economic activity, this Budget seems to be relying on new property-based tax breaks rather than a programme of strategic investment to support economic activity.
Budgetary measures in this context included changes to Stamp Duty, Capital Gains Tax and Mortgage-Interest Relief (MIR) aimed at incentivising transactions in the commercial and private property markets. The changes in MIR include an increase to 30 per cent for first-time buyers who bought at the peak of the boom (2004-2008) along with increases to MIR for new first-time buyers and non-first time buyers in 2012. These measures fail the test of fairness for a number of reasons:
• If you bought a house during the boom you are likely to be in negative equity, but if you are still able to make repayments and have not lost your job, the changes to MIR are an added bonus and will reduce your mortgage repayments.
• If you bought a house during the boom and are in negative equity and you are in mortgage arrears, the reduction in MIR may improve your prospects of meeting your mortgage commitments, but many will never be in a position to repay the mortgage. Changes to MIR should have targeted this group along with the introduction of personal insolvency resolution mechanisms whereby personal and mortgage debts are restructured and/or written down. An announcement on the latter is due shortly.
• Many low income families were never in a position to buy their own home during the boom and will never be in a position to benefit from state subsidies for home ownership. For these groups social housing, housing associations and/or private renting are the only options.
Another measure relates to Section 23 property reliefs, the abolition of which was announced in last year’s budget but was later reversed pending an economic impact assessment. Yesterday’s measures included the introduction of a property relief surcharge of 5 per cent on annual gross incomes over €100,000.
Reforms to the budgetary process include a commitment to greater transparency, so the economic impact assessment should be published so that it can be subject to public scrutiny.
The main taxation measures include changes to the Universal Social Charge (USC), increases in VAT, carbon tax, motor tax, CGT, CAT along with the introduction of the household charge. The changes to the USC are welcome and certainly pass the fairness test on the grounds of equity on their own terms. The increases in CGT and CAT are also to be welcomed as these are taxes on the sale and transfer of assets. The application of the PRSI to other forms of income along with increases in DIRT is also good news, although the former will only come into effect in 2013.
Ireland is a poor performer when it comes to taxing assets and wealth compared to other European countries, so these increases are a step in the right direction but much more could have been done in this budget to spread the burden of the adjustment more equally.
An example of where more could have been done relates to the taxation of Irish people who are non-resident for tax purposes. The domicile levy can only be described as a failed attempt to ensure that this group of people are made to pay their fair share. Plans to abolish the “citizenship” condition for payment is unlikely to make any difference to the amount of revenue generated through this measure. The introduction of a “citizenship-based” tax or a tax on global assets are measures used to generate revenue from non-residents in other countries.
The bad news on taxation is that when you combine the changes to the USC with the decision to base the jobseekers’ benefit payment week on a 5-day week rather than a 6-day week, the likely outcome is that people earning less than €10,000 – who are probably working on a part-time basis and likely to be women - will actually lose more of their income, especially when the increases in VAT and carbon tax is included, not to mention the household charge.
Indirect flat taxation measures are blunt instruments for collecting revenue. They are regressive and take proportionately more from low income families. Such measures are also counter-productive because they reduce the spending power of such households which will further depress consumer demand and ultimately lead to more jobs losses and job insecurity. So this group of measures fails both the fairness and jobs tests.
The household charge is a good example of how not to introduce a property tax and fails the fairness test because it is going to apply to all houses (with a few exceptions) regardless of location, house size and income. While the introduction of a Site Valuation Tax has been flagged for 2014, the household charge will cause alot of pain in the meantime. TASC has developed an equality-proofed residential property tax model that could have been introduced relatively easily and used on an interim basis.
As organisations start quantifying the effects of the overall Budget,the picture that seems to be emerging is one where everyone will be affected by the budgetary measures, but once again, low income families will lose proportionately more through reductions in their income, spending power and access to essential public services.
This budget also contains cuts to areas that are not going to save the Exchequer a significant amount of money but will have a disproportionate impact on the provision of locally-delivered services and advocacy work that provides a voice for marginalised groups. These cuts include the disproportionate cut to the budget of the National Womens’ Council, cuts to the Local and Community Development Programme, Rural Transport Programme and Community Employment.
This budget is a very bad budget for women and children in particular, both of whom are at the coal face of this recession.
The latest poverty statistics illustrate the impact that responses to the economic crisis are having on women and children. Unfortunately, this budget is likely to result in a continuation in this trend, so it is more important than ever that the effects of budgetary measures are quantified and alternatives policy options put forward.
At the end of the day the budget represents a set of choices and the political priorities of the Government. Once again the wrong set of choices appear to have been made for the economy and a large part of the population.
A big part of yesterday’s announcements related to measures aimed at resuscitating the property market. Although every successful advanced economy has a functioning property market that makes an important contribution to economic activity, this Budget seems to be relying on new property-based tax breaks rather than a programme of strategic investment to support economic activity.
Budgetary measures in this context included changes to Stamp Duty, Capital Gains Tax and Mortgage-Interest Relief (MIR) aimed at incentivising transactions in the commercial and private property markets. The changes in MIR include an increase to 30 per cent for first-time buyers who bought at the peak of the boom (2004-2008) along with increases to MIR for new first-time buyers and non-first time buyers in 2012. These measures fail the test of fairness for a number of reasons:
• If you bought a house during the boom you are likely to be in negative equity, but if you are still able to make repayments and have not lost your job, the changes to MIR are an added bonus and will reduce your mortgage repayments.
• If you bought a house during the boom and are in negative equity and you are in mortgage arrears, the reduction in MIR may improve your prospects of meeting your mortgage commitments, but many will never be in a position to repay the mortgage. Changes to MIR should have targeted this group along with the introduction of personal insolvency resolution mechanisms whereby personal and mortgage debts are restructured and/or written down. An announcement on the latter is due shortly.
• Many low income families were never in a position to buy their own home during the boom and will never be in a position to benefit from state subsidies for home ownership. For these groups social housing, housing associations and/or private renting are the only options.
