1. Introduction
The rapidly collapsing world economy and Ireland’s particular condition within it present profound and immediate challenges both to the Irish Government and the Irish people. In addition, with our national focus on crisis management we are failing to engage with the near-to-medium term risks of an energy-induced systemic crisis that will dwarf the current economic crisis in both consequences and complexity. In the meantime, the risks associated with climate change are rising, and at the same time our effort to manage those risks is under increasing strain. There are then two crises facing the government.
This submission attempts to address these looming and overarching risks to our future as a stable society with a functioning economy based on sustainable practice. This requires a deep rooted understanding that the concept of an unrestricted growth economy is what has got us into this predicament, and only by moving to a sustainable[1] model based on an ecosystem management approach[2] can we have hope for the future. You cannot fix a problem using the very tools that caused the problem in the first place.
1.1. Towards a truly Sustainable Society
Short term measures to stabilise the economy by perpetuating the current global economic model are failing due to an inherent fault in this model. This can be summarised as follows:
- The current economic model is one in which finance is based on debt and interest payment on this debt.
- Servicing this debt requires a continuous expansion or growth of the economy.
- All economic activity is ultimately based on extraction and manipulation of natural resources for raw materials and energy.
- Since we live on a finite planet with finite resources, infinite growth that surpasses the resources of a finite planet cannot be maintained and it is therefore a matter of ‘when’ and not ‘if’ the current model fails. A model based on unrestricted economic growth that relies on the depletion of our natural capital and threatens our ecosystem services[3] is just not sustainable.
- Given that we are approaching oil and gas peak it would appear that we have entered into the inevitable contraction of our growth economy.
The only feasible response is to move to a ‘steady-state economy’. This will be based on non debt-based currencies (see glossary page 15) and renewable fuel sources. Radical times require radical solutions and the signatories to this submission urge the Government to take a strategic look at the problem from a global systemic perspective. Much work has been and is being done on models for sustainable economics. This document outlines some of these models and makes concrete suggestions as to how to proceed.
1.2. Resilience
Our economy needs to focus strongly on creating resilience to outside forces of global change. In this context the budget must support sustainable management of our natural resources to strengthen food and energy security and mitigate the impacts of climate change. Fundamental to this is the need to employ for example land use grants to promote carbon sequestration, sustainable forestry and farming, flood mitigation and indigenous food production. By protecting our terrestrial and marine natural infrastructure jobs will be created, imports reduced, energy saved, and the economy strengthened for both the long and short term.
1.3. Objectives
This submission contains both short term and long term proposals. Some of the proposals presented will require a good deal of practical preparation and others much less. The overall objective is to present realistic alternative models to our current disastrous way of running our economy. The development of these models will require the Social Partners working together with Government and the wider society. In some cases the models are not fully formed but are intended to initiate the debate, in others all that is required is the political will to implement them.
In this submission we propose prescient, adaptive, and resilient policy that serves the following objectives:
1.3.1. Common Purpose
The proposals recognise that in times of increasing social stress there is need for policy that cultivates social cohesion and common purpose through fairness and transparency. There is an understanding here that whilst economic stability is essential, the development of sustainable communities where people have a good quality of life should be the central aim of the policy.
1.3.2. Security
The proposals aim to support human security in all its facets, including economic, physical, and environmental. A creative vibrant society needs all these aspects to be protected.
1.3.3. Realism about Ecological Limits
The proposals acknowledge that human welfare, the economy and civilisation, are on the cusp of major change arising from the unsustainable use of environmental resources and sinks upon which they depend.
2. Proposed Measures
The measures below are proposed as part of an integrated whole, with crossover checks and balances between the different mechanisms.
2.1. Taxation
In general what is needed is a shift from taxes on income and profits to tax on consumption of natural resources. Where taxes are applied they must be progressive and just. Any new taxation should not be based on cyclical sectors of the economy that leave the exchequer vulnerable.
2.1.1. Tax and Share
This mechanism involves taxing carbon entering the country, and dividing the income two ways, a percentage going to each of:
- A flat level dividend to every person in the state
- Investing in the transition to a low carbon economy
This system rewards those that use the least carbon, is largely beneficial to urban dwellers and promotes public transport use. It is easy to administer as there are only a small number of energy importers, as is the distribution of a flat rate benefit. This will also help to achieve our climate change goals and reduce any requirements to pay for not meeting our Kyoto targets.
