Budget will make Ireland less fair, less safe and less ready for recovery

 

 

The Irish people have shown time and again that they are willing to accept hard choices, they understand that there is no easy way out of an unprecedented crisis which has engulfed Ireland much of Europe and the world in recent years.

However their support is based on measures meeting two core principles – they want Budgets which are fair and which make a clear contribution to returning growth and job creation.  This Budget fails on both measures.

Last year, having won a mandate from the people promising a radical and progressive government Fine Gael and Labour chose to abandon their promises to the people and actually introduced by far the most regressive and unfair budget in many years,and independently assessed as such .

This year they have done it again.  In some cases it even looks like ministers sat down to see if they could find new ways of making sure that the most vulnerable suffered more.  To take only one example, how else can you explain first cutting home help and then cutting respite care?

Ceann Comhairle, in the ever growing mountain of documents and press releases which have accompanied this year’s Budget one thing is already clear: this is a deeply unfair Budget presented by a government which has no strategy for growth and job creation other than hoping that something will turn up.  Driven purely by the short-term political tactics of competing parties, it systematically betrays election promises, places the heaviest burden on those who are least able to bear it and will further damage confidence which is essential for recovery.

Yet again Labour and Fine Gael used true, half-true and completely false leaks during negotiations.  Their growing band of Malcolm Tucker wannabes were constantly on the phone to journalists briefing for and against different ministers and talking up the resolve of their parties.

Now we know that for all of the tough talk from the Labour Party, the ongoing muttering from its backbenchers and the soothing words of their ministers Labour has once again been shafted. 

On the other hand, Fine Gael used every tactic it could muster in an ultimately successful move to protect the highest earners from taking more of the load.

It was a direct trade off – every one of the regressive welfare cuts could have been avoided with the increase in USC for the highest earners which has widespread political and public support.

Fine Gael should have the honesty to explain why it demanded that supports for the poorest families be cut rather than hit those who earn the most.

For all of its smug sense of having prevailed over its coalition partner, Fine Gael also has to explain why it didn’t lift a finger to try and stop a property tax which the Taoiseach himself once called “unjust, immoral and illegal.”

After nearly two years in office the only government strategy evident this week is a public relations strategy.  The government has been putting its trust in the idea that people won’t compare the claims they are making with the substance of what they have decided to do. 

Most ministers have been making claims which are the direct opposite of the truth and have been using unprecedented gimmicks to try and cover-up the hard reality of their choices.

Over the next few weeks ministers will have to explain exactly what is involved in many of the general ‘adjustments’ in their allocations.

At that point there is no doubt that we will find many more unfair, damaging and avoidable cuts – however from what is already known there is more than enough to see the mean spirit and lack of direction which lie at the heart of this Budget.

 

Overall Fiscal Framework

The overall fiscal framework for next year is widely accepted and we believe that it is the correct one.  It did not originate from the troika – it is a required next step in bringing the deficit to a sustainable level.

As the Budget documentation point out, the major part of the fiscal adjustment was done in previous years, with next year and the year after being relatively  easier.

While the targets are correct there is now serious reason to believe that they might not be met – and also that public support for the targets is being undermined by the crass and growing inequity of the decisions being taken by government.

A new concern is that these targets may not be met because of a combination of overspending and reduced revenue. 

In spite of government claims of having an iron hand on spending, including Minister Howlin’s repeated claims that everyone would stay within budget, the two largest Departments are showing major overruns for this year. 

The inclusion of large amounts in unspecified savings for these Departments for next year suggests that exactly the same thing will happen again.

On the Revenue side, last week’s figures showed a serious undershooting of key taxes, but in particular the €300 million deficit in income tax receipts.

For 2012 the combination of overspending and low receipts has been able to be covered up with a number of once-off measures and the benefit of the Greek interest rate deal being automatically passed to all countries.  This will not be available next year and there is no reason to believe that this year’s problems have been tackled.

 

Economic Context

One of the most striking things about the Budget is how little is actually has to say about the economy.  Beyond empty generalities, there is no analysis of the direction of the growth or employment.

There is no discussion of the impact of the Budget on any economic indicator.  There is no attempt to set out anything which updates plans made two years ago. 

In a major departure from tradition, most economic projections were relegated to appendixes which the Ministers didn’t mention.  It is there that you find the detail of a government which has already missed every one of its targets for broad economic indicators.

This year, the targeted growth of 2.5% will actually be less than 1%.  The target of 3% growth for next year has now been halved.  These are not cold, irrelevant statistics; they have a very real impact on people’s lives, particularly in employment.

