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Opinion: When it comes to paying for Covid-19, are we still 'in this together'?

Economist Dr Brian O’Boyle says we need to learn the lessons from the last global recession and make sure the economic burden of Covid-19 is shared equally.

Brian O'Boyle

PART OF THE government’s strategy over the last few months has been to insist that ‘we are all in this together’. The fact that infections for healthcare workers and deaths in nursing homes have been high, shouldn’t take away from the fact that social solidarity is essential if we are to meet the challenge of Covid-19.

What we do individually matters to others. This is a key lesson of the current pandemic, but there is a second lesson that has yet to be learned by Fine Gael, Fianna Fáil or the Green Party.

Namely, that there must also be solidarity in the way that we pay for Covid-19, starting with the vast wealth and higher incomes that have been accumulated since the Great Recession. 

A two-tier Ireland

Economically, the last 12 years have been a tale of two halves. In the first five years, successive governments targeted low and middle-income earners with austerity measures totalling €30 billion.

At the same time, they sheltered the richest members of society by refusing to increase corporation tax, to implement a tax on wealth and refusing to burn senior bondholders. Poverty rates predictably increased and deprivation went up by a third.

But austerity was also extremely important for businesses who used the high unemployment to increase their competitiveness. Data from Eurostat shows that Irish productivity increased by 34% from 2010 to 2017, at the same time as labour costs fell by 17%.

This, in turn, set up a six-year recovery as profits, higher incomes and household wealth all increased spectacularly. The key information is detailed below: 

  • According to the Revenue Commissioners, Gross Trading Profits increased from €83 billion in 2013 to €190 billion in 2018. This is an increase of 228%.

  • According to the Revenue Commissioners, tax units earning more than €100,000 increased from 95,000 to 209,000 – with their share of the total income also going from 22% to 31%

  • According to the Irish Central Bank, household wealth increased by €350 billion in the years between 2013-2020. This meant that for the first time ever, Irish households entered the latest crisis with a total wealth of more than €800 billion

If this wealth was distributed equally, it would give every person €162,577 and every household just over €500,000. But the Central Statistics Office has estimated that the top 5% of households (85,000) own 33% of the national wealth, while the top 10% holds 48%.

‘The rich get richer’

If this is even close to being accurate, it suggests that the richest households increased their wealth by an average of €1.36 million over the last seven years. This equates to 77% overall or to an 11% annual increase – more than most workers have received in the entire period since 2008.

These figures alone are enough to show just how much wealth has been amassed in the wake of the Great Recession. 

Politically, moreover, they reveal two very important facts about our society. The first is that up to now, the values underpinning the economy have not been solidarity or looking after the vulnerable, but a conflict between the ‘haves’ and ‘have nots’ and looking after the privileged.

The second is that an Irish government claiming that it ‘we are all in it together’ now has the chance to prove it. As a socialist, my preference would be to shift assets to the workers who actually produce them, but failing this, the obvious way to demonstrate solidarity would be to tax the most privileged members of society and use the resources for a combination of temporary wage subsidy payments, pandemic unemployment payments, support for micro-businesses’ and a major public sector recruitment drive.

Time to share the spoils

I do some work with People Before Profit and in our Alternative Budget for 2020, the party received costed responses from the Department of Finance showing how nearly €8 billion could be raised through a solidarity wealth tax, a graduated increase on higher incomes and an increase on PRSI for profitable companies.

We also showed how a further €11.5 billion could be raised by closing corporation tax loopholes and increasing taxes on corporate polluters. These figures will need some adjusting to take account of Covid-19, but the signs are that the tax take has been surprisingly resilient – up slightly on last year in the figures published in June

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Choosing this path would be a more equitable way of paying for Covid-19 than handing interest to private bondholders and it would avoid the blackmail that comes with what Minister for Finance Paschal Donohoe described as “bond market vigilantes” in April of this year.

The naysayers will undoubtedly suggest that this isn’t possible without corporations threatening to leave, but if we want a society based on social solidarity, shouldn’t the rich be expected to play their part as well as the rest of us?   

Dr Brian O’Boyle is an economist with People Before Profit. He holds a PhD in economics from the National University of Ireland, Galway. He has just finished a book on Ireland as a tax haven.

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