In the longer term as both the use and cost of carbon begin to rise, a national and gradually decreasing cap would be placed on the importation of carbon. This would have the effect of increasing energy efficiencies, promoting alternative energy systems and through the “cap and share”[4] mechanism protecting the fuel poor and rewarding those that reduce their use of fossil fuels.
The sharing of the income from both ‘tax and share’ and ‘cap and share’ will enable a buy in of the public to the higher fuel prices that would result. As low carbon users tend to be poorer it is very likely that they will spend the revenue straight back into the economy.
Mechanisms for distribution of the dividends are being explored and will be presented later. That said the simplest mechanism would appear to be the issuing of an annual cheque/voucher that is cashable through a bank or post office to everyone with a PPS number.
2.1.2. Land Value Tax
The introduction of an annual Land Value Tax (LVT) at the earliest opportunity is essential to the long-term well-being and control of our land usage. It is also a revenue resource that is fair, transparent and reliable. It will however require considerable research to set up a register of land ownership, and so would have a lead in time of about one year, given the political will.[5]
The precipitous loss of revenue from the transaction-based taxes in the downturn has created an urgent need for a sustainable replacement that will not impede productive investment and economic recovery. Only annual land value tax has the potential to deliver this result. This will be based on higher taxation linked to the provision of greater public services.
Most taxes distort economic decisions.[6] If labour, buildings or machinery and plants are taxed, people are dissuaded from constructive activities, and enterprise and efficiency are penalised due to the excess burden of taxation. This does not apply to LVT, which is payable regardless of whether or how well the land is actually used. Because the supply of land is inelastic, market land rents depend on what tenants are prepared to pay rather than on the expenses of landlords, and so LVT cannot be passed on to tenants.[7]
Transaction taxes such as stamp duties, VAT and sales taxes inhibit proper market functioning; are an inducement to the grey economy and should be phased out and replaced with annual land taxes.
LVT could immediately raise desperately needed revenue for local authorities to provide energy, waste, educational and transport infrastructure for local communities. It would also reduce pressure on elected representatives to over-zone or rezone prematurely for development.
LVT is based on the value of land, depending on parameters such as type, zoning, location, and connectivity. Thus the LVT on a Dublin 4 detached house would be high and that applied to a rural dwelling with no services would be low. Owner-occupants of a multi-story residence in a town or city would divide the LVT between them. In this way increased residential densities are encouraged whilst rural dwellers are not penalised.
2.1.3. Taxes on environmental “bads”
The acceptance of taxation for carbon emissions sets the scene for the introduction of a range of taxation measures that will lead ultimately to serious savings for society and improvements in the quality of life, as well as the creation of a revenue stream for government. These should include taxes on:
- All products that cannot be fully and easily recycled.
- Pollutants emitted from industrial facilities and on emissions from mobile telephone masts. This may reduce long term health costs.
- PVC, polystyrene and plastic in food packaging as these all have serious health implications as endocrine disruptors.
- toxic chemicals, including pesticides and herbicides
- All one-way drinks containers. The recycling industry is slowing down due to lack of demand, and even if it wasn’t we should be moving to long-life reusable containers as soon as possible.
- Excessive packaging of products. This will be a difficult measure to put in place but one that merits attention at the EU level.
- All food additives that have little or no food value but are known to cause obesity and other medical conditions.
It is essential that we initiate more stringent polluter pays policies across the whole economy. It will broaden the tax base, help put the public finances on sound footing for the longer term, and begin the process of shifting taxation from goods (such as paid work) to bads (such as resource use and pollution). Just how much has the ‘pig crisis’ cost the country in cash and reputation?
2.1.4. Water Service Charges
These are essential to fund the necessary infrastructure work on water services as well as to curtail the levels of wastage. There should be no charge for per-capita consumption below a certain cut-off, and then progressive charging above that level. It costs the taxpayer €650/ year to supply each one of us with potable water[8].
