Colm’s columns

Colm Rapple
Irish Mail on Sunday, 17th August 2008

Too many people are precluded from third level education because of their social background or a lack of money. There are persistent social inequalities in accessing higher education. And that’s an understatement. Even among those who do get to third level, there is a latent inequality. Students from professional and more highly educated backgrounds dominate entry to degree-level courses in the university sector. Others tend to go to less prestigious institutions or do less prestigious courses.

These are facts documented in successive reports from the Higher Education Authority. It is true that an ever increasing proportion of young people are accessing third level education and that that extends to the less-advantaged, but the gross inequality continues.

We are all losing out as a result of this failure to develop all our children to their maximum potential. The children themselves lose out in their income earning potential while society and the economy loses the enhanced contribution which they might make if they were better educated and skilled.

This is the problem which should be exercising the minds of those politicians and commentators who are currently getting excited about the decision to re-examine the question of third level fees.

Of course, there is a case for reintroducing fees as a direct way of helping to finance third level education. Investing in one’s education, even at the full cost, tends to yield a very good return over a lifetime. Given our less than progressive tax regime, the costs of free education are not adequately recouped from those who benefit the most.

It would make sense to introduce some form of deferred fees or loan scheme to ensure that some or all of the costs borne from the State coffers are recouped. But the political realities suggest that it will never happen – what with the Government declining in popularity, local elections looming ever closer, a general election not all that far behind, and a solution to be found to the Lisbon Treaty impasse.

It’s likely that education minister, Batt O’Keefe, is simply copying the stratagem adopted by a predecessor, Noel Dempsey, five years ago in an effort to squeeze more money out of the Department of Finance.  Perhaps he really believes that bringing back third level fees is the way forward. But most likely the threat is designed to force the Finance Minister, Brian Lenihan to be a little more generous in his budgetary allocation to the Department of Education.

He has certainly helped to underline the financial difficulties faced by the educational sector and the extend of the political backlash that might be felt by any Government that opted to bring back fees.

But the debate on fees has nothing to do with ensuring greater access to third level education. Fees were never a problem for the lower paid or disadvantaged. They didn’t have to pay them. The fees were covered by the grants to which all lower paid, and many middle class, parents are entitled.  The abolition of fees in 1996 did nothing to promote greater equality. Indeed it actually had the opposite effect.

Many lower paid still can’t afford to send their children to college yet most of them are paying taxes that help to subsidise the education of their richer neighbours.

Participation rates are over seven times higher in some Dublin districts than in others.  Over 86% of young people in some areas go on to third level while the figure is less than 12% in others. The average for Dublin as a whole in 2004 was just over 50% but the rate was under 25% in five of the City’s 21 postal districts and over 60% in six of them.

Just so you’ll know the highest participation rates were recorded for Dublin 14, 6, 18, 4 and 3. The bottom five postal districts in ascending order were Dublin 10, 17, 1, 22 and 20.

Those figures are from the latest survey conducted by the Higher Education Authority. And while there has been some improvement since 1998, the clear inequality remains.

It has nothing to do with fees. Even without fees, third level education is too expensive for many. The maintenance grants, which about one-in-three students get from their local authorities, are far from adequate to pay the costs involved.

The maximum grant is €3,420 this year for students whose home is more than 15 miles from the college and €1,370 for those living closer. To qualify the parents annual means has to be below €39,760. Even if we spread those grants over a 36 week academic year, ignoring holidays, it works out at only €95 or €38 per week. That falls far short of the real cost of attending a third level institution, even without fees.

Grants of €6,690 are paid to some children in low-income families who are living more than 15 miles from a college but the parents’ income must be below €20,147 to qualify. Understandably there aren’t too many takers.

Whether they qualify for €3,420 or €6,690 the gap between the grant and the actual cost of living imposes an insurmountable barrier for many low income and disadvantaged families. But a greater barrier to third level access, identified by the Higher Education Authority, is a social inequality at the primary and secondary level.

It’s not only third-level education that needs more finance and now that resources are in short-supply, there’s a certain logic in getting those who benefit most from education to foot more of the bill. It’s impossible to defend the current system where those who benefit least contribute significantly, through their tax payments, to the costs of those who benefit most.

