Sinn Féin - On Your Side

We have built a society that serves our economy, rather than an economy to serve our society - it's time for change - Pearse Doherty TD

25 July, 2019 - by Pearse Doherty TD


On my way here this evening I was reflecting on last night’s RTÉ Investigates programme in respect of failures in the childcare sector and the manner in which our economy serves our people. I think what last night’s show illustrates - and I’ll come onto some of this in my contribution this evening - is that we have an economy that doesn’t serve our people.

As a father of four children, growing up not too far from here, one thing that would keep myself and Róisín up at night is not knowing if our children are safe while we are out at work. What we witnessed last night was what happens when childcare is reduced to a business designed solely for profit with little or no enforcement of regulations or standards.

On my way here this evening I was reflecting on last night’s RTÉ Investigates programme in respect of failures in the childcare sector and the manner in which our economy serves our people. I think what last night’s show illustrates - and I’ll come onto some of this in my contribution this evening - is that we have an economy that doesn’t serve our people.

 As a father of four children, growing up not too far from here, one thing that would keep myself and Róisín up at night is not knowing if our children are safe while we are out at work. What we witnessed last night was what happens when childcare is reduced to a business designed solely for profit with little or no enforcement of regulations or standards.

It was shocking and comes after similar programmes on nursing homes and with regards services for people with special needs.

When it comes to protecting our children, our parents or family members with special needs, Fine Gael and Fianna Fáil have privatised essential services and outsourced service provision to the detriment of common decency; based on the false assumption that it’s cheaper and more convenient to do so. 

I strongly believe that childcare should never be just a business, I strongly believe that the care of our elderly should never be just for profit, and I strongly believe that a roof over your head should never be abandoned to developers and landlords.

The reality is that it’s a false economy, because ultimately people suffer and the taxpayer ends up forking out more.

The role of government must be to say enough is enough and accept that the privatisation of essential services that the likes of Fine Gael and Fianna Fáil have fostered will never provide proper, decent services for all citizens. It will only put more money in the pockets of millionaires.

We see it in terms of housing, where they are in hock to private developers and landlords, we see it in terms of healthcare; with the public-private system, and we see it in the lack of regulation in banking and in the insurance sector where ordinary people are fleeced every day of the week.

Not only has the State a role to play, it has a responsibility to act and to provide essential services to a high standard and for a fair price.

It must be the role of the State - in promoting the development of an economy that serves everyone and all - to take a side and take a stand for what it right and what is good.

They are the values we must abide by; stepping up and providing where there are failings, rectifying wrongs where they’ve been made and taking charge where the State has abdicated its responsibility.

That is the big challenge we face, particularly when the economy is doing better.

And it is doing better… so what could go wrong?

Global efforts of many varieties to tackle international avoidance and profit shifting may have turned the egg timer on the industrial policy in this State of overreliance on FDI.

With it, a renewed focus has rightfully been placed on the volatility of the temporary boon in Corporate Tax receipts collected by the Irish Exchequer.

This undermines our ability to develop a strategy for the future to resource solutions to the profound social and ecological issues of our time.

Any such strategy must also take account of the position of the domestic economy which teeters precariously between fire and ice: a trend towards overheating, or a Brexit induced shock to output.

I must start though by pointing to the wasted years that I believe we will look back on the last few years as having been.

We have the fastest growing economy in the European Union but we have made zero progress towards universal health care.

Our corporations and banks are experiencing boom time profits but there are 10,000 homeless people in our State.

Our workers are stressed, families are facing decisions on the very basic questions of life, such as whether to have another child, taken away from them.

They have no choice anymore. The mortgage or rent and childcare must be paid for and family choices are reduced to calculations on a page.

We are getting the very fundamental issues wrong because we have done things the wrong way around - we have built a society to serve an economy, not the other way around.

And now, we are facing deep uncertainty with a downturn of some sort probable and how prepared are we today?

Have we built the houses our people need?

Have we built the world class health and education systems to build an economy on?

My contention is that the country is making a lot of the same mistakes.

Let’s look at tax.

Over €10 billion in Corporate Tax was collected in 2018; 45% of which derives from the ten most profitable firms in the State.

Despite claims from the Minister for Finance that this has overconcentration has been a priority for his government; this is record over reliance - an increase from 39% in just a year.

With €3 to €6 billion - or up to 50% of 2018’s Corporation Tax take estimated to be unsustainably high - government policy has relied on these unreliable windfalls to fund day-to-day current spending.

Moreover, the gross take is double what it was just 10 years ago.

