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Balancing the books, but neglecting the people




This op-ed article, by CESR Executive Director Ignacio Saiz, appeared in the Irish Examiner on 30 November 2012. It is a synthesis of a presentation he delivered at a conference staged by Amnesty International Ireland on 22 November 2012. Previously, CESR also produced a briefing document - Mauled by the Celtic Tiger: Human Rights in Ireland's Economic Meltdown - examining the impacts of the economic crisis and the government's austerity-based response to it.

Families struggling to deal with a property boom that collapsed. Rising inequality and unemployment. Public services being cut. Austerity measures failing to stimulate the economy and undermining fundamental human rights.

The problems facing Spain and Ireland are similar. The solution chosen by both governments to deal with the deficit created by the economic crisis — austerity and cut backs to social spending — are failing on two levels. They are striking hardest at the most vulnerable and deepening social inequalities. And they are not stimulating the economy.

Indeed, prominent economists are increasingly warning that entrenching these types of austerity measures in economic downturns risks deepening recession and unemployment.

Since the economic crisis hit in 2008, Spain’s unemployment rate has increased dramatically and now stands at 25% — more than double the EU rate. Spain also has one of the highest rates of child poverty in the EU.

Marginalised groups are especially vulnerable and older women have particularly suffered, with 30% of them at risk of poverty. Hundreds of thousands of people now unable to pay their mortgages face eviction. Eviction-related suicides have been reported across the country.

In May, the Spanish parliament approved the largest budget cuts in its democratic history, totalling €27.3bn with further cuts to health and education of €10bn. Aimed at reducing the public deficit, these cuts target basic social services. Contrary to perceptions in Brussels, per capita social spending in Spain was already comparatively low even before the crisis.

Cross from Catalonia to Cork and the narrative remains the same. In February the Centre for Economic and Social Rights, which has studied the human rights implications of the crisis in Spain, published an analysis of how successive austerity budgets have undermined human rights in Ireland.

We found that a poorly managed recession, followed by a series of austerity budgets prioritising regressive cuts to social spending over progressive tax reforms, have undermined the rights to education, health, housing, decent work, and an adequate standard of living.

As in Spain, the cost of austerity is borne disproportionately by those already disadvantaged, including women, children, older people, migrants, and minority groups.

Despite international commitments to protect human rights regardless of financial constraints, the cuts announced by the Government undermine basic social rights such as the right to adequate housing.

In 2011, the social housing budget was slashed by 36%. This was followed a year later by a further cut of 26% to capital expenditure in this area. Hikes in student fees, along with further guts to education grants and reductions in the number of teachers, throw serious doubts over Ireland’s commitment to the right to education.

For both Spain and Ireland, there is a different path. International human rights law requires governments to maximise the resources available to them to protect rights, even in times of recession, to avoid retrogression and to guard against discrimination at all times. Neither government is doing that. The focus in both countries has been on slashing spending rather than increasing income through progressive taxation.

Ireland remains one of the lowest- tax economies in the EU, with a total tax take of just 28% of GDP, as compared to an average of 36% across the EU. Corporate tax rates are particularly low, and their tax exemptions especially generous.

Although it has been argued that low tax rates are necessary for competitiveness, Denmark and Sweden, two of the most economically competitive countries in the world, enjoy tax contributions of 48% and 46% respectively.

Tax breaks, in particular the wholly inequitable private pensions tax break, disproportionately affect the better off. One assessment by TASC found that the amount of revenue lost through tax breaks to landlords alone was equivalent to all of the social welfare cuts in 2010. Like Ireland, Spain’s ability to protect rights in times of scarcity is hampered by its comparatively low rates of taxation.

Spain’s union of tax inspectors has estimated that both legal and illegal tax evasion deprived the public coffers of some €88bn in 2010 — with large corporations and wealthy individuals among the principal evaders.

Making even a small dent in that would offset the need for drastic cuts to social spending.

The Irish Government is obliged under international law to consider all available policy alternatives before adopting measures that could undermine human rights, and to prioritise the most vulnerable at all times. Evidence shows fairer alternatives to austerity do exist.

For Ireland, there are two steps that can be taken immediately.

The Government must demonstrate that all fiscal policies are consistent with standards of human rights law, including the duty to prevent retrogression and discrimination. This requires a transparent assessment of the human rights impact of proposed cuts and other measures, particularly on the most vulnerable. Budgetary measures should include progressive tax reforms, designed to maximise available resources while minimising the burden on those already bearing the brunt of the crisis.

Secondly, the Government’s proposed Constitutional Convention should look at how the human rights of people in Ireland to adequate housing, accessible healthcare, a decent education, and other economic and social rights can be better protected. The constitutional protection of these rights in other EU countries such as Germany, Hungary, and Latvia has helped to shield citizens in those countries from the worst of austerity. If Ireland and Spain can insert a constitutional obligation to balance the budget, as they did to comply with the EU Fiscal Compact, how can the same value not be given to protecting the human rights and dignity of their people?