Another measure relates to Section 23 property reliefs, the abolition of which was announced in last year’s budget but was later reversed pending an economic impact assessment. Yesterday’s measures included the introduction of a property relief surcharge of 5 per cent on annual gross incomes over €100,000.
Reforms to the budgetary process include a commitment to greater transparency, so the economic impact assessment should be published so that it can be subject to public scrutiny.
The main taxation measures include changes to the Universal Social Charge (USC), increases in VAT, carbon tax, motor tax, CGT, CAT along with the introduction of the household charge. The changes to the USC are welcome and certainly pass the fairness test on the grounds of equity on their own terms. The increases in CGT and CAT are also to be welcomed as these are taxes on the sale and transfer of assets. The application of the PRSI to other forms of income along with increases in DIRT is also good news, although the former will only come into effect in 2013.
Ireland is a poor performer when it comes to taxing assets and wealth compared to other European countries, so these increases are a step in the right direction but much more could have been done in this budget to spread the burden of the adjustment more equally.
An example of where more could have been done relates to the taxation of Irish people who are non-resident for tax purposes. The domicile levy can only be described as a failed attempt to ensure that this group of people are made to pay their fair share. Plans to abolish the “citizenship” condition for payment is unlikely to make any difference to the amount of revenue generated through this measure. The introduction of a “citizenship-based” tax or a tax on global assets are measures used to generate revenue from non-residents in other countries.
The bad news on taxation is that when you combine the changes to the USC with the decision to base the jobseekers’ benefit payment week on a 5-day week rather than a 6-day week, the likely outcome is that people earning less than €10,000 – who are probably working on a part-time basis and likely to be women - will actually lose more of their income, especially when the increases in VAT and carbon tax is included, not to mention the household charge.
Indirect flat taxation measures are blunt instruments for collecting revenue. They are regressive and take proportionately more from low income families. Such measures are also counter-productive because they reduce the spending power of such households which will further depress consumer demand and ultimately lead to more jobs losses and job insecurity. So this group of measures fails both the fairness and jobs tests.
The household charge is a good example of how not to introduce a property tax and fails the fairness test because it is going to apply to all houses (with a few exceptions) regardless of location, house size and income. While the introduction of a Site Valuation Tax has been flagged for 2014, the household charge will cause alot of pain in the meantime. TASC has developed an equality-proofed residential property tax model that could have been introduced relatively easily and used on an interim basis.
As organisations start quantifying the effects of the overall Budget,the picture that seems to be emerging is one where everyone will be affected by the budgetary measures, but once again, low income families will lose proportionately more through reductions in their income, spending power and access to essential public services.
This budget also contains cuts to areas that are not going to save the Exchequer a significant amount of money but will have a disproportionate impact on the provision of locally-delivered services and advocacy work that provides a voice for marginalised groups. These cuts include the disproportionate cut to the budget of the National Womens’ Council, cuts to the Local and Community Development Programme, Rural Transport Programme and Community Employment.
This budget is a very bad budget for women and children in particular, both of whom are at the coal face of this recession.
The latest poverty statistics illustrate the impact that responses to the economic crisis are having on women and children. Unfortunately, this budget is likely to result in a continuation in this trend, so it is more important than ever that the effects of budgetary measures are quantified and alternatives policy options put forward.
At the end of the day the budget represents a set of choices and the political priorities of the Government. Once again the wrong set of choices appear to have been made for the economy and a large part of the population.
Tuesday, 6 December 2011
Day 1 - Budget 2012
Sinéad Pentony: Yesterday’s budget was presented on the basis of three guiding principles: fairness, jobs and reform. Let’s put these principles to the test with some of the big ticket items announced yesterday.
Fairness aims to ensure that the burden of the cuts is shared fairly, but as we all know fairness, like beauty is in the eye of the beholder. Fairness is subjective and difficult to measure – equality, on the other hand, is objective and it can be measured by quantifying the gap between the highest and lowest earners. It is therefore a more robust principle than fairness because you can quantify the impact of budgetary changes on different income groups. See TASC’s initial study which quantified the effects of Budget 2011 on different income and household groups to see how this can be done.
The Department of Social Protection measures announced yesterday included maintaining primary social welfare rates and the rate of child benefit for the first and second child. Other measures to be welcomed include the reductions in the employers' rebate through the redundancy and insolvency scheme.
There are going to be cuts to the higher rates of child benefit for the third and subsequent children over two years. Having looked at Table D8 in the Department of Social Protection’s 2010 Statistical Information, you can estimate the number of children that will be affected by the changes to child benefit – 460,450 to be exact. 663,553 will not be affected directly by this change – but inflation will reduce the value of the payment indirectly.
According to SILC 2009, the at-risk-of-poverty rate for households containing two adults with three or more dependent children was 18 per cent. So the reductions to child benefit - 11.4 per cent for the third child and 9.6 per cent on the fourth child are likely to increase the risk of poverty for larger families.
The other big change relates to the introduction of restrictions to entitlement for One Parent Family Payments. This reform has been presented as “bringing Ireland’s support for lone parents more in line with that provided internationally”.
However, if this is to be real reform and not just about cutting supports to lone parents we need to see other international best practice applied here in Ireland – such as reducing the cost of childcare which is amongst the highest in the OECD by providing state subsidised high quality early year childcare and flexible afterschool care.
Activation policy also needs to be reformed to facilitate people to participate in education and training and access work experience for the purpose of upskilling and retraining. Yesterday’s budget speech included an announcement of €20 million for a Labour Market Activation Fund. This works out at approximately €65 extra for each person who is unemployed.
There are cuts to the back to education allowance, student supports and access initiatives under the Department of Education. These measures will make it more difficult for lone parents to access and participate in education and training initiatives. And where will the jobs come from?
Yesterday’s budget included announcements that public sector numbers will be reduced by 6,000 in 2012. The capital budget is also be cut by €750 million which makes up approximately one third of the overall reduction in public expenditure. Ireland is now the lowest spender in the EU when it comes to expenditure on gross fixed capital formation, and that’s even before this cut is implemented.