2.2. Reduction of recurring expenditure
2.2.1. Income tax relief
Any tax relief should only be in investments that prepare for a low-carbon, low-energy future. A review of current pension systems and tax reliefs on this basis should be part of the deliberations of the Commission on Taxation.
2.2.2. Public Private Partnerships (PPPs)
There is a great lack of transparency in these “partnerships” and this problem needs to be addressed now. On-balance-sheet accounting should be an essential part of this, and there should be no securitisation of debt. There should be no passing off of debt to the public purse.
2.2.3. Rationalisation of the National Development Plan (NDP)
An immediate stop should be put to the rush to sign contracts on all NDP projects. A moratorium for re-evaluation should also be put on all projects that are not already underway.
It is proposed here that the NDP be reviewed and subjected to strenuous cost benefit analyses that include carbon accounting, and that rationalisation of the plan takes place based on a set of transparent sustainability criteria. These criteria should include:
- Transparent cost-benefit analyses including the carbon and ecological footprint
- Full compliance with:
- environmental and planning law (including independent, rigorous and effective Environmental Impact Assessments and Strategic Environmental Assessments) and
- international conventions including the Convention on Biological Diversity and the Stockholm Persistent Organic Pollutants.
- All projects must be considered and implemented in accordance with the ecosystem management approach.
- All projects related to non-viable settlements should be abandoned.
Examples of where these criteria might result in substantial economic savings might include major road projects, incinerators and Metro North.
In addition to meeting these above criteria, the NDP needs to be reprioritised to focus on the building of sustainable communities through investment in renewables, next-generation broadband, green infrastructure, sustainable planning.
2.3. Air Travel
Remove all subsidies for air travel.
3. Promoting and protecting employmentand volunteering
3.1. Social Capital and Social Inclusion
Volunteering in Ireland is seriously underestimated, undervalued and disincentivised. Volunteerism by those in work or out of work should be encouraged and resourced. The development of community based cooperatives should be strongly supported.
3.2. Special Emergency Employment Scheme
This scheme is designed to maintain employment, support employers, reduce the numbers of unemployed, keep money in circulation and raise the self-confidence of the public.
This plan could be offered to existing employers. To register for the scheme an employer must declare how many employees he/she currently has (backed up by PRSI payments records). On condition that he/she agrees to continue to employ the registered number of employees for the duration of the scheme, the employer becomes entitled to employ new special scheme employees (SSEs).
These SSEs receive a pro-rata wage (satisfying trade union standards and watchdogs) which is sourced 50% from Government and 50% from the employer.
A cap should be placed on the Government contribution in order to not exceed 75% of average un-employment contribution. This figure is then to be matched by employer and the pro-rata number of hours to be worked to be agreed. Employer’s PRSI arrangements for SSEs would be paid pro-rata.
The scheme is designed to offer an attractive, opportunity for employers to increase their workforces thus reducing numbers on the unemployment register.
The scheme should be kept simple and user-friendly, introduced rapidly and reviewed after 18 months.
4. Specific measures
This list of measures is intended to deal with more specific issues but is not intended to be exclusive.
4.1. Cost cutting
4.1.1.
Where feasible travel reimbursements should be at public transport rates, and where private vehicles have to be used the rates should decrease with increased carbon emissions, the opposite to the current arrangements, with the current rate for the smallest car being the top rate of reimbursement.
4.1.2.
Regarding travel and subsistence for both public servants and public representatives the following should be banned:
o private car travel and expenses (public transport and/or taxis obligatory unless not possible)
o Claimable travel on government business inside Ireland by plane and helicopter.
o Government or public representative make-up, hairdressing, clothing expenses, etc.
o For private use of vehicles provided for work – better enforcement of benefit-in-kind regulations.
4.2. Revenue Generation
4.2.1.
Annul all tax breaks on property/land/holiday home etc. In particular it is essential to end the situation where a landlord receives tax relief on rent that has already been subsidized by the tax payer (Social Welfare), e.g. in Section 23 housing.
4.2.2.
Remove the ceiling on PRSI.
4.2.3.
Ensure that all outstanding planning contributions are paid.
4.2.4.
Count the days that tax exiles are allowed in the country as any part of a day – removing the ability to fly out of the country before midnight and it not counting.
4.2.5.