Colm Rapple
Mail on Sunday, 10th August 2008

Tax increases are definitely on the agenda for the December budget. It’s not a novel idea although it may seem so after the tax cuts of the Celtic tiger era. The plain truth is that we went too far with the tax cuts and at this stage, increasing taxes is a much more sensible option than cutting spending on social services or on essential infrastructural investment.

Those are the choices which are now facing finance minister Brian Lenihan as he prepares his first budget.

Of course, the wrong mix of tax increases could greatly worsen our economic prospects. Impositions on the lower and middle-income groups would obviously be reflected in wage demands whether they eventually get formulated through a national pay deal or a free-for-all.

But there are many people in well paid secure public and private sector jobs who are riding out the recession quite comfortably. Having done very nicely out of the boom years, they are well able to handle a year or two of static or even slightly declining incomes. And while their assets will have dropped in value, they are not going to be forced to sell. The equity market is already on the way up again and, in due course, the property market will follow suit.

These recession proof individuals will gain the most from the upswing and can’t complain too much if asked to pay a little to ensure an easier passage through this bad patch for the less fortunate.

There are many solutions to the Government’s budgetary difficulties. There’s obviously scope for judicious cutbacks that wouldn’t adversely affect State services or curtail future economic progress. But that type of fat trimming is always opposed by the public servants and is difficult to achieve.  It will take more than that to solve the problem.

There is reason to hope that some of the budgetary gap will be bridged by taking a holiday from contributions to the National Pension Fund and/or by getting the fund to invest a small part of its massive resources in infrastructural projects that would otherwise have to be funded directly by the Exchequer. But that may not be enough either.

There is plenty of scope for borrowing a bit more. But the Government seemed very anxious not to exceed the EU imposed borrowing limit of 3% of national income. So in the end it may come down to a choice between raising extra taxes or imposing spending cuts that will impact on the level of public services and benefits.

The case for raising taxes in such a situation is overwhelming.

The simplest option would be to simply raise the top level of income tax. Over the past ten years it has been reduced from 48% to 41% and there is a commitment in the programme for Government to reduce it further to 40% “if economic resources allow”.

They clearly don’t. Alongside that commitment, in any case, is one to reduce the standard rate from 20% to 18%. That’s not possible either.

Neither commitment should have been made. It’s very obvious that tax rates have been reduced too much. They should be at a level sufficient to fund public services not only in the good, but also in the bad years.  This is the time to create a tax base that will be sufficient to meet our needs through thick and thin. It will be time enough to talk of tax cuts again when all our capital infrastructural needs have been met.

If the 41% rate was raised to 45%, the Exchequer would benefit by over €1,100 million a year. To put that in context it would in one fell swoop make up about a third of the amount by which this year’s overall tax revenue is expected to fall short of target.

It would affect some middle income earners. A single person currently pays the top rate on anything over €35,400 but, of course, the higher the earnings the greater the imposition. So someone on €40,400 would only pay an extra €200 a year in tax while someone on €150,000 would pay an extra €4,584.

That seems fair enough and the bottom threshold could be raised or else a new high rate of tax could be imposed only on incomes above a higher level, fifty, sixty or seventy thousand. Only about 15% of taxpayers declare incomes in excess of €70,000 but they account about 35% of all declared income.

The unions could hardly baulk at such a development given their new found commitment to favouring the lower paid. The decision by the private sector unions to look for a flat rate increase of at least €30 a week for all lower paid workers stands in stark contrast to their willingness last time around to cave in to employer opposition to flat rate increases for anyone.

Perhaps it reflects a recognition by the union hierarchy that they will need the support of the lower paid in a free-for-all industrial relations climate, while they could effectively ignore them in national agreements.

But that’s a by-the-way. If there is a willingness to share the current burden equitably then some form of extra progressive taxation is clearly an option. If not an increase in the top-rate of tax, then maybe abolishing the current €50,700 ceiling on PRSI contributions. Indeed the Programme for Government promises that linked to a cut in the rate from  4% to 2%. But why not abolish the ceiling and not cut the rate.

The Programme does also commit the Government to “building an equitable tax system” and to “maintaining a sound budgetary position which encourages economic growth”.