The economy has been starved of investment for the last number of years and we cannot begin the process of recovery in the absence of significant investment. TASC and others have made creative suggestions about how investment could be financed. The fiscal adjustment must be counter-balanced with an investment strategy aimed at embedding job creation and growth in the economy. In the absence of a twin-track approach to dealing with the crisis, we cannot create the conditions for recovery which is desperately needed.
In the areas of health and education, a number of measures to be welcomed included increased charges for the use of public beds by private patients. But this is double-edged sword because health insurers will pass on the costs to their customers, which will result in more people being a position of not to be able to afford private health cover. This will have a knock-on effect on the public system and put it under even greater pressure.
The introduction of free GP care for chronically ill patients and the ring fencing of €35m for mental health is also to be welcomed. However, the big issue for health is the staff reductions – thousands of whom have left in recent years, and many more are expected to leave in the months ahead. How can we hope to provide health services that are going to be subject to particular demographic pressures associated with an ageing population with declining staff numbers?
Finally, in the area of education, the good news is that the overall number of Special Needs Assistants (SNAs) and resource teachers will be maintained at current levels. There will be no increase in the general average of 28:1 for the allocation of classroom teachers at primary level. However, there will be phased increases in the pupil threshold for the allocation of classroom teachers in small primary schools. The pupil teacher ratio (PTR) in secondary schools is set to rise with a greater increase in the rate for private post-primary schools, which should be welcomed on the grounds of equity.
However, cuts to the capitation grants for schools will impact on subject choices and the general resourcing of schools. But schools that are able to subsidise reductions in their capitation grants with ‘voluntary contributions’ from parents will undoubtedly fair better. Cuts to school transport will add to the cost of sending children to school and this measure will have a disproportionate impact on families in rural areas where there is unlikely to be an adequate public transport system in place.
Other regressive measures include cuts to capitation grants across a range of further and adult education courses and allowances for participation in Youthreach, Community Training Centres and FAS courses. These measures are particularly bad news as they are likely to act as a barrier for many students wishing to participate in these types of training initiatives. The profile of participants in these courses tends to include many young people for whom the mainstream education system is not an option. Finally, cuts in student supports and access initiatives along with increases to the student registration fee will make it more difficult for low and middle families to support their children in Third level education.
We await Part Two of Budget 2012.
Fairness aims to ensure that the burden of the cuts is shared fairly, but as we all know fairness, like beauty is in the eye of the beholder. Fairness is subjective and difficult to measure – equality, on the other hand, is objective and it can be measured by quantifying the gap between the highest and lowest earners. It is therefore a more robust principle than fairness because you can quantify the impact of budgetary changes on different income groups. See TASC’s initial study which quantified the effects of Budget 2011 on different income and household groups to see how this can be done.
The Department of Social Protection measures announced yesterday included maintaining primary social welfare rates and the rate of child benefit for the first and second child. Other measures to be welcomed include the reductions in the employers' rebate through the redundancy and insolvency scheme.
There are going to be cuts to the higher rates of child benefit for the third and subsequent children over two years. Having looked at Table D8 in the Department of Social Protection’s 2010 Statistical Information, you can estimate the number of children that will be affected by the changes to child benefit – 460,450 to be exact. 663,553 will not be affected directly by this change – but inflation will reduce the value of the payment indirectly.
According to SILC 2009, the at-risk-of-poverty rate for households containing two adults with three or more dependent children was 18 per cent. So the reductions to child benefit - 11.4 per cent for the third child and 9.6 per cent on the fourth child are likely to increase the risk of poverty for larger families.
The other big change relates to the introduction of restrictions to entitlement for One Parent Family Payments. This reform has been presented as “bringing Ireland’s support for lone parents more in line with that provided internationally”.
However, if this is to be real reform and not just about cutting supports to lone parents we need to see other international best practice applied here in Ireland – such as reducing the cost of childcare which is amongst the highest in the OECD by providing state subsidised high quality early year childcare and flexible afterschool care.
Activation policy also needs to be reformed to facilitate people to participate in education and training and access work experience for the purpose of upskilling and retraining. Yesterday’s budget speech included an announcement of €20 million for a Labour Market Activation Fund. This works out at approximately €65 extra for each person who is unemployed.
There are cuts to the back to education allowance, student supports and access initiatives under the Department of Education. These measures will make it more difficult for lone parents to access and participate in education and training initiatives. And where will the jobs come from?
Yesterday’s budget included announcements that public sector numbers will be reduced by 6,000 in 2012. The capital budget is also be cut by €750 million which makes up approximately one third of the overall reduction in public expenditure. Ireland is now the lowest spender in the EU when it comes to expenditure on gross fixed capital formation, and that’s even before this cut is implemented.
The economy has been starved of investment for the last number of years and we cannot begin the process of recovery in the absence of significant investment. TASC and others have made creative suggestions about how investment could be financed. The fiscal adjustment must be counter-balanced with an investment strategy aimed at embedding job creation and growth in the economy. In the absence of a twin-track approach to dealing with the crisis, we cannot create the conditions for recovery which is desperately needed.
In the areas of health and education, a number of measures to be welcomed included increased charges for the use of public beds by private patients. But this is double-edged sword because health insurers will pass on the costs to their customers, which will result in more people being a position of not to be able to afford private health cover. This will have a knock-on effect on the public system and put it under even greater pressure.
The introduction of free GP care for chronically ill patients and the ring fencing of €35m for mental health is also to be welcomed. However, the big issue for health is the staff reductions – thousands of whom have left in recent years, and many more are expected to leave in the months ahead. How can we hope to provide health services that are going to be subject to particular demographic pressures associated with an ageing population with declining staff numbers?
Finally, in the area of education, the good news is that the overall number of Special Needs Assistants (SNAs) and resource teachers will be maintained at current levels. There will be no increase in the general average of 28:1 for the allocation of classroom teachers at primary level. However, there will be phased increases in the pupil threshold for the allocation of classroom teachers in small primary schools. The pupil teacher ratio (PTR) in secondary schools is set to rise with a greater increase in the rate for private post-primary schools, which should be welcomed on the grounds of equity.
