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06/10/2019 Comments are off SIPTU Health

Budget 2020 needs to Brexit proof economy

With less than a month to go before Britain leaves the EU, there is deep uncertainty over the impact a ‘no-deal’ Brexit will have on the Irish economy.

Tens of thousands of jobs, including members of SIPTU many in the agri-food industry, are under threat. Exports to Britain and to Europe across the UK land bridge could face severe disruption while the return of any form of hard border will jeopardise the hard won peace settlement and cross border co-operation on the island.

According to the ESRI and the Central Bank growth, employment and wages will slow and prices will rise due to Brexit and particularly a no-deal Brexit.

In fact, the Central Bank is predicting we could be flirting with recession. The Taoiseach, Leo Varadkar, is hinting at tax cuts with an eye to an election next Spring and has ruled out an emergency budget in the event of a ‘no-deal’ Brexit.

It is almost as if there is no housing or crisis, not to mind the emergencies in our health service, in elder care and early years education.

Of course, no one can predict the impact of Brexit – deal or no-deal. This is a once-in-a- lifetime event. There is no past experience which can guide projections. Therefore, it is proper that the Government is basing Budget 2020 on a worst-case scenario.

However, there are already some ominous kites being flown about. For example, pension payments will be frozen with only secondary benefits rising. That would mean a real cut to pensions (factoring in inflation).

This could be extended to all social protection payments. This would amount to below-the-radar austerity – letting inflation do the dirty work while saving the Government money.

Therefore, we need to be vigilant to the fine print.

Even before new budget measures, the Government intends to freeze current spending per capita in real terms over the next few years – spending on public service and social protection. It wouldn’t take much of a budgetary adjustment to turn that freeze into real cuts.

Whatever about the implications for below- the-radar austerity, what is the Government proposing to pro-actively counter a Brexit slowdown? So far there is a Brexit fund to support enterprises and sectors that are hard hit.

Employees and their trade union should be directly involved in the design, monitoring and evaluation of resources spent and supports for firms to minimise the impact. After all, it is workers and their livelihoods at stake. However, the Government doesn’t seem interested, which means they will forgo the experience, ideas and innovation that workers in these enterprises can bring.

The Government could strengthen the economy through a Short-Time Work Scheme. Instead of laying workers off, this scheme would allow businesses to introduce work- sharing for their workforce with top-ups from the Government to maintain workers’ incomes as was done successfully in Germany after the 2008 financial crash.

Another measure would be to adjust pay- related unemployment benefit. If people lose their jobs, unemployment benefit would be pegged at 60% to 75% of their wage rather than fall to a flat-rate €203 per week. This would not only help maintain people’s living standards, it would help maintain their spending power so that other sectors (retail, hospitality) don’t suffer a fall in consumer spending.

And what about a little redistribution? The ICTU has called for a net assets tax (wealth tax) to raise nearly €400 million. This could be used for social investment such as affordable childcare which would raise wages in the sector and reduce fees.

This would put money into the pockets of workers and parents without any negative impact on borrowing and deficits.

Another instrument to combat a downturn would be to take the ‘surplus’ which NAMA is promising to transfer to the Government (some €4 billion over the next two years) and build public housing – to reduce rents and house prices.

Not only would this boost economic activity, it would divert money away from landlords and developers and into the productive economy. Building houses is a win-win proposition.

A Brexit slowdown should not be used as an excuse to defer necessary action on the climate emergency. The carbon tax should go ahead but only on condition of a Carbon Dividend – returning the revenue to households through a flat-rate payment.

This would benefit low-average income households and reduce income inequality, an excellent instrument during a downturn.

These are just some of the steps that are necessary to Brexit-proof the economy. Indeed, these measures should be taken regardless of a slowdown. These steps would increase productivity, economic efficiency and social stability.

Unfortunately, early signals from government leaks are not encouraging. If these and other progressive proposals don’t appear in Budget 2020, SIPTU members will continue campaigning for their introduction.

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