No one in this room will be alien to the warnings Sinn Féin and many others have made about the folly of building public service spending on the bedrock of sand that is our Corporate Tax base. Indeed, it has dominated discussion regarding the public finances.

But this justified focus, and comparisons to inflated pre-crash Stamp Duty, disguises the real story and source of volatility in the Irish economy.

There is a structural imbalance in the Irish economy, of which Corporate Tax receipts are not the cause. Indeed, they are merely a symptom.

A productivity gulf has opened up between hyper-productive FDI firms based in the capital, and SMEs and micro firms which comprise over 95% of enterprises in the State.

Simply put, SMEs do not have the capacity to compete with multinational wages and benefits, nor do they face prospects in which they will soon be able to do so.

Despite accounting for almost 99% of all enterprises in the State, and about 70% in total private sector employment, domestic SMEs contribute just 35-40% of value added.

Recent work by the Nevin Institute estimates that productivity in Dublin is some 89% higher than the EU-15 average, but the border region and midlands are just half  as productive as their EU counterparts (when measured in value-added per hour worked).

While these two economies co-exist, Fine Gael have hollowed out our tax base.

The position of abolition the USC, which would mean a €4 billion hole in the Budget, has been dropped. The merger of USC and PRSI is off the agenda and the new rallying call is a €2.2billion tax cut for those of us lucky enough to be on the higher rate of tax. 

At the same time, the government, in planning Budget 2020, are still not budgeting for the Christmas bonus which will take up almost half of discretionary spending available.

The trend so far suggests a supplementary health budget will be needed, and as we heard last night here at MacGill runaway capital projects have the potential to waste resources, with the IFAC saying that up to €2 billion from other projects will have to be found if this trend continues.

I have already touched on the risks, so let’s stop and ask what type of government looks at Brexit, climate chaos, unsustainable possible Corporate Tax bubbles, the warnings from its own watchdog and the state of our public health services, and decides now is the time for such deep and costly tax cuts?

In my view this is not the time. Indeed to address these challenges will require more resources.

Those resources can be harnessed through policies, among others, such as ending the very generous tax credits for very high earners, taxing wealth and making our banks pay tax and, yes, the multinationals can contribute more by closing tax loopholes.

Huge investment funds, which play a bigger and bigger role in the rental market, are effectively untaxed.

Billions of euro of intangible assets have been onshored in this State. The cost of doing so by these corporations are offset against their taxable profit reducing their taxable profits to, in some cases, close to zero.

This has been partially addressed but not fully. Doing so could bring in €750 million in each of the coming years. As recommended by Seamus Coffey in his report on Corporation Tax.

The impact of Brexit has been well discussed at this Summer School. In terms of the Irish Economy the latest figures suggest that a no-deal Brexit would result in a  €6 billion hit in the first year and €28.5 billion over five years.

It is predicted that the fallout will result in the loss of between 55,000 and 85,000 jobs in the South, and 40,000 jobs losses in the north in the short to medium term.

They are the headlines but the real effects will be businesses closing, mortgages going unpaid, cuts to public services as governments struggle to balance the books and emigration returning to certain parts of our State.

There has been much speculation over the last three years but we are now closer than ever to that catastrophe, with the election of Boris Johnson and the appointment of his Brexiteer Cabinet.

He refuses to recognise that the ‘backstop’ is the insurance policy that allows Britain to leave the EU while protecting trade on the island of Ireland and crucially protecting our peace settlement and ensuring that we do not see the return of a hard border on the island of Ireland.

Despite the massive impact a no-deal Brexit would have, the Summer Economic Statement contained very little with regard to the possible policy response.

Sinn Féin have outlined a Brexit Support Fund which seeks to provide active support to communities and industries most at risk, and to lift capital investment and our economic fortunes in a time of instability.

We have also outlined in great detail how the EU can mitigate the damage of Brexit. 

The Irish government must demand and win EU help through; 

·         Changes to EU Fiscal Rules.

·         Securing an exception to State Aid rules.

·         Leveraging Structural Funds to fight Brexit’s impact.

·         A new Brexit Solidarity Fund.

·         Broadening the scope of European Globalisation Fund so that workers laid off because of Brexit can benefit from retraining and upskilling.

The evidenceshowsthat sustained and targeted public investment, backed by stable taxes, can expand our output potential and drastically improve quality of life for Irish citizens.

The same is true of the State’s response to climate action, which to date has been an abject failure and among the worst of the world’s high income countries.

Much of the National Development Plan’s commitments to climate action are in fact simply plans to leverage private finance to build, and then own, renewable energy infrastructure through their RESS scheme.

