It goes without saying that the government’s primary focus for now must be on battling Covid-19. The authorisation of two highly effective vaccines, with the promise of others to come soon, means we are pushing back against the virus on two fronts: suppression and immunisation.
The government must spare no effort in deploying these two powerful tools 24/7. While the fight against the virus with be the primary focus of the State’s energies and resources, policymakers must look at what state our society will be in afterwards.
We cannot underestimate the lasting damage this virus has inflicted. Few townlands or families have been untouched by it. Most of us have family members or friends who have contracted Covid. Sadly, too many of us know people who have succumbed to it. All of us know someone in our social circles who has lost their job, or seen their business or livelihood decimated by Covid.
Some of us, and I include myself in this, have been fortunate enough to continue to work remotely. It has not been easy or fun, but it has been manageable. Many people never had that option. Some have been able to continue working, often in difficult and worrying circumstances. Many others have lost their jobs and been moved on to PUP.
Far too many of our fellow citizens do not know with confidence if their job will still be there when the crisis has passed. There is an obligation on policymakers and planners to start preparing now for how we restore our economy, and our communities, post-pandemic.
The 2020 revenue figures may look less unnerving than some feared. However, they still contain pointers to the scale of the problems we will face.
The figures show that income tax yield held up reasonably well, with no massive fall from 2019. At first glance this seems like a positive… but look closer.
This figure tells us that those with moderate to high incomes, those who pay the bulk of income tax, are just about managing to get through this. Most importantly, confirms to us that those on lower incomes have shouldered the brunt of the Covid cost, they are the ones who pay the lowest levels of income tax.
This also points to strong likelihood that we are facing a K-shaped recovery, with our society going on two opposing post Covid trajectories. One group, the top arm of the K, are the ones on moderate incomes and their recovery should be easy and steady. The other group, those on the lower arm of the K, the ones who have lost their jobs or business will be spiralling downwards. Thus we find ourselves with an even more divided and unequal society than we had at the end of 2019.
Many people who never knew long bouts of unemployment before Covid19 will find themselves on that lower arm, along with the many tens of thousands who were already struggling, pre Covid, to cope with Ireland’s cost of living.
In recent interviews the Taoiseach has stated that this government will not increase income tax. That’s a welcome announcement, but the Taoiseach knows you don’t have to increase income tax rates or bands to increase someone’s income tax bill. Leave the rates and the bands alone, and time and wage growth will do that.
Recognising this basic fact, the Taoiseach has said that the government will move to index income tax bands and rates to keep take home incomes stable. It is a welcome move, one that I applaud.
It is one we should apply to people on the lower arm of the “K” too, so I want to see us adopt a similar approach to welfare payments. What I propose is that we also “index” welfare payments, to retain their real buying power.
The indexing must not be based on the headline inflation rate. That would only serve to permanently lock people into poverty. Indexing of welfare rates must be based on the cost of a basket of essential items (mainly food, heating etc.) which is all people on welfare can afford.
We must do this now to avoid a repeat of the government’s failure to increase rates or increase them by amounts that keep pace with the people’s real-world cost of living. In the two years before the Covid virus hit us, people who depend on welfare saw the real buying power of their payments drop by 6%.
This government and the last one did not cut rates. However, they allowed the value of welfare payments to fall by failing to increase them. We must not allow that happen again. The consequences for politics and society would be too dire.