However, cuts to the capitation grants for schools will impact on subject choices and the general resourcing of schools. But schools that are able to subsidise reductions in their capitation grants with ‘voluntary contributions’ from parents will undoubtedly fair better. Cuts to school transport will add to the cost of sending children to school and this measure will have a disproportionate impact on families in rural areas where there is unlikely to be an adequate public transport system in place.
Other regressive measures include cuts to capitation grants across a range of further and adult education courses and allowances for participation in Youthreach, Community Training Centres and FAS courses. These measures are particularly bad news as they are likely to act as a barrier for many students wishing to participate in these types of training initiatives. The profile of participants in these courses tends to include many young people for whom the mainstream education system is not an option. Finally, cuts in student supports and access initiatives along with increases to the student registration fee will make it more difficult for low and middle families to support their children in Third level education.
We await Part Two of Budget 2012.
Wednesday, 30 November 2011
Poverty, inequality and Budget 2012
Sinéad Pentony: The publication of the preliminary results from the 2010 Survey of Income and Living Conditions (SILC) is very timely in the run up to the budget as it clearly illustrates the impact of austerity measures on the levels inequality and poverty. The results also confirm the findings from TASC’s Equality Audit of Budget 2011, which clearly shows that low income groups lost proportionately more of their income than higher income groups as result of the budgetary measures for 2011. These measures will exacerbate income inequality and lead to growing numbers being put ‘at risk of poverty’ and forced to live in poverty. Given that next week’s budget looks set to continue the failed austerity policies of previous budgets, we can expect to see these trends continue for the foreseeable future. However, there are alternatives, and the choices that are made next week will clearly illustrate the political priorities of the current government.
The headline SILC results show us that income inequality between 2009 and 2010 increased, with the average income of those in the highest income quintile 5.5 times that of those in the lowest income quintile. The ratio between 2008 and 2009 was 4.3 times. The ‘at risk of poverty’ threshold decreased from €12,064 to €10,831, reflecting declining incomes and cuts in social welfare payments over the last number of budgets, and this was accompanied by a sharp rise (12 per cent) in the number of people who are now classed as being ‘at risk of poverty’ - from 14.1 per cent in 2009 to 15.8 per cent in 2010. The proportion of the population ‘at risk of poverty’ is now back to 2006-2007 levels.
One of the most striking figures is the 30 per cent increase in the deprivation rate, which is defined as being deprived of two or more essential items that are deemed essential for meeting basic living requirements. The deprivation rate increased from 17.1 per cent to 22.5 per cent between 2009 and 2010 and the CSO has highlighted the fact that much of the increase has come from those who are NOT ‘at risk of poverty’. The combination of the deprivation rate and at risk of poverty rate gives us the measure of consistent poverty, and this increased from 5.5 per cent to 6.2 per cent. While this might not sound like a lot, the number of people in consistent poverty has increased by almost 50 per cent since 2008, the onset of the current crisis.
Once again, the SILC 2010 preliminary results show us that the groups identified as being most ‘at risk of poverty’ were children and single adult households with children. Almost one in five children were ‘at risk of poverty’ in 2010, with the rate increasing from 18.6 per cent to 19.5 per cent between 2009 and 2010. The ‘at risk of poverty’ rate for households composed of one adult with children was 20.5 per cent. When we look at the rate of consistent poverty, we see once again that children are the group most likely to experience consistent poverty.
The crucial role of social transfers in providing a large proportion of the population with income supports to meet basic needs is also evident, with the results showing us that over half of the population - 51 per cent - would be deemed to be’ at risk of poverty’ if social transfers were excluded from income. In 2004, this figure stood at 39.8 per cent.
These results show us the devastating effects of the policy responses to the crisis on children in particular and on single adult households with children. The burden of the adjustment has clearly been placed on those groups in society that are least able to absorb reductions in income and loss of access to vital public services. There are also strong economic arguments for protecting the incomes of those already on low incomes, particularly in relation to maintaining and boosting demand in the domestic economy.
The National Anti-Poverty Strategy is in tatters, and that there is a need for a complete shift in policy and how we formulate policies aimed at addressing poverty and inequality. All budget proposals should be equality proofed in advance of the budget, and this can only be achieved by undertaking a full distributional analysis to identify how different groups in society are likely to be affected. Budgetary measures should be audited for their effects on different groups after implementation.
We also need to change our system of taxation and benefits to increase the incomes of the low paid and those on welfare. This will have the dual impact of reducing poverty and inequality and protecting existing jobs in the local economy by maintaining aggregate demand. So we potentially have a win-win situation for the economy, and for the society which it should serve.
The headline SILC results show us that income inequality between 2009 and 2010 increased, with the average income of those in the highest income quintile 5.5 times that of those in the lowest income quintile. The ratio between 2008 and 2009 was 4.3 times. The ‘at risk of poverty’ threshold decreased from €12,064 to €10,831, reflecting declining incomes and cuts in social welfare payments over the last number of budgets, and this was accompanied by a sharp rise (12 per cent) in the number of people who are now classed as being ‘at risk of poverty’ - from 14.1 per cent in 2009 to 15.8 per cent in 2010. The proportion of the population ‘at risk of poverty’ is now back to 2006-2007 levels.
One of the most striking figures is the 30 per cent increase in the deprivation rate, which is defined as being deprived of two or more essential items that are deemed essential for meeting basic living requirements. The deprivation rate increased from 17.1 per cent to 22.5 per cent between 2009 and 2010 and the CSO has highlighted the fact that much of the increase has come from those who are NOT ‘at risk of poverty’. The combination of the deprivation rate and at risk of poverty rate gives us the measure of consistent poverty, and this increased from 5.5 per cent to 6.2 per cent. While this might not sound like a lot, the number of people in consistent poverty has increased by almost 50 per cent since 2008, the onset of the current crisis.