Building our green productive capital stock and creating high quality green collar jobs in areas that have suffered an investment drought to date can drive greater regional balance, while unleashing this island’s potential as a world-leader in the coming green economy.

This means, for example, funding Science Foundation Ireland to create new publicly devoted research centres, to add to their widely renowned stock of the same, to create knowledge and drive innovation in areas of social and environmental need.

In doing so we bring together Ireland’s brightest minds and innovators in common cause for public good.

In short, targeted public spending in the time ahead - that doesn’t exceed our structural position and outstrips our tax base - and that doesn’t exceed our nominal growth potential, can be used to give Irish people the services and sustainable economic opportunities they deserve.

In doing so, it also allows us to mitigate the risks facing our economy.

However, as we outline the risk on the horizon it is important that we recognise opportunities.

One of those is the debate that is well underway in the north in relation to the creation of a new, agreed Ireland utilising the Good Friday Agreement to make that happen.

The issue of Irish unity is not confined to the north, but has also been much referenced by British politicians; including at the most senior level up to former Prime Minister Theresa May but has been more muted here in the south with notable exceptions.

One of those I wish to pay tribute to, who I shared a panel with here almost ten years ago, the late Noel Whelan, was an active participant in events to discuss Irish unity and the development of a new relationships on the island.

I want to extend my sympathy to his friends and family on his untimely passing.

This debate is happening, with or without us, and it is important for all of us - especially those of us in a position of influence - to participate in a meaningful and constructive manner.

Today’s focus is on risk. Risk need not necessitate a response that fails to tackle the social and economic problems which pervade across this State.

Sinn Féin’s approach to risk; such as severe Brexit disruption, uncertain global conditions, and economic volatility at home, is a positive, radical and realistic response.

It is one aimed at preventing further erosion and volatility of our tax base, and therefore our public services, and of ending the effective subsidy by ordinary people to investors and financial institutions, including domestic banks, that aren’t paying their fair share.

It is rooted in public spending and investment that isn’t about endlessly funnelling resources into failed private housing, childcare and infrastructure, but in creating a society of public provision that unlocks our social and economic potential.

So, yes the economy is doing better and yes there are serious risks staring at us but for many others there is a risk too - the risk that nothing will change.

Whether they are the family that struggled this week to pay for school books and uniforms in September, or those living in fear of the monthly rent wiping out their income or small businesses that don’t have a single company to insure them on the island of Ireland and others facing premium hikes of massive proportions.

Or indeed, as the Cabinet met today in Donegal, there is a risk that nothing changes here - a county with the highest level of unemployment, a county which saw a decrease in population, a county without basic infrastructure like a train line.

There is a risk that nothing will change for Donegal.

And so I conclude on my central point that we have built, and are building, a society that serves an economy rather than an economy to serve our society.

We have placed core public services in the hands of for profit operators and we are living with the consequences.

We must change our policies or we risk losing a lot more than budget surpluses or positive growth figures on a page.ssed last night was what happens when childcare is reduced to a business designed solely for profit with little or no enforcement of regulations or standards.

It was shocking and comes after similar programmes on nursing homes and with regards services for people with special needs.

When it comes to protecting our children, our parents or family members with special needs, Fine Gael and Fianna Fáil have privatised essential services and outsourced service provision to the detriment of common decency; based on the false assumption that it’s cheaper and more convenient to do so.

I strongly believe that childcare should never be just a business, I strongly believe that the care of our elderly should never be just for profit, and I strongly believe that a roof over your head should never be abandoned to developers and landlords.

The reality is that it’s a false economy, because ultimately people suffer and the taxpayer ends up forking out more.

The role of government must be to say enough is enough and accept that the privatisation of essential services that the likes of Fine Gael and Fianna Fáil have fostered will never provide proper, decent services for all citizens. It will only put more money in the pockets of millionaires.

We see it in terms of housing, where they are in hock to private developers and landlords, we see it in terms of healthcare; with the public-private system, and we see it in the lack of regulation in banking and in the insurance sector where ordinary people are fleeced every day of the week.

Not only has the State a role to play, it has a responsibility to act and to provide essential services to a high standard and for a fair price.

It must be the role of the State - in promoting the development of an economy that serves everyone and all - to take a side and take a stand for what it right and what is good.

They are the values we must abide by; stepping up and providing where there are failings, rectifying wrongs where they’ve been made and taking charge where the State has abdicated its responsibility.

That is the big challenge we face, particularly when the economy is doing better.

And it is doing better… so what could go wrong?

Global efforts of many varieties to tackle international avoidance and profit shifting may have turned the egg timer on the industrial policy in this State of overreliance on FDI.