Last year the Government said it was all about jobs, jobs, jobs.  It had a Jobs Budget, which it downgraded to an initiative, and the Budget speech was almost entirely given over to claims of jobs on the way.  Minister Noonan predicted a growth in employment of 0.5% for this year – the reality is minus 1.2%.  He predicted a fall in unemployment to 13.7% – it will be nearly 15%.

Yesterday all that Minister Noonan had to say about the failure to hit any major economic target was that everything is Europe’s fault.  This is simply untrue. 

The government’s policies have had a direct impact in reducing growth and employment.  Frontloading a major VAT increase, removing investment funds from the economy by an enormous levy on pensions funds, and threatening employers with extra costs for every employee were amongst the measures which helped drive down domestic demand and confidence – the two things our economy needs most if it is to recover.

In this debate last year you were told that implementing these policies would damage the economy, but you went ahead with the measures anyway.

Let no one be in any doubt, the policies of this government have directly damaged domestic confidence and thereby reduced both growth and employment during this year.  They will do so again next year unless there is significant external growth which drags us up with it.

What is also striking is that the government is silent on the vital issue of debt sustainability.  We are apparently seeking a deal to make our debt sustainable, but no member of the government has yet said what they believe we need our debt to be at in order to be sustainable.

 

Europe & Banking Debt

Domestic demand and confidence are the most important things which we require to build a strong recovery, but the situation in Europe is also extremely important.

To date the government’s approach to Europe has been to hope that others win concessions which will be automatically extended to us.  Every development has been over-spun and under-delivered.

Getting a substantial deal to reschedule the promissory notes would provide significant extra resources.  Ireland’s case is extremely strong.  As the Taoiseach finally admitted in October: “Ireland was the first and only country which had a European position imposed upon it in the sense that there wasn’t the opportunity, if the government so wished, to do it their way by burning bondholders”.

In spite of the claims made since June, nothing was agreed in relation to Ireland’s debts and the news this week from Brussels marks a significant setback.

The German Minister explicitly stated that he did not intend supporting Ireland and Portugal getting major concessions and the Banking Union, which was supposed to be operating from January and which is essential for our banks, has been delayed to some unspecified time.

Given how important Europe is, after nearly two years in office it is time for the government to set out a policy on Europe which goes beyond hoping something turns up which can be claimed as a great victory.

 

Broken Promises

The number of promises broken by both parties in this Budget is even larger than anyone imagined.  The defence which is being trotted out is the usual one that they are being forced to break their promises because circumstances changed.

In reality the only thing that has changed is that Fine Gael and Labour are in government and their reckless campaigns to win votes has left them having to justify the systematic abandonment of pre-election promises.

The budgetary constraints faced by this government were fully known to Fine Gael and Labour before they made their promises.  In fact, last year the situation was ahead of what was targeted.  No one forced you to make these promises and no one is forcing you to break them.

The overpowering cynicism of their campaigns is summed up when you look at Labour’s ‘Every Little Hurts’.  In the closing days of the campaign Labour decided that it needed to attack Fine Gael, so it drew up a list of cuts and extra charges it said would happen if Fine Gael got in without Labour to stop them.

They even went as far as to say that they were red lines which they would never cross.  In response Deputy Noonan did a press conference where he had journalists rolling in the aisles as he found new and creative ways to dismiss Labour’s warning as empty scaremongering.

Today, less than two years later, we know that every little does hurt – because they have already implemented or are planning everything they said they would never do.

 

Equity

Because of the mounting wave of negative commentary about its regressive policies and its lack of any real innovation in nearly two years, the government yesterday unveiled a new tactic.

This involves changing the baselines wherever it might give a better result.  In some areas the government thinks it can claim success, so it talks about what has happened since March 2011.  However in most areas it has started using earlier dates to present a better picture.

Yesterday there was messing with the presentation of figures in a range of areas from fiscal adjustments to reduction in public service numbers.  However, the brass neck award has to go to the attempt to claim that budget policy has been progressive.  On page 10 of his speech Minister Noonan talked about how we have one of the most progressive tax systems in the developed world and said the role of recent budgets in this were contained in an annex.

When you take the time to look at the annex you discover that the only reason our tax system is progressive is because of 2 budgets which every member of this cabinet voted against.  If you actually include just the budgetary decisions of Fine Gael and Labour you find a deeply regressive impact.

