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Oireachtas Brief §12 December 2010 (1) Budget 2011

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Oireachtas Brief 12 is devoted entirely to the debate on the 2011 budget.

2011 budget

The Minister for Finance, Brian Lenihan, presented the 2011 budget to the Dail.  The debates on the budget (Dail Eireann, Debates, 7th December 2010, 18-154; 8th December, 421-523; Seanad Eireann, Debates, 8th December 2010, 306-339) and the subsequent Social welfare Bill (Dail Eireann, Debates, 8th December 2010, 513-536; 9th December, 606-669;  Seanad Eireann, Debates, 14th December 2010, 445-495; 15th December, 536-563; 17th December, 707-726) and the Financial emergency measures in the public interest #2 Bill, 2010 (Dail Eireann, Debates, 9th December 2010, 669-703; 10th December, 753-792; Seanad Eireann, Debates, 14th December 2010, 495-515; 15th December 563-582) are the sole focus of attention in this report.

The Taoiseach spoke of how it was the government’s priority to protect the most vulnerable in our society while ensuring that those who could afford to carry the heaviest burden did so.  He had provided an additional €10m for the disability sector, prioritized the free pre-school education programme, provided €115m for 120,000 new medical cards, €14m for older people, €6m for fair deal, €8m for cancer, €9m for the Ryan report recommendations for children and €1m for suicide prevention.  He was proud of spending €1bn of €8bn in mainstreaming people with a disability into our education system, proud of all those progressive social policies.  The levels of income support provided by the state for people on welfare were still among the highest in Europe, of which he was proud.  People who lived in the border counties knew of what welfare payments were across the border.  Many in the north used to look toward us patronizingly to suggest that we were not capable of looking after our own people.  If we took decisions now, we could maintain much, perhaps 90% of the gains of recent years.  The government was providing 15,000 extra activation places costing €200m on skills and internship programmes, with a community work placement scheme.  It had doubled the number of training places from 66,000 to 130,000.  Next year, the government would invest €4.7bn in capital investment for new road projects, regeneration projects in Ballymun and Limerick, sustain school building and progress high-priority health projects, especially in mental health.  He was supported by Johnny Brady (FF, Meath W) who spoke of how Fianna Fail had always worked hard to protect the elderly and vulnerable in our society.  When resources were there, they had invested heavily in improving social welfare spending, which had increased from €6.7bn to €21bn.

Aengus O Snodaigh (SF, Dublin SC) said that the government side had no understanding of what it was like to be on social welfare.  The majority of social welfare recipients were genuine people and were not involved in fraud or taking double payments or the like.  If anybody on the ministerial or back benches had been unemployed for any length of time, he or she would have an understanding of what it was like to go hungry once or twice a week and not be able to afford to heat the home or pay normal household bills.  The budget promised huge cuts in drugs task forces , which were based in the most disadvantaged areas and there would be a massive cut in the money available for the community development projects.  He cited the increase in prices to October 2010 in such areas as education, 9.5%; housing, electricity, gas and other fuels, 8.5%; transport, 1.25%; health, 0.5%; mortgage interest, 25.1%; and communications such as telephone, 2.5%.

His colleague Pearse Doherty (SF, Donegal SW) asked if the Minister for Finance had ever considered what the budget would mean to ordinary people who were suffering because of what he had done.  When, he asked, was the last time he took a trip to a social welfare office and spoke to those dependent on the dole or visit a school completely made up of prefabs with more than 30 children and one one teacher?  The reality was that the government and those ministers would never see a dole queue.  They would never have to choose between paying their bills or putting food on the table.  They would never have to send their children to school hungry or emigrate.  Enda Kenny (FG, Mayo) asked the Taoiseach how could he justify the unfairness of his salary being 13 times the minimum wage before the cut and was now 14 times the minimum wage.  He attacked the ‘savage’ reduction of €8 a week in the income of carers, of the blind, widows and those with a disability.  There was no economic, moral or social case for cutting the income of vulnerable groups like these when there was an alternative.  Dinny McGinley (FG, Donegal SW) spoke of how social welfare was governed by a very strict code and we knew what happened when people got money they weren’t entitled to – they could even end up in prison.  At the same time, the captains of the celtic tiger, the bankers and developers, had the freedom of the country and the world, a further indication of the unfairness and inequality of our society.

The budget was cruel and would lead to poverty, unemployment and misery, argued Caoimhghin O Caolain (SF, Cavan Monaghan) who described as pathetic the government’s justification of cuts on the basis that there was low inflation.  The consumer price index had risen 2% in 2010.  A recent survey by Sinn Fein showed that 90% would go without something essential this Christmas, such as food, home heating oil or a Christmas present.  More than half of welfare recipients might borrow to see themselves through.  The only stimulus in this budget was for loan sharks and money lenders.  The government could have saved €350m by capping the salaries of public servants at €100,000 and that was nearly half the cut in the health budget alone.