With it, a renewed focus has rightfully been placed on the volatility of the temporary boon in Corporate Tax receipts collected by the Irish Exchequer.

This undermines our ability to develop a strategy for the future to resource solutions to the profound social and ecological issues of our time.

Any such strategy must also take account of the position of the domestic economy which teeters precariously between fire and ice: a trend towards overheating, or a Brexit induced shock to output.

I must start though by pointing to the wasted years that I believe we will look back on the last few years as having been.

We have the fastest growing economy in the European Union but we have made zero progress towards universal health care.

Our corporations and banks are experiencing boom time profits but there are 10,000 homeless people in our State.

Our workers are stressed, families are facing decisions on the very basic questions of life, such as whether to have another child, taken away from them.

They have no choice anymore. The mortgage or rent and childcare must be paid for and family choices are reduced to calculations on a page.

We are getting the very fundamental issues wrong because we have done things the wrong way around - we have built a society to serve an economy, not the other way around.

And now, we are facing deep uncertainty with a downturn of some sort probable and how prepared are we today?

Have we built the houses our people need?

Have we built the world class health and education systems to build an economy on?

My contention is that the country is making a lot of the same mistakes.

Let’s look at tax.

Over €10 billion in Corporate Tax was collected in 2018; 45% of which derives from the ten most profitable firms in the State.

Despite claims from the Minister for Finance that this has overconcentration has been a priority for his government; this is record over reliance - an increase from 39% in just a year.

With €3 to €6 billion - or up to 50% of 2018’s Corporation Tax take estimated to be unsustainably high - government policy has relied on these unreliable windfalls to fund day-to-day current spending.

Moreover, the gross take is double what it was just 10 years ago.

No one in this room will be alien to the warnings Sinn Féin and many others have made about the folly of building public service spending on the bedrock of sand that is our Corporate Tax base. Indeed, it has dominated discussion regarding the public finances.

But this justified focus, and comparisons to inflated pre-crash Stamp Duty, disguises the real story and source of volatility in the Irish economy.

There is a structural imbalance in the Irish economy, of which Corporate Tax receipts are not the cause. Indeed, they are merely a symptom.

A productivity gulf has opened up between hyper-productive FDI firms based in the capital, and SMEs and micro firms which comprise over 95% of enterprises in the State.

Simply put, SMEs do not have the capacity to compete with multinational wages and benefits, nor do they face prospects in which they will soon be able to do so.

Despite accounting for almost 99% of all enterprises in the State, and about 70% in total private sector employment, domestic SMEs contribute just 35-40% of value added.

Recent work by the Nevin Institute estimates that productivity in Dublin is some 89% higher than the EU-15 average, but the border region and midlands are just half  as productive as their EU counterparts (when measured in value-added per hour worked).

While these two economies co-exist, Fine Gael have hollowed out our tax base.

The position of abolition the USC, which would mean a €4 billion hole in the Budget, has been dropped. The merger of USC and PRSI is off the agenda and the new rallying call is a €2.2billion tax cut for those of us lucky enough to be on the higher rate of tax.

At the same time, the government, in planning Budget 2020, are still not budgeting for the Christmas bonus which will take up almost half of discretionary spending available.

The trend so far suggests a supplementary health budget will be needed, and as we heard last night here at MacGill runaway capital projects have the potential to waste resources, with the IFAC saying that up to €2 billion from other projects will have to be found if this trend continues.

I have already touched on the risks, so let’s stop and ask what type of government looks at Brexit, climate chaos, unsustainable possible Corporate Tax bubbles, the warnings from its own watchdog and the state of our public health services, and decides now is the time for such deep and costly tax cuts?

In my view this is not the time. Indeed to address these challenges will require more resources.

Those resources can be harnessed through policies, among others, such as ending the very generous tax credits for very high earners, taxing wealth and making our banks pay tax and, yes, the multinationals can contribute more by closing tax loopholes.

Huge investment funds, which play a bigger and bigger role in the rental market, are effectively untaxed.

Billions of euro of intangible assets have been onshored in this State. The cost of doing so by these corporations are offset against their taxable profit reducing their taxable profits to, in some cases, close to zero.

This has been partially addressed but not fully. Doing so could bring in €750 million in each of the coming years. As recommended by Seamus Coffey in his report on Corporation Tax.

The impact of Brexit has been well discussed at this Summer School. In terms of the Irish Economy the latest figures suggest that a no-deal Brexit would result in a  €6 billion hit in the first year and €28.5 billion over five years.

It is predicted that the fallout will result in the loss of between 55,000 and 85,000 jobs in the South, and 40,000 jobs losses in the north in the short to medium term.

