Charges, levies and ‘voluntary’ fees – how we’ll pay for the crisis
Politicians tell us there will be no increase in taxes or cuts in spending after the Covid-19 emergency – but we should check their sleeves for some old reliables
How bad will Covid-19 ultimately hit our pockets? Will people get their get jobs back when it’s over? And can we really get through the worst recession in 100 years without some form of austerity? Those are the pressing questions, we finally received answers to this week as two economic watchdogs spelt out the financial reality that lies ahead.
It’s bad… but maybe not quite as bad as we had feared.
The looming recession will be the worst downturn yet in this country but the austerity that will result from it will be ‘only’ be up to half as bad as the last time around, according to the Irish Fiscal Advisory Council.
Even long after we go back to work, unemployment will most likely linger at over 9%, the IFAC says – the same as it was five years ago when we were halfway through the recovery process.
So we’re not going back to 2010 – just to 2015. We’ve taken two steps forward since the last crisis; now we’re taking one back.
That means over 100,000 people laid off during the shutdown will not get their jobs back, mainly in retail and the hospitality sectors.
And yes, despite assurances to the contrary from politicians, we’ll hear more of the dreaded A word: austerity.
Fianna Fáil and Fine Gael’s coalition framework document claims we can get through all this without income tax hikes or spending cuts. That has been exposed as a fantasy. Both watchdogs warn of a reckoning.
The slightly left-leaning ESRI’s summer economic commentary this week tells us that the State faces a €27bn cash shortfall this year as the economy is on track to shrink by 12.4% – and could even nosedive by a catastrophic 17% if there is a second lockdown.
That’s an even worse projection than the main ones so far. In fact, it would be the worst economic reverse in the history of the nation.
The less left-leaning Fiscal Advisory Council (the term ‘fiscal’ concerns public money) gave a more direct warning in its report this week of looming tax increases or spending cuts.
Over two years we’ll need to come up with up to €14bn through spending and revenue ‘adjustments’ – i.e. austerity – according to the FAC.
What will that actually mean? Well, that is the equivalent of €14,000 for every person who pays significant tax in this country.
But how would Fianna Fáil and Fine Gael raise the money if they have ruled out income tax increases and welfare cuts in the framework for coalition document?
A carbon tax, possibly. And taxes on wealth and high earners.
There are also the new ‘old reliables’ – stealth taxes and levies. JeanBaptiste Colbert, who was finance minister to France’s Sun King Louis
XIV, famously declared that ‘the art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing’. Well, these are the boys for that.
There are dozens of ways to surreptitiously prise money from our depleted pockets, such as not indexing tax bands or credits for inflation, which costs us a few hundred million every year, or by forcing our schools and hospitals to levy extra charges like ‘voluntary contributions’ from parents because we don’t give them enough money for their running costs.
We already fork out hundreds of euros a year in a raft of levies, which sneak in, are often raised, and are very hard to get rid of.
We pay €39 a year in a levy on electricity. This is meant to pay for ‘national policy objectives’. But isn’t that the Government’s job? And with electricity prices already among the highest in Europe, why saddle even the poorest families with this tax?
There’s another levy on health insurance, which was introduced in 2009 at €160 a year among that year’s crisis measures.
Since then it has risen up to around €400 a year for adults – or about 1/3 of your total premium. There are levies on life assurance (€100 a year) and another two on non-life insurance (costing you around €50 a year).
In the 1980s, we had ‘temporary’ levies for youth employment, health and income that lasted for decades. Then came the Universal Social Charge (USC).
They all sound like good, socially responsible measures. Actually, they are the most brutal and penal forms of taxation because they cut through all the credits and allowance that build fairness into the tax system to take money directly from gross income. That’s
why the USC rakes in so much money – and is so hard to do away with.
Even in Britain, where the government pledged not to hike taxes and politicians are less likely to get away with such knavish tricks, there is talk of a new health levy.
So brace yourself for something similar here, a penal tax… sorry levy… cloaked as support for the health service, perhaps, to cover up broken political promises.
In the Covid-19 crisis our politicians have earned respect for being open and honest about how they are dealing with this terrible pandemic.
But don’t be surprised when they revert to type after it’s over. Normal service will resume shortly!