Once again, the SILC 2010 preliminary results show us that the groups identified as being most ‘at risk of poverty’ were children and single adult households with children. Almost one in five children were ‘at risk of poverty’ in 2010, with the rate increasing from 18.6 per cent to 19.5 per cent between 2009 and 2010. The ‘at risk of poverty’ rate for households composed of one adult with children was 20.5 per cent. When we look at the rate of consistent poverty, we see once again that children are the group most likely to experience consistent poverty.
The crucial role of social transfers in providing a large proportion of the population with income supports to meet basic needs is also evident, with the results showing us that over half of the population - 51 per cent - would be deemed to be’ at risk of poverty’ if social transfers were excluded from income. In 2004, this figure stood at 39.8 per cent.
These results show us the devastating effects of the policy responses to the crisis on children in particular and on single adult households with children. The burden of the adjustment has clearly been placed on those groups in society that are least able to absorb reductions in income and loss of access to vital public services. There are also strong economic arguments for protecting the incomes of those already on low incomes, particularly in relation to maintaining and boosting demand in the domestic economy.
The National Anti-Poverty Strategy is in tatters, and that there is a need for a complete shift in policy and how we formulate policies aimed at addressing poverty and inequality. All budget proposals should be equality proofed in advance of the budget, and this can only be achieved by undertaking a full distributional analysis to identify how different groups in society are likely to be affected. Budgetary measures should be audited for their effects on different groups after implementation.
We also need to change our system of taxation and benefits to increase the incomes of the low paid and those on welfare. This will have the dual impact of reducing poverty and inequality and protecting existing jobs in the local economy by maintaining aggregate demand. So we potentially have a win-win situation for the economy, and for the society which it should serve.
Friday, 25 November 2011
Who will pay more and who will be protected in Budget 2012
Sinéad Pentony: Budget season is well and truly underway and the slow drip feed of information and kite flying continues. The broad thrust of the fiscal adjustment is presented as a fait acompli – ‘we have no choice’ but to continue on the long hard road of austerity, with those least able to absorb reductions in income and access to essential services being faced with bearing the brunt of the adjustment. TASC and others continue to point out that there is an alternative and this involves ensuring that those who can afford to make a greater contribution to the adjustment are made to do so.
Once again, child benefit appears to be in the firing line and it's filling plenty of column inches. There are also plans for a range of other savings across the Department of Social Protection In the area of health, the proposals being considered include the imposition of an annual fee of €50 for medical card holders along with increases in other user health charges covering prescriptions and access to A&E services.
Even if only some of these proposals make their way into the budget, when they are combined with the confirmation that the main rate of VAT will be increased by two percentage points, this year’s budget is looking very similar to last year’s budget.
In contrast to the debate about where the cuts should be made and by how much, last week Revenue provided details on the amount of tax that was collected through the ‘domicile levy’. This levy of €200,000 was introduced in Budget 2010 on Irish people who are domiciled in Ireland but non-resident for tax purposes. The levy is applied to individuals whose income and assets exceed certain thresholds.
Revenue reported that less than €1.5 million was collected and this was based on a average return of €147,000 by ten individuals who are liable for the levy. The returns are made on a self-assessment basis. Revenue also estimated that, in 2009, there were almost 6,000 individuals who were classed as non-resident for tax purposes and that 440 of these were considered to be very wealthy.
By anyone’s standard,s the domicile levy has failed to ensure that this particular group of Irish people is made to pay their fair share as part of the adjustment. The question is - will the up-coming budget send a clear message that this situation is not going to be tolerated any longer and that other measures are going to be put in place to ensure that the wealthiest Irish people will be made to contribute to the fiscal adjustment on a more equitable basis?
The Community Platform's taxation proposals have highlighted the types of measures used in other countries to tax wealthy non-residents – the US citizen-based tax and the French tax on global assets. The TASC proposals also include measures to increase the level of taxation on assets and passive income from assets held in Ireland, along with reducing the number of days that non-residents can be present in the State from 183 to 90 days.
The economic and equality arguments have been well rehearsed at this stage for targeting taxation measures high earners residing both inside and outside the country. TASC’s Equality Audit of Budget 2011 clearly illustrates who was made to pay more in the last budget. It will come down to the political choices and priorities in relation to who will be made to pay more and who will be protected this time around.
Once again, child benefit appears to be in the firing line and it's filling plenty of column inches. There are also plans for a range of other savings across the Department of Social Protection In the area of health, the proposals being considered include the imposition of an annual fee of €50 for medical card holders along with increases in other user health charges covering prescriptions and access to A&E services.
Even if only some of these proposals make their way into the budget, when they are combined with the confirmation that the main rate of VAT will be increased by two percentage points, this year’s budget is looking very similar to last year’s budget.
In contrast to the debate about where the cuts should be made and by how much, last week Revenue provided details on the amount of tax that was collected through the ‘domicile levy’. This levy of €200,000 was introduced in Budget 2010 on Irish people who are domiciled in Ireland but non-resident for tax purposes. The levy is applied to individuals whose income and assets exceed certain thresholds.
Revenue reported that less than €1.5 million was collected and this was based on a average return of €147,000 by ten individuals who are liable for the levy. The returns are made on a self-assessment basis. Revenue also estimated that, in 2009, there were almost 6,000 individuals who were classed as non-resident for tax purposes and that 440 of these were considered to be very wealthy.
By anyone’s standard,s the domicile levy has failed to ensure that this particular group of Irish people is made to pay their fair share as part of the adjustment. The question is - will the up-coming budget send a clear message that this situation is not going to be tolerated any longer and that other measures are going to be put in place to ensure that the wealthiest Irish people will be made to contribute to the fiscal adjustment on a more equitable basis?
The Community Platform's taxation proposals have highlighted the types of measures used in other countries to tax wealthy non-residents – the US citizen-based tax and the French tax on global assets. The TASC proposals also include measures to increase the level of taxation on assets and passive income from assets held in Ireland, along with reducing the number of days that non-residents can be present in the State from 183 to 90 days.
The economic and equality arguments have been well rehearsed at this stage for targeting taxation measures high earners residing both inside and outside the country. TASC’s Equality Audit of Budget 2011 clearly illustrates who was made to pay more in the last budget. It will come down to the political choices and priorities in relation to who will be made to pay more and who will be protected this time around.