The European year for combating poverty and social exclusion, 2010, had already seen more people driven into poverty, said Maureen O’Sullivan (independent, Dublin C).  There were significant elements in the budget which instead of lifting people out of poverty would push them into it further.  The higher rate of tax had stayed the same, but there was little evidence that those who had more would pay more.  Roisin Shortall (Lab, Dublin NW) attacked the government for effectively abandoning its national anti-poverty strategy, with children most at risk.  The minister should remember that once a childhood was blighted, it could not be reversed.  The Joint Committee on Social Protection had heard about the difficulties experienced by those struggling with the cuts introduced last year from numerous groups such as the Society of St Vincent de Paul, One Family, Social Justice Ireland, Focus Ireland and various others.

Her colleague Mary Upton (Lab, Dublin SC) commented on how much had gone into politically proofing the Social welfare Bill but how little attention had been given to its true effects on the daily lives of ordinary people.  Older people dependent on the fuel allowance would either go to the Society of St Vincent de Paul, if they were lucky and access such assistance, or else they would be freezing in their homes and afraid to turn on the heating.  Although the minister had made much of returning payments to earlier levels, he clearly had not checked the rise in the price of electricity, home heating, oil, petrol, gas, bin charges, hospital charges, health insurance, car insurance, house insurance or any of the other myriad charges faced by the average citizen.

James Reilly (FG, Dublin N) spoke of how the government prided itself on taking the tough decisions, but those tough decisions were always tough on the poorest, the most vulnerable, the chronically ill, the disabled, the blind and the carers.  His colleague Charles Flanagan (FG, Laois Offaly) noted how child poverty had risen from 6.3% in 2008 to 8.8% in 2009 and would increase further as a result of the government’s changes.  He criticized the 24% cut in the youth justice budget, the cut in school transport and to special needs assistants.

Fergus O’Dowd (FG, Louth) attacked the government for not investing in education.  In reading skills, Ireland had fallen from 5th place to 17th place out of 39 in the international tables and one in six children was estimated to have poor reading skills.  17% were low achievers in reading and almost a quarter of males had an average literacy score below the level necessary to participate in society.  His colleague Catherine Byrne (FG, Dublin SC) welcomed the budget increase in the fuel allowance of €14m to ensure households received €40. She criticized the cut in housing provision of 36% – would this mean that people would stay on local authority housing lists forever?  There were thousands of empty properties littering the Irish landscape, yet no initiative to use these properties to facilitate those in urgent needs of housing or the homeless.  Funding for drugs initiatives was cut 7%, with a further 63% cut from the Department of Education and Skills, which would have a devastating impact on local services.  The budget would put enormous pressure on charities such as the Society of St Vincent de Paul, which the minister had made virtually a semi-state body because of the number of people forced to turn to it for help this Christmas and in the coming year.

The budget and voluntary and community organizations
The Minister for Community, Equality and Gaeltacht Affairs, Pat Carey, told the Dail that there would be an ‘adjustment’ of 16% in the voluntary and community area and his department would continue to prioritize front-line services in the coming year, with €80m to support the development of communities (local and community development programme, volunteering initiatives, funding scheme for national and voluntary organizations).  His department would, in the new year, enter structured dialogue with voluntary and community organization to ensure that the impacts of any budgetary adjustments were minimized.  A new funding scheme for key voluntary and community organizations would be advertised shortly and the three-year scheme ending on 31st December was a very successful one. It had been evaluated  and calls for proposals from that particular budget head would be invited shortly and he was aware that there would the the usual interesting mix of organizations coming forward.  The senior alert scheme would have €2.4m in 2011, a larger figure than this year.  There would be €33.8m for the strategy against drugs, a reduction of just over 1%.  The funding would enable the 480 community-based drugs projects to continue while the Family Support Agency and the family resource centres ‘which are doing invaluable work the length and breadth of this country, will also continue’.   €62m was allocated o the LEADER programme, an increase on the original €40m in 2010, ensuring the programme would continue to transform the social and economic fabric of rural Ireland.

