I have just finished them. I shall come back to them. I am only summarising them. Otherwise, we should be here too long. I am only allowed ten minutes for this opening presentation.
Page 4 of the presentation cites the ten key choices the Government should make. It should first recognise that progress means more than increasing GDP, and take the required steps to adopt a broader measurement of progress, and in the process measure what matters. We are not saying growing GDP is not important. Of course it is, but it is important that we recognise that other issues are involved in making progress as well. The second issue is to integrate the income tax and social welfare systems because the current systems were designed for another age and are inappropriate in the present world.
A third choice we believe Government should make is to promote a life-cycle approach to social policy, as agreed in Towards 2016, and promoted in other publications as well. This involves providing programmes to ensure adequate income, appropriate services and activation for children, people of working age, older people and people with disability so that all can live life with dignity. This means ensuring that Ireland's total tax take is at the level required to achieve this.
The fourth point calls for the recognition of all work, not just paid employment. We are arguing here for much higher value to be placed on the work done in the community, in caring and across a variety of other areas. The fifth point calls for a strong focus to be placed on strengthening participation by all. The sixth puts sustainability at the core of all policy making — and that includes economic, environmental and, very importantly, social sustainability.
The seventh point makes refers to the need for us to reclaim our time. As a society and across the world problems arise from the fact that nobody has time for anything. We are running around on enormous commutes with little time, which gives rise to many other issues. We need to reorganise ourselves, so that we reclaim our time. We need to promote a whole of health approach and we can broaden that out if people are interested in discussing what it means. In practical terms, that means things like promoting primary health care centres as the cornerstone of a more inclusive health process. We must broaden the focus of education to ensure it produces fully rounded human beings, and strengthen social capital and civil society.
Values are at the core of decision making on public policy issues. The values that underpin public policy should be articulated and debated by all concerned with public policy, before decisions are made. This is especially crucial at this time, as Ireland decides what choices to make in a world that is in serious crisis.
What has been happening on poverty? There has been a fall from 19.4% to 15.8% over a three year period in the most recent study on poverty rates published by the Central Statistics Office. This reduction is due principally to the increases in social welfare, totalling €51 a week, that were contained in the three budgets of 2005-07. This has resulted in bringing the lowest social welfare rates to 30% of gross average industrial earnings for a single person. In spite of the growing population, the number of people at risk of poverty fell by 100,000 over the three year period. In welcoming the reduction in Ireland's poverty rate by almost one fifth over the three year period to 2007, the figures nonetheless highlight the Government's failure to maintain the anti-poverty momentum in the budgets for 2008 and 2009.
We would also like to point out that almost a third of all households in 2007 at risk of poverty were headed by a person with a job. These are the working poor. Initiatives are required to tackle this, and we will address that in the next section. More than half of all those at risk of poverty — 55.9% — live in households headed by a person who is outside the labour force, such as those who are older or who are ill, or who have a serious disability or are in caring roles. These people are completely dependent on welfare payments. They are not in the labour force and are not the people who are unemployed. It is important to point out that there has been major progress on benchmarking social welfare payments in recent years.
The Government has stated that it is committed to protecting the most vulnerable in these difficult economic times. If it is to do this credibly, then CORI urges the Government to continue benchmarking the lowest social welfare rates at 30% of gross average industrial earnings; make additional resources available to support households at risk of poverty by targeting further welfare increases at the second adult and the children in these households; and take initiatives to tackle the working poor issue, the rising level of unemployment and issues such as food poverty that were not addressed in the 2009 budget.
CORI recognises that poverty is about much more than income adequacy, although income is of critical importance. Consequently, it is important that the deficit in social services be addressed in the period ahead. These include services in the areas of education, health, child care, care of the elderly, housing, transport and training. Likewise, it is critically important that activation programmes for people who are unemployed or at risk of becoming unemployed be supported adequately. It is important to ensure that activation programmes for people with disabilities, for children and others should also be supported adequately.
Of particular importance in this economic crisis is the need to ensure that the brunt of the adjustments do not fall on those who are vulnerable. Consequently, services and activation measures should be adequately resourced to ensure that the system is poised to take full and early advantage of the economic upturn, and avoid a lag between economic recovery and social service provision.
Why and how should tax credits be made refundable? Tax credits were introduced in 2001 to replace personal and PAYE tax allowances, and this was a very progressive move by the Government of the time. This was a positive development. Currently, the values of the main tax credits are €1,830 for the personal tax credit and €1,830 for the PAYE tax credit, which totals €3,660, or €70.14 per week. They are available to all workers. As currently configured, the full value of the tax credit is not available to many people with low earnings. A person with low earnings, whose tax bill is not up to the level of the tax credit, will not get the full value of that credit. This is especially important for the working poor. Their incomes are at a level where many of them do not benefit from the full value of the tax credit.
We believe that the full value of the tax credit should be available to all workers. If a person's tax bill is €50 per week, and the tax credit is €70 per week, then that person should be given the €20 extra. The simplest way to do that is to get the Revenue Commissioners pay it as a refund at the end of the year, in the same way that they pay out on other refunds such as unclaimed health bills.
There has been a long-running argument on all this. The Government set up a working group on making tax credits refundable, and this group reported in 2002. It did not finalise its report because as a member of the group, I refused to sign the final report unless it included two points that I thought were crystal clear. The comments made on basic income were out of date, even when using the Government's own published work. I also argued that the costing for making tax credits refundable, which was very high and was produced by Revenue and the Department of Finance, was for a proposal that nobody was making. However, the proposal we made for a targeted refundable tax credit was never costed, but that fact was not acknowledged in the report. I emphasised that we needed at least a footnote to make the point that we had made a proposal that was never costed and that people who read the report could easily be under a misapprehension. This argument has run and run.
The most recent figures, according to parliamentary questions answered by the Minister for Finance, is that it would cost about €2.5 billion to make tax credits refundable. Our view is that this figure is not a credible estimate of the cost, even though it is coming from the Department of Finance. We are proposing a targeted application of tax credit refunds, making them available to people over 21 years of age, because we do not want people to be given incentives to leave school early. They would also be targeted only at people who had worked in the previous year, so that somebody would not work for one hour in one year, and then claim a refundable tax credit for the whole year. Therefore, our proposal is targeted at those who worked at least eight hours per week for the previous year.
The most recent figures given by the Revenue Commissioners show that 683,000 people paid no tax in the most recent year for which figures are available. If we take the bill of €2.5 billion and divided it by 683,000, we get €3,660. What does that mean? The Department of Finance is claiming that, on average, the 683,000 people who are not benefiting from a refundable tax credit are entitled to €3,660 each — that is the actual result of its calculation. However, this would mean in effect that they were not working at all because once they earned €1, they would be liable for tax, which would have to be deducted from the €3,660.
The way we have structured this, it is totally impossible for the targeted refundable tax credit that we have been proposing for ten years to cost the kind of money the Department of Finance claims it would cost. We are tired of trying to get this done independently through processes linked to the Department of Finance so we established our own working group——