Thursday, 4 August 2011
Education cutbacks bad for economy
Sinéad Pentony: Today’s news that class sizes are set to increase highlights the shortsightedness of responses to the fiscal crisis.
As in many areas of public expenditure, Ireland has consistently lagged behind other OECD and EU countries both in terms of spending and performance. Ireland spends 4.7 per cent of GDP on education compared to the OECD average of 6.2 per cent. Even during the boom, education spending remained one of the lowest in the OECD. Our class size average is 24 pupils, compared with an EU average of 20, which is the second largest in the EU. The Minister for Education has said that our education system is not ‘fit for purpose’ and he’s right – our reading levels (OECD/Pisa survey results) have fallen from 5th place in 2000 to 17th place in 209. Our ranking in mathematics tumbled from 16th in 2006 to 26th in 2009. So the proposal to increase class sizes will reduce our low level of spending even further and will undoubtedly have a knock-on effect on our performance. Also, the impact of increased class sizes will be felt disproportionately in schools and communities that are already struggling with reduced resources. These schools tend to be concentrated in deprived areas where there is limited scope for parents to make “voluntary contributions” to their local schools.
However in the medium-long term, cutbacks in education will impact on our ability to compete at a global level in new industries that are driven by innovation. An education system that is ‘fit for purpose’ requires:
• a major reduction in class sizes at all levels in the education system
• proper equipping of all schools with educational technology
• a radical movement away from rote learning and mass testing at all levels of the system towards group-based project work.
Our recovery is predicated on investment in our future – education.
As in many areas of public expenditure, Ireland has consistently lagged behind other OECD and EU countries both in terms of spending and performance. Ireland spends 4.7 per cent of GDP on education compared to the OECD average of 6.2 per cent. Even during the boom, education spending remained one of the lowest in the OECD. Our class size average is 24 pupils, compared with an EU average of 20, which is the second largest in the EU. The Minister for Education has said that our education system is not ‘fit for purpose’ and he’s right – our reading levels (OECD/Pisa survey results) have fallen from 5th place in 2000 to 17th place in 209. Our ranking in mathematics tumbled from 16th in 2006 to 26th in 2009. So the proposal to increase class sizes will reduce our low level of spending even further and will undoubtedly have a knock-on effect on our performance. Also, the impact of increased class sizes will be felt disproportionately in schools and communities that are already struggling with reduced resources. These schools tend to be concentrated in deprived areas where there is limited scope for parents to make “voluntary contributions” to their local schools.
However in the medium-long term, cutbacks in education will impact on our ability to compete at a global level in new industries that are driven by innovation. An education system that is ‘fit for purpose’ requires:
• a major reduction in class sizes at all levels in the education system
• proper equipping of all schools with educational technology
• a radical movement away from rote learning and mass testing at all levels of the system towards group-based project work.
Our recovery is predicated on investment in our future – education.
Wednesday, 20 April 2011
Towards the Good Society
Sinéad Pentony: As the debt, fiscal and economic crises rumble on, and as fire-fighting policy responses continue, it can be difficult to think about the bigger picture and the wider impacts the crises are having on societies across Europe. However, if we are to avoid repeating the mistakes of the past we need to understand that a paradigm shift is required. Orthodox responses to the failings of neo-liberalism are clearly not working for anyone (with the possible exception of some financial institutions), and there is a growing acceptance of the link between the crises and inequality
That’s why events such as the recent conference in Stockholm on ‘Dimensions of Equality in a Good Society’, and the accompanying online debate at the Social Europe Journal, are so important. The conference was organised by two think tanks, Germany’s Friedrich Ebert Foundation and the Swedish labour think tank, Arbetarrörelsens Tankesmedja.
The aim of the conference was to analyse the concept of inequality and to locate it within a wider framework of a new social and democratic political agenda.
The focus was on four dimensions of equality: the philosophical, economic, social and integration dimensions. I’m going to focus on the economic dimension, where the conference attempted to broaden the boundaries of the discourse on equality beyond “marginal debates on a couple of percentage points up or down in a progressive tax system”.
We can’t have equal citizenship if there is a large gap between rich and poor, mainly because the rich have the means to influence the political system and public institutions. This was considered to be a systemic problem – regulatory capture with inequality spiral – whereby the richest players influence the rules and their application, thus expanding their own advantage. Public facilities come under the influence of players who are motivated by short-term profit gain – and who buy support from media and academics for this purpose. Sounds familiar? We don’t need to look much further than the Nyberg Report, as an example of how regulatory capture manifested itself in the Irish banking system.
This systemic problem is a major contributing factor to current (and future) trends of continued increases in social, political and economic inequalities. For example, during the last US economic expansion (2002 – 2007) average per capita household income grew by 16 per cent. The top one per cent enjoyed growth of 62 per cent, while for the remainder of the population it was just 6.7 per cent. The top percentile captured 65 per cent of the real per capita growth of the US economy. During the period 1978 – 2007, the income share of the bottom half declined from 26.4 per cent to 12.8 per cent. Meanwhile, that of the top one per cent rose from 8.95 per cent to 23.5 per cent (a 2.6 fold increase).
It’s a similar story in China. During the period 1990 – 2004, the income share of the bottom half declined from 27 per cent to 18 per cent, while that of the top tenth rose from 25 per cent to 35 per cent. In Ireland, TASC’s HEAP research demonstrated a more equal distribution of incomes in 1987 compared to 2005 and the analysis also found that 5 per cent of the population control 40 per cent of Ireland’s wealth, and the top 10 per cent have a disposable income 11 times the bottom 10 per cent. The trends are similar across the developed world, and point to growing income inequality.
In terms of fiscal policy, the point was made that countries with the biggest deficits are low tax economies such as the USA, Ireland, the UK and Portugal. Higher spending countries have a better track record in controlling their deficits. They also tend to have smaller income differentials as a result of progressive taxation. The World Economic Forum has consistently shown that the most competitive economies are high spending economies, particularly in areas such as education and training, innovation, infrastructure. High spending economies have also weathered the crises much better than low spending economies, and are proving more capable of recovery.
