Dr. Seán Healy:

Thank you, Chair. I am grateful for the opportunity to present on this issue which is close to our hearts. Social Justice Ireland has always been of the view that the budget process does not allow for much of the work that requires to be done, in particular in advance of the budget.

We wish to say four things on pre-budget audits. The first is that they are welcome. Second, we want to look at what happens currently without pre-budget audits. We want to examine what a pre-budget audit would be like. Finally, we want to look at what it would achieve for budget 2013. We have five minutes so we will just hit a few points on each issue.

First, pre-budget audits would be welcome and would bring real reform. We know the Government is committed to reform of the budgetary process. We are not convinced that it has gone nearly far enough. Some of the things that have been done are welcome but the introduction of pre-budget audits would be a most welcome initiative. It would hopefully result in the elimination of kite flying and the destabilisation that comes with such a practice because all sorts of ideas get flown as kites and have the impact of making people worried even though there might not be much substance to them, whereas, if there was a pre-budget audit such an exercise would be unnecessary. A pre-budget audit process would also ensure that parliamentarians would be fully informed before they vote on the budget. Much of the problem currently is that the budget is presented and most Members in either Chamber have had very little time to see it or discuss it in advance and they are voting on particular parts of it within a matter of hours.

In terms of what happens currently without pre-budget audits, one consequence of budget 2012 is that the income of the poorest 40% of households fell by a factor of 2% to 2.5% while the richest households fell by only 0.7%. The budget was skewed towards benefitting the better off rather than those who are poorest. The bottom 40% took the major hit. A pre-budget audit would have shown that was the situation that would emerge and if it were sufficiently clear in advance I hope it would have produced a different outcome in that the Government would have made adjustments.

In the absence of pre-budget audits over the past 25 years - let us look at the period between 1986 and 2011 - social welfare rates dramatically fell behind pay and other increases across all sectors, yet because there was a substantial increase in welfare in budgets in the years from 2005 to 2007 and people tend to look only at the most recent years there is a misunderstanding that welfare recipients have benefited enormously compared to others. However, when one looks at the process over a quarter of a century one sees that is not true. A pre-budget audit would show that to be the case.

A third issue arises in that context which we feel is important, namely, without a pre-budget audit the selective use of data leads to inaccurate analysis which in turn leads to inappropriate policy proposals and decisions. That is not confined to the Oireachtas. A recent troika document selectively used data in five areas we identified and discussed with them. They did not challenge anything we presented to them in recent meetings. We have shown, for example, that they selectively used the data on poverty, how unemployment rates have fallen over time and data on the increase in welfare rates in the past decade, which is the one to which I just referred. They have selectively chosen data on replacement ratios and they have also selectively used data on the distribution of hits in the budgets during the recession. Those are just five examples.

In selectively using data, and we can show members those data in response to questions if they are interested in it, inaccurate analysis was presented by the troika in its documentation and, as a result, it is proposing inappropriate policy initiatives. We believe that is a critical issue that would be exposed if there were a pre-budget audit process.

Another example of issues that get missed without a pre-budget audit is the cumulative impact. For example, poor children had multiple hits, which we can document, but that is not exposed in advance without a pre-budget audit and, as a result, many issues get put out of place and the same group of people take many of the hits.

Two other points arise in terms of not having pre-budget audits. At Government level there tends to be serious engagement only with those who represent the rich and the powerful, and there is no real engagement with the rest of us. We are seen as residual. There may be a small amount of engagement but it is not of any consequence. We argue that would change if there were a pre-budget audit process.

In terms of what a pre-budget audit would look like, first, it would be a year-round process and not something that happens in the last few weeks before the budget. Second, it would be a system approach in which the entire Government system - Government, Oireachtas, civil and public servants, advisers and so on - would be open to proposals being presented. That is essential in any pre-budget audit process. In such a situation all stakeholders should be free to make proposals that should include costings which could be considered. Groups with the capacity to generate full sets of budget proposals showing revenue and expenditure impacts should have access to assistance, for example, in ensuring the costings they are presenting are accurate.

Another part of a pre-budget audit is that it would have the capacity to have comprehensive analysis of a range of different options which it would examine in terms of short, medium and long-term outcomes. In terms of some of the long-term outcomes, if we examine the 30 years from 1980 to 2010, it is the top three deciles of the income distribution who have benefited most in that period. That kind of analysis must be brought to bear in the context of budget decisions that will have long-term as well as short and medium-term impacts.

What would a pre-budget audit achieve for budget 2013 if it were in place? In our opinion it would achieve a number of things. First, it might bring a certain amount of truth to bear in the process. For example, there is an argument about the ratio of expenditure cuts to tax increases. Social Justice Ireland has recently met both the troika and, as part of the community and voluntary pillar, the Minister for Finance and the Minister for Public Expenditure and Reform, but they are telling us directly opposed points about the same issue. For example, the troika is telling us it does not mind whether the ratio between cuts and tax increases is changed as long as the total amount of borrowing reduction is achieved. The Minister for Finance is telling us explicitly that this is not true. He says that when they want to remove a cut, they must find another cut to replace it, and when they make a proposal that they will not increase a tax item, they have to put a replacement tax in place. Both of them are dealing with the same reality but they are both giving us the opposite view. One of them is being economical with the truth. It would be very useful if we knew the actual story. A pre-budget audit process would make that clear.

Another example is that such a process would clarify real options and get beyond the knee-jerk dismissal of proposals. One example of a proposal in our budget choices policy briefing is a part-time jobs opportunities programme to provide tens of thousands of positions for people who are long-term unemployed but who have skills that will be useful in the future rather than skills that will have to be replaced with new skills. There is a great deal of potential in that regard in a programme that was piloted and mainstreamed in a previous time of high unemployment. What we are getting, however, is a series of knee-jerk reactions.

In terms of what a pre-budget audit would achieve in budget 2013, it would show how the tax system could be fairer and the tax take increased in an equitable manner. It would highlight how vulnerable people would be protected in budget choices, and it would show how social infrastructure could be protected because social infrastructure is at risk given the lack of short, medium and long-term analysis before the decisions are made.