Budget 2016: 21st Century Thatcherism

If you were to only listen to mainstream media in the wake of Budget 2016 you would be forgiven for thinking that austerity was over and we were back to the so called ‘giveaway budgets’ of the Celtic tiger era. But instead of resembling the budgets of the Celtic tiger it resembles the budgets of the infamous Thatcher years. Whilst Thatcher was for many a deeply unpopular figure she still managed to successfully win three elections throughout the crisis ridden era of the 1980’s, making her the longest serving prime minister of the 20th century. This was done through a combination of two strategies, the first; consistently pushing the narrative of TINA. Claiming that There Is No Alternative to austerity, cuts, privatization, de-regulation and the repaying of odious debts etc. This is the narrative that the Irish public has been fed by Irish and European elites and their media since the crisis hit in 2008 and it will be something Fine Gael and Labour will be continuing to parrot throughout the election period. Insisting that they were the ones who had to make the “tough decisions” and they are the only safe pair of hands to lead the so-called recovery; that it is either a future of “stability” in their hands or “chaos” in the hands of the left and independents, failing to recognize that the chaos is already here for the thousands of people on hospital trolleys and those living in poverty and deprivation because of their devastating policies.  


The second strategy of Thatcherism was in delivering carefully aimed budgets that would shore up their support base close to election time. Such budgets were aimed at appeasing particular sections of society, the corporate sector and the middle to upper middle classes. If we peer behind the headlines of “giveaway” Budget 2016 we see that it is these sections that benefit most from the €1.5 Billion that is being returned to the Irish economy from a total of €30 Billion that was striped off the Irish people over the last 5 years, with Social Justice Ireland describing it as ‘the fifth regressive Budget in a row’.


Corporate Giveaway


Many of the key benefits from Budget 2016 will flow directly to the corporate sector. The jewel in the crown is undoubtedly the introduction of a Knowledge Development Box (KDB) to reduce corporate taxes even further.


Over the last 12 months, the Irish state has come under increasing pressure to close the various tax loopholes enjoyed by multinationals. To save the elites from this unwanted scrutiny, Noonan eventually relented on the so-called ‘double Irish’, but not before dreaming up the introduction of a research and development catch-all category.


The whole idea of a KDB is a scam. It allows corporations to declare profits relating to their research & development at 6.25%. This is half the current low rate of 12.5%, confirming that the Irish state is completely wedded to corporate welfare. The status of profits coming from R&D is extremely hard to identify and this is really the point of the exercise. People Before Profit have long since argued that the effective rate of corporate tax in Ireland was somewhere around 6%. Now we have the evidence.


Appealing to those with wealth


The government parties want to strengthen the support of the middle to high-income earners and those with capital. This is evident in their reduction of Capital Gains Tax from 33% to 20% and a big increase in the amount exempt from capital acquisitions taxes – from €225,000 – €280,000 (eventually rising to €500,000). This ensures that the children of the elite can inherit their parent’s wealth without paying as much towards our underfunded public services.


Another key move was the changes to income tax.  In a package that cost a total of €847m (€75m on income tax reductions and €772m on USC reductions) it benefits high-income earners disproportionately. A single person earning €20,000 gains €493 per annum, while a single person on €75,000 gains €902.  Appealing to this demographic not only fits neatly in with Fine Gael and Labour policy of protecting the wealthy but it also reaps rewards in terms of votes, as affluent areas like Sandymount and Donnybrook have voter turnout rates of 87%, which is more than double that of most working class areas.


All in all, this budget must be seen as an important part of Fine Gael and Labour’s broader electoral strategy. Mainstream Irish media has played its part in feeding the illusion that this budget was somehow a giveaway for the masses but it was not. This has been a giveaway to the wealthy that will further the gap between rich and poor and leave the door wide open for further tax avoidance of the corporate sector. This is something People Before Profit must expose during the build up to Election 2016 whilst clearly articulating an alternative that protects the most vulnerable and present a vision of society in which everyone can prosper and live with dignity. This can be done through taxing the super-rich and the stopping of corporate welfare, by ensuring multi-nationals - at least- pay the 12.5% tax-rate they are supposed to be paying in order to fund our public services. By ending the €8 billion euro giveaway to wealthy bondholders every year, which equates to building 37 children’s hospitals. Otherwise the vast majority of people will continue to suffer at the hands of 21st century Thatcherism.

Nigel Gallagher - People Before Profit Election Candidate #SLSDWC