ICTU's pre-budget submission outlines a set of concrete alternatives to the Government's austerity policies. However, the real test is what strategy the organisation will pursue to mobilise the broadest possible coalition to support that set of alternatives. By Michael Taft.
ICTU’s pre-budget submission Growth is the Key poses a direct challenge to the austerity programme being pursued by the Government – in both its critique but, more importantly, in the alternative programme it puts forward. Let’s look at the main strands of ICTU’s alternative, for it has the capability of uniting the various strands of the broad progressive movement.There are two main elements, which are inextricably inter-related: the investment strategy and the budgetary strategy.
Investment: The submission proposes a twin-track investment strategy. The first track foresees a €6 billion investment programme over the next three years. It proposes a menu of suggested programmes: water & waste network, education, health, retro-fitting buildings, public transport, etc. All of these would result in new and productive assets upon which the economy can generate employment and income – in the short and long-term.
The second part of this investment strategy is the State Holding Company. Rather than selling off public assets and enterprise, ICTU proposes to marshal their commercial power to expand enterprise activity. In essence, the shares of all public enterprises would be vested in the Holding Company, which, in turn, could raise private funds on the market (through borrowings, as happens now) for future investment. The benefit of this approach is that it would allow for the expansion of successful public enterprises while using private, not public funds, (meaning no extra state borrowing).
This strategy has the capacity to boost growth, employment and tax revenue – and therefore constitutes an important element of fiscal consolidation. But this is not a short-termist programme; investment creates assets which can be used down the years to generate further growth and income. This is a positive stride forward.
Budgetary Adjustment: While no one doubts the need to increase investment (though those supporting austerity never explain how this increase will occur within their deflationary framework), the biggest challenge ICTU poses is in the realm of budgetary strategy. Simply put, it calls for the end of overall current spending cuts and the driving of fiscal consolidation through tax increases on high-income groups and their property and capital. The implications of this approach are far-reaching.
First, it rightly poses spending cuts as a political choice, not a budgetary imperative. If the Government cuts public services, social protection or investment it is because they chose to do so. They could make better choices if they were politically so inclined.
Second, and following on from the first, it has implications for the trade union movement’s relationship with the Croke Park Agreement. While it doesn’t negate the operation of the agreement (seeking to raise productivity through agreement is a sound enough principle), it puts ICTU at odds with the Government over what to do with the efficiency savings that arise from Croke Park. The Government wants to use the savings to reduce public sector employment in the (vain) hope that this will reduce the deficit. ICTU has an alternative:
“It is difficult to quantify the likely size of these savings [Croke Park, reduction in interest rates] in 2012 and 2013. But any savings arising from public sector reform, reduction in regressive expenditure and reductions in unemployment costs arising from Congress’s investment programme, should be reinvested back into public services and social protection.”
In other words, reductions in one area should be used to increase expenditure in other areas – whether that’s reopening hospital wards, increasing Special Needs Assistants, hiring more teachers and gardaí, or restoring social welfare cuts. That’s a direct challenge to the Government’s deflationary strategy and suggests that while ICTU will operate Croke Park, it will oppose the policy intention of the Government; namely, using Croke Park to cut overall levels of public spending.
In effect, ICTU is calling for at least a freeze in current spending at 2011 levels – still a difficult task - but it opposes the Government’s planned cuts of approximately €1.5 billion in current spending.
Third, to drive fiscal consolidation ICTU calls for a range of new taxation measures that largely impact on high-income groups: wealth tax, a solidarity levy on high incomes, a temporary corporate profits levy, elimination of property tax reliefs, the extension of the Universal Social Charge onto capital income, etc. The advantage of this approach is that it would be less deflationary than spending cuts and, so, would actually reduce the deficit more than a budget made up primarily of spending cuts.
These are the three main elements:
- An end to spending cuts
- Taxation on income groups
These are the core principles for a progressive counter-strategy to failed austerity policies – principles which would have considerable support among workers, social organisations and progressive politicians.
But announcing these principles is one thing. The real test is what strategy ICTU will pursue to, in the first instance, convince public opinion and, then, to mobilise the broadest possible coalition to oppose austerity behind its concrete alternative. Last year ICTU mobilised over 100,000 in Dublin but then let the initiative die. Were it to return to that strategy – and there are strong arguments that it should – it will have to build a follow-on strategy; one that is inclusive of other social organisations.
This will be ICTU’s real test. It has the right ideas, now let's start debating the best strategies that will derail austerity policies and mobilise a majority in society around the principles that ICTU has ably put forward in its pre-budget submission.
Image top: infomatique.