Raise rent supplement; bring in strict rent control, writes Declan Jordan.
More and more attention is now shifting to Budget 2018. The usual lobby groups are publishing pre-budget submissions to stake their own claims on the so-called fiscal space.
The Finance Minister Paschal Donohoe does not have large resources to allocate. Estimates of the fiscal space, the amount the minister has to allocate in the absence of new taxes or spending cuts, range between €300m and €500m. The Government should heed the advice of the fiscal watchdog Irish Fiscal Advisory Council and be cautious.
The Government has already committed to the restoration of public pay. While €300m may seem like a lot of money for the minister, it is relatively small in the context of the demands being placed on the Government. Reducing the lower rate of income tax by 1% would cost €580m and reducing the top rate would cost €280m. Increasing the state pension by €5 per week would cost €170m. An increase in working age social welfare payments by €5 per week would cost €200m, while a similar increase in payments to carers and those with disabilities would cost €65m.
There is little justification from an economic perspective in cutting taxes anyway. Traditionally the approach on budget day when there is scope for some spending increases or tax breaks has been to spread out the jam thinly. The result is usually no meaningful change for anyone, even if the minister can point to the small improvements. This is what will happen in Budget 2018 if Minister Donohoe follows the same approach this year.
Just as the boom years benefitted most, but not all, so too the current recovery is benefitting most, but not all. The depth of the recession imposed austerity that was felt most severely by the most vulnerable. The cuts in services were deep and have left substantial gaps.
However, the most significant problem facing Irish society now is the housing and homelessness crisis. We have the unacceptable situation in a rich country of thousands of people and families without homes or in imminent danger of losing their homes.
There has rarely been such political and public consensus on the need to tackle this crisis. It may be time to focus our attentions and resources, rather than continue to try in vain to please every interest group. The Minister should take a bold approach and announce the following: The growth in the economy makes tax cuts unwise. There is no scope for meaningful increases in social payments this year. The available resources for 2018 will be focused on the housing and homeless crisis.
This may include increases in rent supplement, accompanied by strict rent controls, additional funds for move-on facilities and supported housing, more funding for voluntary agencies, and local authority funding to bring vacant housing back on stream rapidly. This will complement capital spending on the long-term solution of more public housing. More money alone will not fix the housing and homelessness crisis since many of its root causes are structural, cultural, and legal. However, we are running out of time and we will give ourselves a better chance with a clear focus and more resources to tackle the problem.
Dr Declan Jordan is a senior lecturer in economics at Cork University Business School, UCC.
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