I was talking to a guy the other night, a zoologist, as it happens. We both agreed that people who come from outside a discipline can often bring more to that field of endeavour than the incumbents. In my years of studying marketing and management, the guy I learnt most from was probably the Prof, who was an anthropologist by trade, which made him damn good at economics and business strategy.
Anyway, the zoologist had an economic theory. It was the white van index. Back when he was an academic, he had done some work on counting skyscrapers and cranes as a measure of economic success. He reckoned that didn't work. He is now convinced that the white van index is the best measure of economic recovery. How many white vans are there around the place? Because all the guys in all those white vans are trading. Some of them might be trading illicitly; some of them might just be moving stuff for other people. But it is life and movement and commerce. It's not 200 jobs in some American tech firm and it's maybe not huge export business. But it's business. It is a sign of life in the local economy, where most people make their living.
A zoologist would probably tell us right now that the white van very nearly became an endangered species in this country. They might tell us that the high street is an ecosystem that is under threat. They might tell us that the shopper is becoming an endangered species.
It was Leo Varadkar who pointed out recently that millionaires spend their money on yachts; the middle classes spend their money in shops. What he meant to say, of course, was that the middle classes spend their money in shops if they have any left after paying their bills and their taxes.
Varadkar, who has been unashamed about the fact that the middle-classes are his people, even back when the middle-classes were even more unfashionable than they are now, made those comments in the context of saying that middle- income people could not take another hammering in this Budget, that they are at their limit. And Varadkar was not just speaking on behalf of his middle-class hinterland here; he was speaking out of concern for everyone. Because, as he said at the time, when it comes to social protection, the middle-classes pay the bills. In other words, if the middle-classes go over the edge, everyone goes down with them. And, as Leo says, the middle-classes are fairly close to the edge.
'Middle-classes' is a fairly loaded term that means different things to different people. So, say for the sake of argument that we took as our definition of the coping classes, the income tax class. While it's hard to pin down specific figures because there are problems in counting it exactly, broadly speaking, roughly half the adults in Ireland pay income taxes. Many of those pay a negligible amount and indeed the vast bulk of tax is paid obviously by people earning €40,000 and up, with the two-thirds of taxpayers who earn less than this paying just 10 per cent of all income tax (based on 2010 figures, the most recent I could find).
But call it roughly half the population anyway who pay income tax. This is probably the same half of the population who pay for everything else, too. They are probably roughly the same half who don't have medical cards, for example. They are the ones who don't get much back from the State, apart from maybe some child benefit.
Cutbacks will affect these people to a certain extent. They will feel cuts in education. And if they are unlucky enough to get sick or to have someone in the house with a disability, they will feel the brunt of health cutbacks. But in my experience, these people are not primarily concerned about cutbacks in this Budget. Don't get me wrong, they are concerned about cutbacks and they will feel them, but their primary worry concerns the other half of the budget equation, the one there has been much less talk about. Tax. The coping classes are primarily worried about having to pay more taxes.
As another Government TD, Labour's Colm Keaveney, said recently, middle Ireland's capacity to take further pain is declining. Keaveney points out that these people are already being squeezed by increased charges, wage stagnation, debt payments and increasing costs. And the Budget intends to add to this by taking more taxes from them.
The Irish Tax Institute thinks that people can't take any more tax hikes either. They said last week that a family with one income of €55,000 are paying €3,400 more in tax now than they were four years ago.
Grant Thornton predicts that the upcoming Budget will take another €4,000 or so in tax from such a family. Grant Thornton is predicting an increase in the Universal Social Charge from seven per cent to eight per cent, and an increase of 10 per cent on earnings over €100,000. They predict PRSI will be levied on non-PAYE income such as rent and dividends. They are building in a cut in pension tax relief to the standard rate, which is obviously still under debate. And they are predicting a property tax rate of .25 per cent of the cost of a person's house. Those changes, none of them highly unlikely, would see a family on €40,000 a year paying €3,000 extra in taxes, while a family earning €80,000 would be paying €5,410 extra in taxes. That's after just one Budget, without increasing rates of income tax.
As Martin Phelan of the Irish Tax Institute said last week, "a small base of people are contributing vast amounts of the revenue for the Government. It is getting to a dangerous level with fewer people paying more and more taxes with less income". They point out that we now have 1.8 million taxpayers in Ireland, as against 2.1 million five years ago. They also point out that when water charges and property tax come in, that will mean households have had 10 new types of taxes levied in the last four years. So, fewer and fewer people paying more and more taxes.
Of course, most people don't have a lot of sympathy for the people in the middle, the ones who pay incomes taxes. They have jobs, don't they? For which they should be grateful in the current climate, and they mainly look like they are getting by – whatever is going on behind the hall door.
But the more you prick the ones in the middle, the more they bleed. And they will reach a tipping point where they have nothing left to give. It will start, as Leo predicts, in the shops. That €3,400 the average family has already lost in the last few years was money that was spent in shops. The extra €3,000 to €6,000 that a middle income family will lose in the upcoming Budget will be money they would have spent in shops, too. They will still have to pay the mortgage and the bills, but there'll be very little left to circulate around and keep other people in a job. There'll be very little to keep the guy in the white van going. And increasingly, there'll be less and less to pay the bills when it comes to social protection.
You see, the story of the middle is the story of everyone. Everyone sinks or swims based on the middle. And if they're in danger of going under, and if we push them under in two weeks' time, then we could be drowning the whole place.