Pity Labour, Pity Us

This was originally written for Irishelection.com

Pity the Labour Party. They have bent over backwards to insist they will not raise taxes. The first issue of their free tabloid, The Rose, stated baldly on the front page, 'Taxes are low and will stay low.' They have entered an election pact with a party that details all the taxes they won't raise, and in bold font lest the casual reader might miss it. If there are doubts about other policies, there is certainly no equivocation when it comes to taxes - Labour will not increase them.

And yet Liz O'Donnell, TD is scared.

She is scared that Labour will increase taxes. She is scared because she profoundly believes that 'low tax is an instrument of social and economic justice.' She is scared that Labour automatically seeks more public spending when not even confronted by a serious problem (which leaves open the validity of seeking more spending when problems become serious).

In this fear she takes exception to Garret Fitzgerald's contention that Irish society is one of the more unequal in Europe. She claims he did not back this up with hard evidence. Instead, she hails Ireland as being more equal than social democratic-governed Italy (Italian voters only recently elected a social democratic government - booting out Berlesconi who for years gutted the Italian economy and used the Parliament as a shield against judicial investigations into his many alleged crimes).

So what of this argument about inequality? How do we stack up against the rest of Europe? Here are a few facts from the CSO's latest EU Survey of Income and Living Conditions.

First, Ireland has the highest rate of relative poverty in the EU - tied with Portugal and the Slovak Republic for last place. 21%, or more than one in five, have incomes that put them at risk of poverty (i.e. 60% of median income). If we wanted to bring down poverty to the EU average we would have to cut it by nearly 25%. If we wanted to reach the level of those social democratic Scandinavian countries we would have to cut poverty by half.

Second, using the Income Distribution figures that measure the ratio between the top 10% income earners and the bottom 10%, we find that Ireland, again, languishes in the bottom half of the equality league table - 18th. Again, if we want to compete with those spendthrift Scandinavian countries and their high taxes, we'd have to cut income inequality by about 32%.

Third, using the Gini co-efficient (this measure the cumulative share of total income distributed among the population) we find Ireland, yet again, performing worse than the EU average - ranking a lowly 18th. And, yes, we're about a third worse off than our fellow EU partners in the far social democratic North.

The interesting thing about the Gini measurement is that inequality has grown here - by more than 10% since 2001 - while in the rest of Europe, it's equality that is growing.

There are many things that should frighten us: poverty, inequality, the sorry state of our public services. But Liz seems most anxious about Labour promoting higher taxes even though they have done and said everything possible to assure her and the rest of us that that it is the last thing they would do.

The problem confronting Labour - given that its damned if they do and damned if they don't - is that it is attempting to square a circle. Low-tax, low-spend economies are a breeding ground for poverty and inequality, in addition to poorly functioning public services. To rectify this state of affairs means grappling with the problem of raising investment and enhancing redistribution. This means more tax. In short, if we want a life-style that competes with the best in Europe, we're going have to pay for it.

Its probably too late to make this argument, this close to the election. People are wary of the state's ability to mobilise resources for the benefit of society (and when one surveys the chaos that is our health service, this is not unreasonable). But sooner or later progressives will have confront this argument and engage in an open and honest dialogue with the electorate on how we can improve and finance our living standards.

Here's a good opening gambit: if any politician comes to your door with a promise that they can increase the number of hospital beds, affordable housing, school and childcare places, buses and trains, pension levels, in addition to cutting poverty and inequality - all without raising taxes one cent, you should chase them away. Because they are either dishonest, ignorant or just so desperate to say anything to get your vote. If progressives were to counsel this, a lot of people would approve.

And, by the way, Liz - those high-tax, high-spend, low-poverty social democratic countries I referred to: according to the high priests of the market-place - the World Economic Forum they far outrank Ireland in terms of business and economic competitiveness. They are in the top four in the world. We come in at 21.

If they can have it both ways, why can't we?

Comments

[Niall]

Labour market participation in Ireland is now estimated at approx. 70%, which on the face of it looks rerasonable, if well below the UK, Holland and the Scandinavian states. However if you factor in the inflow from Eastern Europe, you are probably looking at a participation rate of at or below 60%. It is impossible to see any major changes in poverty levels without changing this pattern.

The current Government has been happy to ignore them, throw a few €uro their direction as long as they remain quiet. Second level participation remains poor in many areas, in particular among boys. Level cert. levels on the northside of Dublin are still below where more prosperous parts of the city were 25 years ago.

State spending is only a tiny part of the solution. And clearly SW spending is absolutely not part of the problem, other than perhaps Child Benefit.

[Michael]

Yes. We are probably not reading the unemployment figures right and focusing on participation rates is a better measurement. And the situation regarding school-leaving is desperate in some parts. The problem is that spending money in situations crying out for institutional reform and strategies will not solve it as you say (I hope to address this particular point on child income poverty in a subsequent post).

However, regarding Social Welfare spending being 'absolutely not part of the solution', there is this issue. According to the CSO's EU Living Survey (and this is of the top of my head) - about 40% of the population would be below the 'at-risk' poverty line without social transfers. And that would be a problem.

[Niall]

Point taken. However I did emphasise the whole issue of child related payments, which I think are crucial to ensuring participation, both child benefit and FIS. There is a need to develop payments through these sources.

On the issue of poverty and SW transfers, much of this issue is around pensions and clearly there is a need to increase pension payments. However, I was dealing with those of working age in my comments.