Cutbacks For Us. Tax Breaks for Them

The Tory election victory in Britain and Stormont’s economic consensus in support of the cutback agenda threatens the future of Northern Ireland’s youth while pandering to the multi-nationals cor­porations, Justin O’Hagan reports.

The number of people claiming unemployment benefit in North­ern Ireland fell by 200 in April to 55,400 after more than two years of increases. Hardly a cause for cel­ebration. In the past two and a half years, 32,000 jobs have been lost in Northern Ireland, including 10,000 in construction. Nearly 38% of the local unemployed are classified as long-term unemployed. In addition, 16% of 18-24 year olds are unem­ployed, compared to an overall rate of 6%. On top of this, around 50,000 working-age people in Northern Ireland’s “economically inactive” population would like to work but have given up trying. Consequently, the real unemployment rate is closer to 12%.

What is the response of the local parties to this social crisis? In the wake of the recent election, all parties have been keen to tell us that they will defend tooth and nail the block-grant – the Assembly’s funding from the UK Treasury. But the truth is that all parties to the Stormont Coalition have already been working on cut­ting back social services. Recently the Stormont Executive has pushed through £350m of public expendi­ture cuts for the financial year begin­ning in April. These will be followed by around £700m in the 3 years to 2014. Recent hospital closures in Whiteabbey and Mid-Ulster are among the first steps in this pro­cess. Because politicians, under the advice of mainstream economists, are unwilling to make cutbacks in infrastructure development, public sector jobs and pensions will face the biggest threat from our represen­tatives in Stormont. There will be further reductions in health, social service, housing, education and local authority spending if these proposals are not resisted. All this, to pay for the excesses of the global banking system.

As well as working together in pushing through public sector cut­backs, all parties in the Stormont Co­alition are united in their desire to see the introduction of a lower corpora­tion tax rate here. The new Secretary of State, the Thatcherite Owen Patterson is keen, “that we do publish a paper on the mechanics of possibly devolv­ing corporation tax to the devolved institutions here.’’ The hope is that a lower rate of corporation tax will entice foreign investment into North­ern Ireland but as Secretary of Derry Trades Council, Liam Gallagher, has noted, “It will create another loop­hole for corporations to avoid paying tax and make shareholders richer. The whole concept of a cohesive fair society which cares for the less well off is predicated on the principle of a fair taxation system based on ability to pay.”

Moreover, in order to comply with EU competition law, a lower rate of tax here would have to be paid for out of the Block Grant. It is estimated that initially this will amount to £200 million a year, which will be funded by yet more cutbacks in the Stormont Budget.

In relation to taxes, a recent report by the TUC, The Missing Billions (available here), shows that £25 billion is annually lost due to tax avoidance and evasion in the UK. This is made up of £13 billion from tax avoid­ance by individuals and £12 billion per annum from the 700 largest corpora­tions. A socially concerned government would do everything in its power to claw back this money rather than imposing cutbacks on working people.

Economists agree that cutbacks will put less money into the Northern Ireland economy, which in turn will lead to further job losses. According to Ulster Bank economist Richard Ramsey there may be dark times ahead with “a secondary surge” in construction-related job losses over the next 12-18 months. Mr Ramsey explained: “This will be linked to cuts in capital investment, which is likely to bear the brunt of the forthcoming public expenditure cuts. …Quite simply, the steeper the cuts the sharper the rise in construction-related unemployment. …We still expect the unemployment register to swell to around 62,500 later this year with the services sector, notably retail, vulnerable to job losses in the coming months.”

The alternative to this crumbling economy would be to develop the economy by government spending in areas of social need. They aren’t hard to find. The money put into the economy through job creation would have the virtuous effect of stimulating the economy. This is an approach that none of the Stormont parties has signed up to.