It could be argued that the scale of the crises has also threatened democracy: you can change your government, but you can’t change the policy as this is set elsewhere. We have direct and very recent experience of this here in Ireland. Also, liabilities have been shifted from corporations to states as in the case of our banking debts. In the current context of what was described as “permanent austerity”, fiscal policy requirements determine the level of welfare state retrenchment policies and social policies have been de-nationalised and Europeanized in reaction to the debt crises across Europe.
In order to reverse the trends of growing inequality and minimise the chances of the same happening again, we need to put the global economy on a different trajectory. As we can see the problems are numerous and complex, and progressive solutions will need to be sophisticated and address systemic failures that have brought us to where we are today. A number of solutions were put forward and debated during the conference, including debt restructuring, and there was consideration of policy measures to allow the exit and re-entry to the Eurozone. Other progressive solutions included the consideration of social policy as a growth sector, since it contributes percentage points to GDP, provides jobs and the creation of new business opportunities.
The need for institutional reform was also identified with an emphasis on redesigning public institutions to be equality-focussed. In Ireland the debate on (public) institutional reform has focussed on creating greater efficiencies and achieving ‘more with less’, alongside greater transparency and accountability. While these reforms are necessary there has been no discussion on the link between public sector reform and equality. However, the link between public institutions and equality was made very strongly at the conference, whereby “high quality government institutions will increase the level of social trust, which will make reciprocity turn into solidarity, which in turn increases equality”.
These are just some of the ideas that were discussed and they reflect some of the complexities that need to be grappled with if we are to emerge from the crises on the path to more equality. ‘The Good Society’ creates a forum for debate on the problems and the solutions. Let’s hope that our politicians, their advisors and policy makers are tuning into the debate..
That’s why events such as the recent conference in Stockholm on ‘Dimensions of Equality in a Good Society’, and the accompanying online debate at the Social Europe Journal, are so important. The conference was organised by two think tanks, Germany’s Friedrich Ebert Foundation and the Swedish labour think tank, Arbetarrörelsens Tankesmedja.
The aim of the conference was to analyse the concept of inequality and to locate it within a wider framework of a new social and democratic political agenda.
The focus was on four dimensions of equality: the philosophical, economic, social and integration dimensions. I’m going to focus on the economic dimension, where the conference attempted to broaden the boundaries of the discourse on equality beyond “marginal debates on a couple of percentage points up or down in a progressive tax system”.
We can’t have equal citizenship if there is a large gap between rich and poor, mainly because the rich have the means to influence the political system and public institutions. This was considered to be a systemic problem – regulatory capture with inequality spiral – whereby the richest players influence the rules and their application, thus expanding their own advantage. Public facilities come under the influence of players who are motivated by short-term profit gain – and who buy support from media and academics for this purpose. Sounds familiar? We don’t need to look much further than the Nyberg Report, as an example of how regulatory capture manifested itself in the Irish banking system.
This systemic problem is a major contributing factor to current (and future) trends of continued increases in social, political and economic inequalities. For example, during the last US economic expansion (2002 – 2007) average per capita household income grew by 16 per cent. The top one per cent enjoyed growth of 62 per cent, while for the remainder of the population it was just 6.7 per cent. The top percentile captured 65 per cent of the real per capita growth of the US economy. During the period 1978 – 2007, the income share of the bottom half declined from 26.4 per cent to 12.8 per cent. Meanwhile, that of the top one per cent rose from 8.95 per cent to 23.5 per cent (a 2.6 fold increase).
It’s a similar story in China. During the period 1990 – 2004, the income share of the bottom half declined from 27 per cent to 18 per cent, while that of the top tenth rose from 25 per cent to 35 per cent. In Ireland, TASC’s HEAP research demonstrated a more equal distribution of incomes in 1987 compared to 2005 and the analysis also found that 5 per cent of the population control 40 per cent of Ireland’s wealth, and the top 10 per cent have a disposable income 11 times the bottom 10 per cent. The trends are similar across the developed world, and point to growing income inequality.
In terms of fiscal policy, the point was made that countries with the biggest deficits are low tax economies such as the USA, Ireland, the UK and Portugal. Higher spending countries have a better track record in controlling their deficits. They also tend to have smaller income differentials as a result of progressive taxation. The World Economic Forum has consistently shown that the most competitive economies are high spending economies, particularly in areas such as education and training, innovation, infrastructure. High spending economies have also weathered the crises much better than low spending economies, and are proving more capable of recovery.
It could be argued that the scale of the crises has also threatened democracy: you can change your government, but you can’t change the policy as this is set elsewhere. We have direct and very recent experience of this here in Ireland. Also, liabilities have been shifted from corporations to states as in the case of our banking debts. In the current context of what was described as “permanent austerity”, fiscal policy requirements determine the level of welfare state retrenchment policies and social policies have been de-nationalised and Europeanized in reaction to the debt crises across Europe.
In order to reverse the trends of growing inequality and minimise the chances of the same happening again, we need to put the global economy on a different trajectory. As we can see the problems are numerous and complex, and progressive solutions will need to be sophisticated and address systemic failures that have brought us to where we are today. A number of solutions were put forward and debated during the conference, including debt restructuring, and there was consideration of policy measures to allow the exit and re-entry to the Eurozone. Other progressive solutions included the consideration of social policy as a growth sector, since it contributes percentage points to GDP, provides jobs and the creation of new business opportunities.
The need for institutional reform was also identified with an emphasis on redesigning public institutions to be equality-focussed. In Ireland the debate on (public) institutional reform has focussed on creating greater efficiencies and achieving ‘more with less’, alongside greater transparency and accountability. While these reforms are necessary there has been no discussion on the link between public sector reform and equality. However, the link between public institutions and equality was made very strongly at the conference, whereby “high quality government institutions will increase the level of social trust, which will make reciprocity turn into solidarity, which in turn increases equality”.