His minister of state, Mary White, spoke of the funding for equality agencies and noted that the Office of the Minister for Integration would see a reduction, which was ‘a difficult decision’, but it had been a good year for the office with the establishment of the Ministerial Council on Integration, which had now met four times.  There would be a migrant media interns project in which two migrants would be given a six month placement with local or regional newspapers.  Some €2.42m was being allocated for gender mainstreaming, which would fund the latest strand of the Equality for women measure, which offered 1,800 women a variety of training and other supports.  Kathleen Lynch (Lab, Cork NC) took a different view, telling the Dail that equality was not about gender, but about ‘class, finance, education and health’.  To tackle the deep inequality of this country, it was important to convince working class people that they were as good as anyone else and should not accept the type of treatment that the government had meted out to them.  They were not just there to go to work when the times were good to sustain the economy, but were worth far more than that.  Their children were as good as anyone else’s children, but the government did not recognize that.

O Cuiv explains government strategy
Introducing the Social welfare Bill in the Seanad, the Minister for Social Protection, Eamon O’Cuiv told senators that he was fully aware that the changes of the budget would affect the living standards of many citizens in the short term.  If we put those changes off, though, there would be an even greater burden in the future on those who could least bear it, such as people with disabilities, families with children, the unemployed, carers and pensioners.  Savings would be made in 2010 by greatly enhanced control measures, labour activation, a brand-new community work placement programme Tus, structural reform measures and reductions in payment.

The minister, Eamon O Cuiv, explained some of the thinking behind his approach.  His department represented 40% of government spending and the idea that one could save money and ignore the big departments was nonsense.  From the beginning, he was faced with a choice of hitting everyone for a little bit through shallow cuts across the board or to exclude large sections and make deeper cuts.  In the end, it was very simple.  1.5m people received social welfare, divided between pensioners, people with disabilities and the unemployed – if you took pensioners out of the equation, the burden fell on the rest. ‘Having examined the matter and listening to the debate that ensued, there seemed to be a national consensus that people over 66 should be excluded from the cuts.  He also excluded parents in receipt of domiciliary care allowance, because the money was not significant.  ‘So far, so good, but that is where I ran into a problem’, he continued.

The minister explained that his next inclination was to exempt people with disabilities.  If you broadened that category out to carers and widows, it would amount to 260,000 people, so he would instead have to take money from the unemployed, ‘but jobseekers are entitled to live too. That is the problem.  No matter what number one decides when must reduce rates, the more groups that are exempted, the greater the payment that must be taken from the remainder.  This was not an easy decision’.  He had huge sympathy for people with disabilities, but people with disabilities got benefits that unemployed people did not, such as the free household package and a free transport pass, worth €996 a year or €20 a week.  Another approach was to divide the 150,000 people receiving disability-related benefits into three groups: disabled, more disabled and most disabled, which had been done in other countries, but it was complicated and took time.  We could then decide to grade the payment, which would give a much better result and was somewhat akin to a costed disability allowance.  As for blind people, a person with partial sight might not be as disabled as a person with multiple disabilities – so he could not pick out one group of people who were disabled but not necessarily the most disabled people, exempting 1,400 people while 150,000, some of whom were more disabled, were not exempt.

He thought the McCarthy report was wrong to recommend the ending of all double payments – his focus was on keeping the architecture of the schemes and maintaining the significant ancillary benefits.  He was fully aware of what carers did, but if he exempted them, he would have to exempt other categories and this hit the unemployed.  That would have tipped it too much against jobseekers, many of who had now hit very hard times and that was his concern.  He was not asking people to applaud him or say that he was right – but he wanted to explain the ideas and analysis and why the decision made was the better one to take.

Fergal Quinn (independent, National University) likewise took the view that the 4% reduction in most social welfare benefits was regrettable, but we needed to address the social welfare system.  When one took into account the cuts in public and private sectors, such a cut was not unreasonable, especially as they would return to the 2007 levels.  We could not fail to remind ourselves that social welfare payments had increased 130% in the past twelve years.  John Hanafin (FF, labour) defended the government decisions.  Social welfare had gone down -4.1%, but there was an 8% decrease in the cost of living, which meant that real spending power had been protected.  The only thing that mattered was what a person could spend.   People were being protected at a level that was sustainable and affordable.

David Norris (independent, Dublin University) returned to his earlier attacks on the government for undermining and dismantling  the agencies that spoke for the vulnerable when we went into the economic blizzard, namely the Combat Poverty Agency, the Equality Authority and the Human Rights Commission – the government did this in a way that was sly, underhand and indefensible, but so was the media which did not cover these events.  As  result, carers, the blind and disabled had been victimized

Nicky McFadden (FG, administrative) spoke of now children, the disabled and carers would bear the brunt of the €873m cuts in the social welfare budget, which was extremely unfair.  She cited figures from Barnardos that the number of children in poverty increased from 26,684 in 2008 to 91,954 in 2009 and they did nothing to deserve this.  Many of them would go without one full meal in a week.  Phil Prendergast (Lab, labour) spoke of how children were being forced into poverty and older people were dying in the cold.  Jerry Buttimer (FG, labour) challenged the ‘mantra of the cost of living coming down’ – since the budget, the cost of petrol, diesel and carbon tax had risen while apart from the specials in the supermarkets, the cost of food and general shopping had not reduced.  Every day he met elderly and increasingly middle aged people wearing coats and jumpers in their own home [because they could not heat them].  He had seen the hardship that people endured.

