IRELAND HAS ENDURED austerity budgets since 2008. Some €25 billion has been sucked out of our economy through spending cuts and taxes on working people. Budget 2013 now looms large on the horizon of every household in Ireland.

The Nobel Prize winning economist Paul Krugman recently wrote: “Far too many very serious people have been taken in by the cult of austerity, by the belief that budget deficits, not mass unemployment, are the clear and present danger, and that deficit reduction will somehow solve a problem brought on by private sector excess”.

It is crucial that we understand what is happening. So far, the only response to the failure of neo-liberalism has been more neo-liberalism. The right wing economic dogma to date has been to shrink the public sector, supposedly creating room for greater private sector investment to drive economic recovery. This is what Paul Krugman has labelled ‘the confidence fairy’.

However, in a recession, maintaining public investment in the economy is essential to recovery. At present, 40 per cent of workers who are unemployed last worked in construction. Therefore, investing in infrastructure is essential if we are serious about tackling unemployment, which is the best way to address the deficit.

Giant cuts to public spending may reduce the deficit somewhat, but they also shrink our economy. The €25 billion taken out of our economy in the austerity budgets to date has cut the underlying deficit (when you strip out special payments and income) by just €3 billion.

Disaster

This policy has been a disaster for people on low and middle incomes. Yet it would be untrue to say that no one has gained during this austerity period. The latest Survey on Income and Living Standards (2010) revealed that the lowest 10 percent of our population suffered a fall of nearly 20 percent in their income, while the richest 10 percent saw their income rise by 8 percent.

The international banks have also been protected, with billions across Europe being pumped into essentially insolvent enterprises. In Ireland, the government is still refusing to rule out paying €3.1 billion at the end of March 2013 as part of the Anglo Irish Bank promissory note repayments.

The Central Statistics Office has shown that corporate profits have been rising since 2010 yet the government predicts that real wages will continue to fall for the next three years. This means that the distribution of income and wealth in Ireland is becoming more polarised and unequal.

Labour TDs should not indefinitely support budgets which harm the economic prospects of working people and cut living standards. Simply put, the role of Labour TDs must be to resist a huge transfer of resources towards the wealthy and powerful, at a time when emigration and unemployment continue to blight our communities.

Failure

It is possible for people with the same vision for society to draw different conclusions as to how to drive social change. But the continued failure of austerity means that Labour TDs must begin to question the direction of this government.

I am suggesting three basic principles for a budget which works for ordinary people:

The Budget should be pro-employment. This means providing for job creation with state investment. At the very least, the Government should not proceed with the cut of €550 million in capital investment. Reversing this cut would create, on average, 5,500 jobs directly on project with additional employment downstream (employment from servicing the project with materials, increased demand, etc).

It should tax high income groups. This means taxing the wealthier sections of society, rather than low and middle income earners. The Government has a range of options at its disposal. It could introduce a French-style wealth tax, which would raise up to €500 million, according to Michael Noonan.

It should be egalitarian. The targeting of vulnerable groups with crude cuts must stop. Not only are such policies socially destructive, they undermine spending in the economy.

We need a recovery that is built on strong foundations of social justice: not the austerity model which is clearly failing our citizens.

Patrick Nulty is Labour TD for Dublin West. He lost the Labour parliamentary party whip after voting against the Government on last year’s Budget.