Implement and give teeth to the parking taxation announced in the last budget. €200 is trivial when parking is €2 an hour in Dublin
5. Glossary
Brief explanations of some of the terms used in the text
Ecosystem
An ecosystem can be defined as the complex system of plant, animal, fungal, and micro-organism communities and their associated non-living environment interacting as an ecological unit. Ecosystems have no fixed boundaries; instead their parameters are set to the scientific, management, or policy question being examined. Depending upon the purpose of analysis, a single lake, a watershed, or an entire region could be considered an ecosystem.
Green infrastructure
This is a term used to describe the networks of land and green space surrounding our towns and cities and threaded through them and which play a key role in sustaining environmental quality in the urban setting.
Natural capital
This is an extension of the economic notion of capital (manufactured means of production) to environmental ‘goods and services’. It refers to a stock (e.g., a forest) which produces a flow of goods (e.g., new trees) and services (e.g., carbon sequestration, erosion control, habitat). To refer to something as a capital asset is to imply it is useful in creating wealth, either in terms of well-being or in monetary terms.
Non debt-based currency
Conventional money is lent into circulation. People borrow it because they believe they will be able to repay it. In times of crisis or of recession this source of money is likely to break down. In these circumstances another method of issuing money is required, which is not based on debt.
There are two main options:
o New money is spent into circulation by the Government
o New money is given into circulation. The goes to the users who create its value when they use it to trade with each other.
It is the latter approach that the “Liquidity Network” is recommending.
http://www.feasta.org/documents/liquidity_network/2009_liquidity_network.html
Resilience
This refers to the amount of disturbance or stress that an ecosystem can absorb and still remain capable of returning to its pre- disturbance state, or the level of disturbance that an ecosystem can undergo without crossing a threshold to a situation with different structure or outputs. Resilience depends on ecological dynamics as well as the organizational and institutional capacity to understand, manage, and respond to these dynamics. In making economic decisions we need to understand that it is not just our short term economic resilience but our longer term, and this must be rooted in ecological resilience.
Smart Economy
“The Smart Economy combines the successful elements of the enterprise economy and the innovation or ‘ideas’ economy while promoting a high-quality environment, improving energy security and promoting social cohesion. A key feature of this approach is building the innovation or ‘ideas’ component of the economy through the utilisation of human capital – the knowledge, skills and creativity of people – and its ability and effectiveness in translating ideas into valuable processes, products and services. A second important aspect is the greening of the economy and the development of green enterprise.” Building Ireland’s Smart Economy – Department of the Taoiseach 2008, page 7
Contact information:
For further details please contact Michael Ewing, Social Partnership Coordinator.
Postal Address: Environmental Pillar of Social Partnership. Knockvicar, Boyle, Co Roscommon.
Telephone: 01 4054834
Mobile: 00353 (0)86 8672153
Email: michael@environmentalpillar.ie
Skype: michaelk.ewing
[1]Sustainable development is maintaining a delicate balance between the human need to improve lifestyles and feeling of well-being on the one hand, whilst preserving natural resources and ecosystems, on which we and future generations depend. “Sustainable development is development that meets the needs of the present without compromising the ability of future generations to meet their own needs” Bruntland definition
[2] An approach to natural resource management which aims to sustain ecosystems (see glossary on page 15) to meet both ecological and human needs in the future
[3] The benefits people obtain from ecosystems. These include provisioning services such as food and water; regulating services such as flood and disease control; cultural services such as spiritual, recreational, and cultural benefits; and supporting services such as nutrient cycling that maintain the conditions for life on Earth.
[4] http://www.feasta.org/documents/energy/Cap-and-Share-May08-summary.htm
[5] A cadastre (register of the extent, value and ownership of land) should be immediately developed as required by the UN CSD 16 and the EU INSPIRE Directive. All property should be registered according to fixed GIS locations; all transactions notified to a central resource; inputted into real time land value map to assist market functioning, prevent fraud, planning corruption and establish the basis for annual land value taxes.
[6] Coughlin (1999) p.263-4
[7] Adam Smith, The Wealth of Nations Book V, Chapter 2,
[8] Sue Scott. ESRI. Presentation Liberty Hall 10th January 2009.