These are just some of the ideas that were discussed and they reflect some of the complexities that need to be grappled with if we are to emerge from the crises on the path to more equality. ‘The Good Society’ creates a forum for debate on the problems and the solutions. Let’s hope that our politicians, their advisors and policy makers are tuning into the debate..
Friday, 28 January 2011
The Finance Bill and Davos - different discourses
Sinéad Pentony: The Finance Bill will bring the measures announced as part of Budget 2011 into law in the coming days. As the effects of these measures begin to be felt by families, business and the wider economy, it is worth restating the impact they will have, and comparing the Irish solutions to the crisis, to what is happening over at the World Economic Forum in Davos.
Budget 2011 measures represent a €6 billion adjustment that will reduce incomes at all levels through changes in taxation (€2.1 billion), with a disproportionate impact on low paid workers. Spending cuts on public services and social transfers (€2.2 billion) will see a further erosion of public services and push more people into poverty, while the capital spending budget cut ( €1.75 billion) will have a direct impact on our competitiveness and economic growth.
Cumulatively, the extreme austerity measures will result in:
• even more demand being taken out of a weak and fragile economy;
• businesses being put under increasing pressure as they struggle to remain viable;
• the jobs crisis continuing and the rate of emigration gathering pace;
• growing inequality - as more families and vulnerable groups are pushed into poverty because they no longer have an adequate income to meet their basic needs.
The absence of an investment strategy to stimulate growth and demand will make it increasingly difficult to address the deficit. The passing of the Finance Bill into law represents more of the same failed policy choices, and they will not address the fiscal and economic crises.
Meanwhile, over in Davos, the World Economic Forum is having its annual gathering of international business leaders, politicians, intellectuals and journalists to discuss the most pressing issues facing the world. The Forum is not normally associated with ‘progressive’ ideas but over the last number of days they have been talking about inequality, jobless growth and youth unemployment, amongst other things, as they grapple with finding solutions to the global financial, economic and fiscal crises.
Fears over jobless recovery and youth unemployment have prompted joint actions between the trade unions and Davos leaders to develop a coherent plan for G20 nations. Job creation coupled with the need to address the issue of growing income and wealth inequalities have been put forward as key parts of the solution. Some of the suggestions include the need to increase the wage share of national income; the creation of a universal safety net to protect workers who lose their jobs; and active labour market policies to create work, amongst others. Action is also needed to ensure the proceeds of growth are distributed more equally and concentrations of wealth are eliminated.
The passing of the Finance Bill into law will copperfasten measures that will do the exact opposite of the solutions being discussed in Davos. Ireland seems to be determined to cut its own idiosyncratic path.
The reduction in social transfer levels and the minimum wage will create a more unequal distribution of wealth, while the absence of any major job initiatives means the most promising job path for Ireland’s unemployed will continue to be the airline ticket out of the country.
Budget 2011 measures represent a €6 billion adjustment that will reduce incomes at all levels through changes in taxation (€2.1 billion), with a disproportionate impact on low paid workers. Spending cuts on public services and social transfers (€2.2 billion) will see a further erosion of public services and push more people into poverty, while the capital spending budget cut ( €1.75 billion) will have a direct impact on our competitiveness and economic growth.
Cumulatively, the extreme austerity measures will result in:
• even more demand being taken out of a weak and fragile economy;
• businesses being put under increasing pressure as they struggle to remain viable;
• the jobs crisis continuing and the rate of emigration gathering pace;
• growing inequality - as more families and vulnerable groups are pushed into poverty because they no longer have an adequate income to meet their basic needs.
The absence of an investment strategy to stimulate growth and demand will make it increasingly difficult to address the deficit. The passing of the Finance Bill into law represents more of the same failed policy choices, and they will not address the fiscal and economic crises.
Meanwhile, over in Davos, the World Economic Forum is having its annual gathering of international business leaders, politicians, intellectuals and journalists to discuss the most pressing issues facing the world. The Forum is not normally associated with ‘progressive’ ideas but over the last number of days they have been talking about inequality, jobless growth and youth unemployment, amongst other things, as they grapple with finding solutions to the global financial, economic and fiscal crises.
Fears over jobless recovery and youth unemployment have prompted joint actions between the trade unions and Davos leaders to develop a coherent plan for G20 nations. Job creation coupled with the need to address the issue of growing income and wealth inequalities have been put forward as key parts of the solution. Some of the suggestions include the need to increase the wage share of national income; the creation of a universal safety net to protect workers who lose their jobs; and active labour market policies to create work, amongst others. Action is also needed to ensure the proceeds of growth are distributed more equally and concentrations of wealth are eliminated.
The passing of the Finance Bill into law will copperfasten measures that will do the exact opposite of the solutions being discussed in Davos. Ireland seems to be determined to cut its own idiosyncratic path.
The reduction in social transfer levels and the minimum wage will create a more unequal distribution of wealth, while the absence of any major job initiatives means the most promising job path for Ireland’s unemployed will continue to be the airline ticket out of the country.
Thursday, 7 October 2010
Benefitting all the children equally
In an Irish Times 'Double Vision' piece with Friends First economist Jim Power, TASC Head of Policy Sinéad Pentony argues this morning that the universal provision of public services or other benefits is fundamental to bridging Ireland's equality divide. You can read the full piece here.
Wednesday, 22 September 2010
Irish laments
Sinéad Pentony: Today’s editorial in The Guardian highlights the dangers for the UK in pursuing Ireland’s policy of austerity measures. As we head into what is being clearly flagged as our fourth austerity budget, the contraction in the economy caused by the financial and economic crises, and exacerbated by Government policy, has succeed in shrinking the economy to the point where there are growing concerns about the capacity of the economy to sustain the costs associated with bailing out the banks. This was reflected in the cost of borrowing reaching a new (and unsustainable) high in the bond auction earlier this week. When you couple this with the latest unemployment figures, acceleration in migration and a lifeless domestic economy - the impact of government policy, which is protecting the banks and the bondholders at the expense of the country and the economy’s capacity to recover, is painfully clear.
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