Dr. Shana Cohen:

I thank the Chairman for inviting the Think-tank for Action on Social Change, TASC, to contribute to this session. We appreciate the opportunity to offer our input.

TASC is an independent organisation and is not politically affiliated or associated with any institution. We examine issues related to inequality and democracy in Ireland and the EU. The research to which we will refer today and which is in the presentation sent to the committee was largely conducted in partnership with the Foundation for European Progressive Studies in Brussels, which receives money from the European Parliament. Because of who we are as an organisation and our interests, we wish to emphasise in our remarks the importance of addressing the causes of economic and social inequality in the budget. Inequality is not the same as poverty, although reducing poverty rates is a critical objective. Inequality relates to differences in income and access to resources in general such as housing and jobs, which in turn provide economic security and enhanced well-being. We are focusing on inequality because it concerns the relationship citizens in Ireland have with each other and the opportunities they have to improve their lives. It also affects how people view themselves and society, their emotions concerning their social position and their individual self-confidence and ambitions or hope for the future. As shown by the data we sent to the committee, Ireland's inequality rates are approximately average for the EU but, as we noted in our Cherishing All Equally reports and the presentations we sent to the committee, that standing is due to the high level of income transfers from the State to the bottom 40% and the income distribution. As mentioned in the previous session, it can be misleading to compare Ireland to other European Union countries as they have very diverse economic and political histories. In the table presented to the committee, we focus on comparing Ireland to other countries with small, open economies and the United Kingdom.

We believe the budget should aim to address at least some of the obstacles to economic opportunity and the achievement of individual aspirations. Despite the uncertainty of Brexit, as mentioned in the previous session, and the current political and economic challenges to the European Union, Ireland's economic growth is strong and the Government is in a position to invest in areas needed to help individual citizens and households gain more security and establish goals. It is the right time to seriously address economic inequality in the European Union. The table illustrates that our inequality research has shown that the top 10% pay the least in comparison to similar other small, open economies but receive the most in governmental income transfers amongst these countries. Transfers paid essentially refer to taxation, especially the category tax on income and social insurance contributions. The low share of transfers paid by the top 10% in Ireland reflects their low levels of social insurance contributions. The transfers received comprise mostly State benefits such as the old age pension, unemployment benefit and family and child allowances. The top 10% in Ireland particularly benefits from child and family allowances in comparison with the other countries, probably because of the fertility rate in Ireland.

The bottom 40%, on which TASC is focusing, depends heavily on transfers because of low wages and-or lack of secure employment. The research, which compares Ireland to other EU economies, shows it is an outlier because of the low percentage of wages within overall income. Labour income is close to half of pre-tax income in most of the other countries studied but in Ireland it is only a quarter. In the United Kingdom, the most inegalitarian country we have studied, the bottom 40% earn just over a third of their income through the labour market. The flip side of the weak earning power and low wages in the labour market in Ireland is the high levels of transfers received and the low levels of transfers paid. The bottom 40% in Ireland receive almost three quarters of their income in transfers from the State and pay just 4% of their income in transfers or taxes.

We recommend addressing this imbalance by investing in public services such as childcare, which was mentioned frequently in the previous session, that enable more people, especially women, to work and investing more in social housing. To save time, I will not go into that in detail. I wish to emphasise that investing in public services such as childcare or healthcare avoids the stigma of means-tested benefits in income transfers which tend to segregate particular income groups. Inequality creates social divisions and addressing it requires a strategy to promote social solidarity. It also affects growth. The report sent to us on gender budgeting cites the International Monetary Fund, IMF, as stating that inequality can promote growth and, in particular, labour force participation by women. To save time, I will not address female labour force participation in Ireland as the statistics were mentioned quite frequently in the previous session. The gap in the participation rate between men and women in Ireland is close to the European Union average but, of the EU 15, only Greece, Spain and Italy have a larger gap between men and women, so it is an issue in Ireland. Furthermore, going back to the point on low wages, the National Women's Council of Ireland indicates that 70% of part-time workers are women, which prevents them from saving or accessing the necessary support services to improve their position. That again raises the issue of childcare. Not surprisingly, approximately one quarter of the Irish female population is at risk of poverty.

We make four recommendations based on our research. The first is to invest in childcare, although I will not go into the details of that because of what was mentioned in the first session, and to build more social housing, which was also dealt with. On childcare, a point that was not made is that it is good for children and is not just about women's labour force participation. The Government early years strategy report, Right from the Start, published by the Department of Children and Youth Affairs in 2013, identified enhancing and extending quality early childhood care in education services as one of its five priorities. It made a number of recommendations, including that investment in early childcare and education services increase incrementally each year to achieve the international benchmark of 1% of gross domestic product, GDP, by the end of the strategy. The report was published in 2013 and current investment is under 0.6% of GDP. Childcare should not be thought of solely in terms of women's participation in the labour force and it should be remembered that it is good for children.

We did not recommend a figure for healthcare because that was dealt with in the first session. However, we wish to point out that increased access is required, according to our research. Many of the people with whom we have been in touch through our studies do not have access to healthcare because they make too much money but those people may have insecure employment or wages that are too low, so we need to figure out a way for them to access universal primary care in particular even if their wages exceed the threshold to qualify for the medical card.

We recommend two revenue-raising mechanisms. Mr. Sweeney will deal with questions on the first recommendation, which is to raise €294 million by adding a third rate of income tax, of 43%, for incomes above €120,000. The second recommendation is to raise revenue of €1 billion by standardising pension tax relief at 20%. I will conclude by further explaining the pension tax relief. We want to protect universal payments, about which there is no argument, and we believe there is scope to reduce tax subsidies which disproportionately benefit those in the top income brackets. In particular, approximately three quarters of tax relief on private pension contributions benefit the top 20% in terms of income distribution, which group is arguably least in need of such relief. One could say that pension tax relief is ostensibly a way of incentivising savings but it functions more to shelter the incomes of the already privileged. In terms of cost to the Exchequer, the Irish system is among the most expensive in the OECD in spite of our relatively young population. Recent analysis by the ESRI shows that granting tax relief at the standard tax rate of 20% rather than the marginal rate of 40% would yield savings of approximately €1 billion. It further notes that the impact on savings behaviour is likely to be minimal. One does not want people stuffing their pensions full of income because they are trying to protect it from taxes. Our recommendation is to generate revenue through changing the tax relief. I will conclude as I know we are short on time. We welcome any questions from the committee.