Phil Prendergast nevertheless described the reduction in the carer’s allowance as ‘extremely harsh’ – carers were not able to come to Leinster House [to protest] because they could not find people to take over their caring duties.  Jerry Buttimer added that we would not see the disabled protesting at the gates of Leinster House, like the students.  ‘They will not be there with the People Before Profit Alliance or the new united left alliance, which is supposedly on the side of the people even though its economic policies are unbelievably scary.  Those groups have to be exposed’.

Varadkar compares assault on minimum wage to Pinochet’s Chile
The reduction of the minimum wage was contested by the opposition.  Joe Costello (Lab, Dublin C) described the minimum wage as a necessary bulwark against abject poverty and exploitation in the workplace and should be a core principle in a civilized society.  The cut in the minimum wage of 11.5% was not going to add a cent to the exchequer but would expose thousands to exploitation by unscrupulous employers and poverty.  The government had begun a new race to the bottom for the most vulnerable in our society and already almost 120,000 workers were deemed to be living below the poverty line.  The assault on the minimum wage could open the floodgates and sharply increase the numbers of the working poor.  Sean Sherlock (Lab, Cork E) told of how the Migrants Centre of Ireland had gathered some 6,000 signatures opposing the cut in the minimum wage.

Most members did not know what it was like to be an employed on the minimum wage, said Joan Burton (Lab, Dublin W).  There were 52,000 workers, 3.4% of the labour force, on the minimum wage, mainly women and young men and women, often as part-time or occasional workers, some parenting on their own or whose husbands were not working.  Most minimum wage businesses were not contracted, the companies had minimum obligations and the workers must be available to work any number of hours when called.

The decision was defended by the Minister of State at the Department of Enterprise, Trade & Innovation Dara Calleary who spoke of research by Forfas which indicated that a reduction in the national minimum wage could result in an increase in employment in the medium term. The reduction in the minimum wage was defended by his colleague as Minister of State in the same department, Conor Lenihan, who argued that it was essential in order to support employment creation and restore competitiveness to the economy.  The last period of austerity from 1987 was worthwhile because it was followed by job-led growth.    Paul Gogarty (GP, Dublin MW) pointed out that in another bailout country, Greece, the minimum wage was €4.28, while in Spain it was €3.84, Portugal €2.86 and Germany did not have one, yet Germans were able to raise their families, care about children and contribute to overseas aid.  In the Seanad, Marc MacSharry (FF, industrial & commercial) noted that the minimum wage had increased by 55% but inflation by 28% while Mark Dearey (GP, Taoiseach nominee) pointed out that Irish wage rates were the fifth highest in the OECD.  ‘We must again together take a step down to regain the competitiveness we have lost and align rates once again with those of our competitors’.

Leo Varadkar (FG, Dublin W) said that no other country had ever reduced the minimum wage, with the possible exception of Pinochet’s Chile.  Not even Reagan or Thatcher cut the minimum wage.  This was the first government in the history of the world to do so and other than a small number of business organizations, nobody has asked the government to do so.  If we wanted a capitalist economy and society, we must also have social justice and a system in which work pays.  Those on the minimum wage worked hard for very little money – domestic workers, cleaners and people such as those who worked in petrol stations.  He said there was a misconception that we had the second highest minimum wage in Europe, which was not true.  There were many countries which did not have a national minimum wage, but they had sectoral minimum wages, which were by and large higher.  Those countries with a higher minimum wage also had lower unemployment.  The suggestion that there was a direct correlation between minimum wage and employment level was invalid.  Similarly, the decision was contested by Alex White (Lab, cultural & educational) as arbitrary – there was no hard evidence, other than anecdotal evidence from employers, that they would prefer the wages to be lower and no evidence had been presented.

In separate comments on the order of business (Seanad Eireann, 9th December 2010, 393), Paudie Coffey (FG, industrial & commercial) spoke of how two five-year-olds had been found by a social worker scavenging for food in the public bins in the streets of Waterford and he had encountered earlier stories of  families on the bread line who could not feed their children.  He was not sure whether the recent budget was poverty-proofed because more poverty traps were being created by the measures implemented by the government.  That was the real impact of the cuts on those who were most vulnerable.