Budget 2023
4 October 2022
Minister for Finance Paschal Donohoe and
Minister for Public Expenditure Michael McGrath.
Part I
A budget framed by imperialism
The widespread debate following the publication of the Irish budget will focus on the claimed mitigation of price inflation for workers, especially in energy costs, the division of tax revenue between rich and poor and the ability of the rich elite to avoid progressive tax regulation. In fact, income tax and VAT account for nearly 70% of tax take. Tax on property counts for little, stacking the deck in favour of the wealthy.
This debate will largely take place without context. The basic context, ignored by the majority on the right and left, is Ireland's role as a tax haven.
In 2020 10 transnational companies contributed 51% of corporation tax. Just 100 companies account for almost 80% of all revenue from corporation tax. This tax accounted for 21 per cent of all taxes collected by Revenue in 2020. The government has fought for years to keep corporation tax at 12.5%. (The effective rate was 10.3%). Ireland was one of the last countries in the world to accept US pressure for a universal minimum of 15% coming into effect in 2023 after winning a number of exemptions. Spending has been restricted in order to reserve €2 billion to avoid the shock of the increase. The possibility of shock is highly unlikely. A low tax is backed by the subordination of all the structures of the Irish state to the interests of transnationals. In addition, millions in vulture capital funds pour into the property market. These are treated as charities and pay minimal tax.
The rate of tax is so low that massive volumes of capital flow into Ireland to take advantage of the deals, generating billions in revenue. Much of the inflow is totally unproductive and has no real connection to the Irish economy. As with the €14 billion tax scam, money earned in other European countries is stored in Ireland, removing revenue from those countries. The total volume is so large that an original budget projection of almost €7 billion is now over €11 billion and a reserve is being held to meet further shocks.
There is some discussion among economists of the instability and unsustainability of the situation. The main point, not discussed, is the reality that transnational companies paying these taxes, essentially own the Irish economy and the Irish political system.
One point, often made, is that Ireland should build up underdeveloped public services. But how are these to be paid for? Not by increasing corporation tax or taxing the rich. The compromise is to stage one-off giveaways that buy off opposition.
In addition to its servitude to transnational capital, Ireland remains in hock to the European Central Bank and continues to hold a substantial sovereign debt. Regulation in place since the Maastricht treaty restricts government investment and insists on "fairness" between public and private investment. In essence this means a constant pressure towards privatisation in every area of public life.
A growing constraint is quiet integration with the NATO alliance and European military structures. This is the reason for the large influx of Ukrainian civilians, in sharp contrast to the treatment of the existing refugee population, a doubling of Ireland's military budget and the €55 million in direct military aid to the Zelensky regime.
The pragmatist might shrug and argue that, as long as the cash flows in, who cares about Ireland's subordination to imperialism? However, low rates have to be paid for. Transnational funds and the banks demand a return and the normal mechanism is to charge the working class, through low wages and cuts to the social wage of public services, public sector workers face a substantial pay cut and the private sector keeps nibbling at Ireland's limited and reeling public services.
There is another effect. A collective blindness on the left and the right based on the pretence that Ireland is a fully independent capitalist state and that the budget, written at the behest of transnational capital, can be amended in significant ways by a capitalist government or by parties willing to operate within the constraints set by capital.
Part II
An €11 billion sticking plaster over a gaping wound
In part one of our analysis of the budget we focused on the context - that is the position of the Irish state as a society dominated by imperialism, constrained by the requirements of transnational investment, by the regulation of the European Central Bank and sovereign debt and by increasing demands from NATO and the European military alliance.
None of this was part of the budget discussion in the Dail. The major elements of the Irish economy, those controlled directly by imperialism, were ignored. The division of resources in the smaller, native sector was what dominated.
In a coalition government, each sector had to get a proportion of the budget bounty. For Fine Gael it was tax. A tax cut applied to many workers but, by its very nature, it was regressive and benefited the wealthy. The budget also included extra support for business.
For Fianna Fail, the more populist of the parties, claims of aid for the working class was their signature. The claims lacked much in the way of evidence. There will be an increase in support for education. There will be more support for childcare. Primary school books will be free and there will be a small increase in teacher numbers and assistants. In health there will be an end to in-patient hospital charges and expansion of free General Practitioner coverage.
The giveaway for the Green Party was an extension to the 20% public transport fare reduction. On the other hand, mirroring their limited influence, the 2% carbon tax was offset with an equivalent tax reduction on fuel.
A key issue for the government was the avoidance of structural change that would offer a permanent advantage to the working class. For that reason €4 billion of the €11 billion budget consisted of one off payments that would reduce public anger while avoiding long term relief for the workers. The list of welfare reforms was piecemeal and would clearly be swallowed up by inflation.
A key aspect of financial planning was the continuation of the Housing For All programme. Almost €4 billion has been assigned to a plan that has rewarded financiers and speculators as the cost of housing increases to unaffordable levels.
One spin-off from the budget was a Sinn Féin protest at a concrete tax. This is a backdoor way for future home buyers to pay compensation for poor regulation that led to homes collapsing because of the mica and pyrite content of the cement used.
Taxpayers who rent will receive a new rent tax credit valued at €500 per year from 2023, but absolutely nothing will be done to cap rents or extend tenant rights.
The critique by Sinn Féin was extremely limited, calling for a fixed price cap on energy as opposed to three tranches of direct payments of €200. Both proposals involved subsidising the profits of the energy suppliers. The political direction of Sinn Féin was indicated by their offering a limited modification of the budget rather than any radical alternative and by the use of the phrase "the squeezed middle" - an indication that they are focused on winning the support of the middle class rather than the interprets of workers.
Labour called for a rent freeze and criticised the absence of a windfall tax. The Social Democrats pointed out that income tax changes benefited those on higher incomes. People before Profit called for a bigger housing budget and boosted the next "People Power" march as a response to coalition policy.
There was no discussion of nationalisation of energy resources not held by the state, such as the Corrib field, nor any suggestion that we break out of the NATO war with Russia which is clearly supporting and which is one of the immediate elements inflating energy prices.
The main post-budget discussion was of a supplementary spring budget - an idea immediately rejected by the government. The suggestion gives the game away. The coalition wants to appear to be protecting the workers while avoiding any structural change. The result is a very expensive sticking plaster.
Capitalism's hopes are placed on a return to stability, but US attempts to reassert its global dominance point to a future of conflict, immiseration of the working class and collapse of political systems across Europe, with consequent convulsions in Ireland.
One thing is clear. Even with the vast amount of money available, value has to flow outwards from the working class to transnational capital and not in the other direction. It is worth noting that the trade union leaderships have negotiated an extension of the "building momentum" public sector pay deal.
At 6% over two years it represents a major pay cut. The Irish Congress of Trade Unions justify this on the basis of their presence inside the government team and the long list of giveaways that they have negotiated - giveaways that do nothing to materially benefit the position of workers in the longer term.
A critique of the ICTU leadership and of social partnership with socialism and imperialism would be a fresh start towards building resistance.