Claiming a Better Future

Over the last four years we’ve heard the same mantra repeated on a daily basis:  there is no alternative.  Claiming our Future (CoF) challenges that dismal chant with the launch of its ‘Plan B:  There is an alternative to austerity’.  The plan involves three key principles:

• First, drive a sustained and substantial investment plan.  CoF proposes a 5-year, €15 billion programme similar to the proposed schedule put forward by the Nevin Economic Research Unit and UNITE.  The investment would cover education and labour training, environmental technologies, broadband, school and medical buildings, and support for indigenous enterprise.

• Second, progressive taxation to pay for quality services – with a long-term aim of increasing taxation to average EU levels, as measured as a proportion of GDP.  In the short-term taxation ‘should fall harder on highest income earners’ with suggestions of a wealth tax, standardising tax reliefs and a new top rate of tax.

• Third, as a consequence of raising taxation to EU average levels, we can raise expenditure on public services, social protection and investment to similar levels.  This will afford greater investment in health, education, social care and housing, child care and community infrastructure.  This investment would not be a cost to the state, if it is paid out of increasing taxation, but rather a contributor to both economic and social value-added.

This is CoF’s broad outline.  What immediately strikes one is not how radical it is but, rather, how common sensical it is.  It is common sense to drive investment, paid for by accessing the Government’s cash on hand, European Investment Bank and Project Bond funding, and private funding via pension funds and other domestic investors.  It makes more sense than cutting public investment. 

It is common sense to drive fiscal consolidation in a growth-friendly way; that is, in a way that does least damage to domestic demand and economic growth.  It makes more sense than pursuing fiscal consolidation policies that damage growth and, therefore, undermine deficit reduction. 

And it is common sense to create more social prosperity through enhancement of efficient public services and a truly comprehensive welfare state (rather than a hole-ridden safety net).  It makes more sense than pretending you can have social prosperity by slashing public services and social protection.

The problem is that it is difficult for common sense to make itself heard; especially when the debate is being drowned out by the cacophony of the cuts brigade: cut spending, cut wages, cut incomes.  This is the dominant discourse which refuses to test whether these policies have been a success so far.  Common sense seeks to engage people, the cacophony wants to browbeat.  Common sense seeks to assess what works and what doesn’t work; the cacophony merely become hoarse (but unfortunately that means it just shouts louder).

So what chance does CoF’s Plan B have of influencing the agenda?  In one respect, it is an act of faith – that common sense will win out, that people have a right to participate in the economic discourse, that the experience of people is something to be built upon rather than exacerbate.  Ultimately, what CoF is staking out is a profound democratic terrain.

This is not without serious difficulties.  That radical democrat, Thomas Paine, once wrote:

‘ . . . a long habit of not thinking a thing wrong, gives it a superficial appearance of being right, and raises at first a formidable outcry in defence of custom . . .’

Oh, yes.  Imagine the austerity orthodoxy’s response: ‘you mean you want to increase public spending’, ‘you want to drive up everyone’s taxes’, ‘where are you going to get the money for all this investment, we’re broke’, ‘what about the deficit, the deficit, the deficit (and the deficit)’.

A formidable outcry indeed.

Over the next few months, therefore, the CoF will have the challenge of showing how Plan B can work – to increase economic growth, increase employment and reduce the deficit.  There will be difficult but legitimate questions:

• How can you drive up taxation to EU levels when real wages are falling and households are trying to deleverage?  Is there enough revenue in the short-term to shake loose from high income groups and unproductive activity to kick-start the programme?

• Are there particular and sufficient investment projects to drive productive capacity?  And just because productive capacity increases, are we sure that we have the enterprise base to exploit that to wider economic benefit?

• How can we transform the debate – both fiscally and politically – over public sector reform; showing the real obstacles to maximising productivity while increasing the range of public services on offer?  How can we show that a highly productive and growing public sector is a contributor to growth?

The extent to which CoF is successful will depend on how Plan B faces up to these and other critical issues.  I am optimistic.  Already, considerable work has been done on many of these issues – most notably by the Nevin Economic Research Institute whose director, Tom Healy, participated in the launch of Plan B. There have been valuable contributions on Irish Left Review and Progress-Economy.ie.  Social Europe journal has dealt with many of these issues in the wider European debate.  CoF has considerable resources to draw upon.

Let’s be frank about this:  the number of options open to the Irish economy and society are being steadily reduced.  Failed austerity policies combined with failed banking policies have limited our room for manoeuvre.  We are headed into a lengthy period of stagnation and a second bail-out which makes an expansionary programme even harder to argue for.  We are falling so far down the austerity hole that the light at the top is being slowly extinguished.

Therefore, there is an urgency in Plan B – to answer the difficult and legitimate questions, to mobilise people and civil society groups (and, here, the trade union movement will be crucial) around an alternative, to make the maximum impact in the run-up to Budget 2013.   

We need to reclaim our future from a dismal repeat of the last few years.  Plan B has provided the road-map – let’s start the journey.

Comments

[tellsitlikeitis]

"Second, progressive taxation to pay for quality services – with a long-term aim of increasing taxation to average EU levels, as measured as a proportion of GDP. In the short-term taxation ‘should fall harder on highest income earners’ with suggestions of a wealth tax, standardising tax reliefs and a new top rate of tax."

Michael, don't you see the contradiction here?

You want to bring Irish taxation levels up to European levels, while exempting the income deciles which are currently paying tax at levels furthest from the European norms.

One of the biggest problems with our taxation structure is its top-heaviness ... far too big a share of the income tax take is accounted for by very few tax-payers. This leaves the yield highly susceptible to sudden shocks due to income reductions squeezing an ever-smaller group paying tax at the high rate.

You seem to be proposing that this structural weakness is addressed by making it even more top-heavy.

If European tax norms are the way to go, why are you not in favour of applying these norms across the board?