U-turning our way to somewhere else

If you’re going to go and U-turn on commitments, why go back on those which were intended to protect low-average income groups? By Michael Taft.

The Independent has published leaked budget proposals (but, as always, check against delivery). There are three issues covered: cuts in Child Benefit and medical card prescription charges, and the imminent property tax. Here is what the parties and the Government said about these issues in the recent past.

Property tax

There are so many U-turns on this issue, I’m surprised Government Ministers haven’t fallen down from dizziness. The fact is that both Government parties actually campaigned against the property tax they are now going to introduce.

Fine Gael actually opposed the introduction of an annual household property tax. This is from their election manifesto:

“Fianna Fáil’s proposal, now endorsed by the Labour Party, to introduce by 2014 an annual, recurring residential property tax on the family home is unfair. But as we tackle the fiscal crisis, we will have to cut central exchequer funding for local authorities, and we recognise that local authorities will have to find more sustainable sources of revenue appropriate to local circumstances. What will be viewed as fair in South Dublin might be viewed as unworkable in rural Clare.

“In this context, we will empower local authorities to put in place, following the 2014 local elections, fairer alternatives to Fianna Fáil’s and Labour’s recurring annual tax on the family home. The options would include:

  • No extra local taxes, forcing local authorities to close non-priority services and/or to deliver increased efficiencies;
  • Increased local user charges for waste etc.; or
  • The option of a local “site sale profits tax”. Such a tax would be levied on the profit made from the site value on the sale of a residence (sales proceeds, less cost indexed by inflation, less stamp duty paid and less home improvements)

“The final measure might be considered as both fairer and more economically sensible than an annual recurring property tax.”

There is no question – Fine Gael campaigned against a property tax. It called for alternatives (the site sale profits tax could be a positive measure) but committed that those alternatives would not be introduced until after the 2014 local elections.

Yet now they are introducing a property tax. This is similar to their opposition to a Household Charge and their u-turn on the issue when they introduced… the Household Charge.

Labour took a different tack. In their election manifesto, Labour called for a ‘site-value’ tax.

“Labour accepts that it will be necessary to introduce a site value charge, in order to prevent higher taxes on work. The Government has not, however, carried out sufficient work to allow such a charge to be introduced in the short-term. Further detailed study will be required to devise a fair basis for such a charge that takes account of the value of property in different regions, the need to exempt some categories of homeowners, and the need to take account of those who have recently paid large sums in stamp duty or who are in negative equity.

“Any charge of this sort, therefore, cannot be set in place before 2014. Accordingly, Labour will publish a Green Paper by the end of 2012 on how the charge can be structured in a fair and efficient manner. As an interim measure, Labour will increase the second homes levy by €300 to yield €95 million.”

Fair enough – and the commitment to a Green Paper showed the importance of debate and transparency. This position found its way into the Programme for Government:

“Consider, arising from the previous Government’s deal with the IMF, various options for a site valuation tax.”

But now we’re getting a different kind of property tax - a market value tax, which Fine Gael opposed – and we’re getting it in 2013. Crucially, there has been no Green Paper and no debate on specific proposals; the Government couldn’t even see fit to publish the Thornhill report which contained proposals for the property tax that is being introduced.

Medical card prescription charges

Fianna Fáil introduced a 50 cent charge for each prescription for medical card recipients. Previously, prescription medicine was free under the medical card regime. The Department of Health commissioned a study, headed up by the ESRI’s Frances Ruane, which recommended that the prescription charge be abolished on the grounds that it was a disincentive to medical card-holders to obtain prescription medicine – especially elderly people who may have a number of prescription medicines. Further, the administration costs of charging for prescription medicine would eat up most of its revenue.

The Minister for Health agreed with this finding and promised to abolish the charge.

“Dr Reilly said the prescription charge was not a wise policy as it could prevent people from being able to get their medicines.”

Now it appears the prescription charges may be doubled.

Child Benefit

In the last election, Labour was very clear about Child Benefit cuts:

“Labour believes that our children should not be made to pay for the current economic crisis. Labour will not cut child benefit, because we acknowledge that:

  • Some extremely harsh budgets in recent years have meant that family incomes have already taken a substantial hit.
  • Despite our current economic problems, Ireland remains a very expensive place to raise a child, and child benefit is the only recognition by the State of this high cost.
  • Cutting child benefit will create poverty traps, work disincentives, and will substantially increase the already high number of children in poverty.”

The bold is Labour’s. Child Benefit has already been cut – for the third and subsequent children. That was cut last year and will be cut this year. And now it appears there will be another cut to the standard rate. Oh, well.

Fine Gael, at least, was more honest. They specifically stated they would cut Child Benefit:

“In government, Fine Gael will implement a rebalanced and integrated ‘Child Income Support’ with universal and targeted components to make the overall system more coherent and effective, and to deliver target savings of €250 million by 2014 (about 7.5% of the current total budget for child supports). The ‘Child Income Support’ will replace Child Benefit, the Qualified Child Increase and the child related component of the Family Income Supplement. It will be integrated into the social insurance system to support the low paid at work. We will protect the 300,000 children at greatest risk of poverty from any cuts in child income support.”

They didn’t state how much they would cut Child Benefit by, but it led Labour to attack Fine Gael in the last general election – accusing them of wanting to cut €252 for the average family. The current cuts will achieve much of the cuts that Labour opposed.

* * *

Yes, the fiscal situation is deteriorating. This and the last Government were warned this would happen if they continued to pursue austerity measures. But if you’re going to go U-turn on commitments, why go back on those which were intended to protect low-average income groups? Why go after medical card recipients? Why cut Child Benefit (it has already been cut by 16%) – especially when the Programme for Government said “We will maintain social welfare rates.” Why impose a tax which you opposed on low-average income earners?

Why not do something different?


Image top: jk+too.