They are the headlines but the real effects will be businesses closing, mortgages going unpaid, cuts to public services as governments struggle to balance the books and emigration returning to certain parts of our State.

There has been much speculation over the last three years but we are now closer than ever to that catastrophe, with the election of Boris Johnson and the appointment of his Brexiteer Cabinet.

He refuses to recognise that the ‘backstop’ is the insurance policy that allows Britain to leave the EU while protecting trade on the island of Ireland and crucially protecting our peace settlement and ensuring that we do not see the return of a hard border on the island of Ireland.

Despite the massive impact a no-deal Brexit would have, the Summer Economic Statement contained very little with regard to the possible policy response.

Sinn Féin have outlined a Brexit Support Fund which seeks to provide active support to communities and industries most at risk, and to lift capital investment and our economic fortunes in a time of instability.

We have also outlined in great detail how the EU can mitigate the damage of Brexit. 

The Irish government must demand and win EU help through;

·         Changes to EU Fiscal Rules.

·         Securing an exception to State Aid rules.

·         Leveraging Structural Funds to fight Brexit’s impact.

·         A new Brexit Solidarity Fund.

·         Broadening the scope of European Globalisation Fund so that workers laid off because of Brexit can benefit from retraining and upskilling.

The evidenceshowsthat sustained and targeted public investment, backed by stable taxes, can expand our output potential and drastically improve quality of life for Irish citizens.

The same is true of the State’s response to climate action, which to date has been an abject failure and among the worst of the world’s high income countries.

Much of the National Development Plan’s commitments to climate action are in fact simply plans to leverage private finance to build, and then own, renewable energy infrastructure through their RESS scheme.

Building our green productive capital stock and creating high quality green collar jobs in areas that have suffered an investment drought to date can drive greater regional balance, while unleashing this island’s potential as a world-leader in the coming green economy.

This means, for example, funding Science Foundation Ireland to create new publicly devoted research centres, to add to their widely renowned stock of the same, to create knowledge and drive innovation in areas of social and environmental need.

In doing so we bring together Ireland’s brightest minds and innovators in common cause for public good.

In short, targeted public spending in the time ahead - that doesn’t exceed our structural position and outstrips our tax base - and that doesn’t exceed our nominal growth potential, can be used to give Irish people the services and sustainable economic opportunities they deserve.

In doing so, it also allows us to mitigate the risks facing our economy.

However, as we outline the risk on the horizon it is important that we recognise opportunities.

One of those is the debate that is well underway in the north in relation to the creation of a new, agreed Ireland utilising the Good Friday Agreement to make that happen.

The issue of Irish unity is not confined to the north, but has also been much referenced by British politicians; including at the most senior level up to former Prime Minister Theresa May but has been more muted here in the south with notable exceptions.

One of those I wish to pay tribute to, who I shared a panel with here almost ten years ago, the late Noel Whelan, was an active participant in events to discuss Irish unity and the development of a new relationships on the island.

I want to extend my sympathy to his friends and family on his untimely passing.

This debate is happening, with or without us, and it is important for all of us - especially those of us in a position of influence - to participate in a meaningful and constructive manner.

Today’s focus is on risk. Risk need not necessitate a response that fails to tackle the social and economic problems which pervade across this State.

Sinn Féin’s approach to risk; such as severe Brexit disruption, uncertain global conditions, and economic volatility at home, is a positive, radical and realistic response.

It is one aimed at preventing further erosion and volatility of our tax base, and therefore our public services, and of ending the effective subsidy by ordinary people to investors and financial institutions, including domestic banks, that aren’t paying their fair share.

It is rooted in public spending and investment that isn’t about endlessly funnelling resources into failed private housing, childcare and infrastructure, but in creating a society of public provision that unlocks our social and economic potential.

So, yes the economy is doing better and yes there are serious risks staring at us but for many others there is a risk too - the risk that nothing will change.

Whether they are the family that struggled this week to pay for school books and uniforms in September, or those living in fear of the monthly rent wiping out their income or small businesses that don’t have a single company to insure them on the island of Ireland and others facing premium hikes of massive proportions.

Or indeed, as the Cabinet met today in Donegal, there is a risk that nothing changes here - a county with the highest level of unemployment, a county which saw a decrease in population, a county without basic infrastructure like a train line.

There is a risk that nothing will change for Donegal.

And so I conclude on my central point that we have built, and are building, a society that serves an economy rather than an economy to serve our society.

We have placed core public services in the hands of for profit operators and we are living with the consequences.

We must change our policies or we risk losing a lot more than budget surpluses or positive growth figures on a page.

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