 

Budget Process

The backing away from a real reform of the political and budgetary process has been obvious to anyone paying attention.  Last year’s Budget Fortnight has been abandoned and a traditional Budget Day restored. In the Oireachtas discussion was allowed in advance of the Estimates, but there is nothing in what has been published which even slightly reflects Oireachtas input.

Within Government, the increasingly ineffective Economic Management Council has destroyed collective responsibility with ministers actively distancing themselves from unpopular decisions on the basis that they weren’t properly consulted.  Sitting around doing nothing for hours and ordering in pizza might be OK for teenagers with a few days off, but it is not what you expect from a cabinet.

What the final Budget decisions reveal is a government which holds many meetings with outside groups but rarely ever listens to what is being said.  How else can you explain all the meetings with children’s organisations which have been followed by the targeting in this budget of families with children?

 

Making Ireland less Safe

Yesterday’s announcement that 100 Garda stations will be closed will rightly lead to demonstrations throughout the country.  When closing stations the government repeatedly said that they were only marginal stations, which were more trouble than benefit.  In seeking to close 100 stations this excuse is irrelevant.

It is a programme to radically change policing in Ireland by making it more distant from the community and exposing large sections of the country to significantly reduced coverage.

If you believe that Gardaí make a difference to keeping us safe, and I have no doubt that this is the case, then you must accept that this radical and dangerous proposal must be stopped before it goes any further.

 

Social Welfare

As I said earlier, every one of the welfare cuts imposed in this Budget could have been avoided if the proposal to target the highest income earners had been adopted.  Instead Fine Gael insisted that social welfare must feel the pain and Minister Burton went about designing a set of cuts which is deeply mean spirited.

Families with children have been singled out for major cuts in their income.  Last year the government told us that Scandinavian childcare was on the way, this year the Fine Gael/Labour vision of Scandinavian childcare is being implemented with cuts to child benefit, taxing of maternity benefit, cuts to clothing and footwear allowances and a handful of extra childcare places.

When she was in opposition Minister Burton liked nothing more than to find ways of attacking welfare packages no matter how generous they were.  She was particularly happy to have coined the term ‘savage sixteen’ and said of the minister concerned “her actions make Margaret Thatcher look like a socialists.”

Today the conscience of the Labour Party in government is justifying cuts which are dramatically more severe and targeted against the most vulnerable.  When challenged about cutting basic support for clothing and foot ware her callous response is to tell people “there is a lot of good value in shops”.

 

Health

The mounting evidence that the Department of Health is out of control is clear to everyone in the country but the Taoiseach.  Even other cabinet ministers are saying that Minister Reilly is turning tough conditions into a crisis.  In this budget we see more about the truth of a regressive and cynical health policy.

The move by the government to restrict the over-70s medical card is especially shameless given their past campaigning on this issue.  Minister Reilly actually put down a motion demanding an extension to medical card eligibility and said it was merited because “Those are the people who made this country what it is today…. They raised us, nursed us when we were sick, protected us from violence, grew our food”.

It may well rate in history alongside Minister Quinn’s visit to the front gate of Trinity College for breath-taking cynicism.

That was the breaking of a promise made before the election, the trebling of prescription charges does that and adds to it the breaking of a post-election announcement.  Minister Reilly was only days in office when he summoned journalists to hear that he intended not just cutting, but abolishing prescription charges.

The cut in the Respite Care Grant is callous when added on top of the cut to home helps.  How can you put out thousands of leaflets claiming to have delivered a fair Budget when you have done this? Shame on the Labour Party in particular for coming up with this cut.

 

Education

In the third-largest Department, Education & Skills, cuts are once again being targeted at disadvantaged families and communities.  The increases in third-level fees will continue and now an effort is being made that more and more families have to pay these fees.  Combining an increase in fees with a reduction in eligibility for grants means that the reversal of advances in equal access will be accelerated.

Giving the HEA a €25 million cut but claiming that no services will be impacted is simply not credible – and the same goes for the unspecified cut of €13 million for the VECs.

 

Family Home Tax 

This year’s shambolic introduction of a Household Charge proved that there is no public acceptance of a family home charge.  As the troika have repeatedly said, it is up to the Irish government to decide how to raise its money; no one is forcing it to introduce a family home tax.

Before the election Fine Gael said that such a tax is unfair and would not be introduced.  Labour said nothing should be done before 2014 and that it must, under no circumstances, be a flat-tax.

The government’s proposal is for an unjust tax which is weighted against urban areas.  It does not have and will not earn public support because of its unfairness and it could cause much wider problems.

It is even more unfair to introduce such a tax before the rising social and economic impact of mortgage and household debt in the economy is tackled – where one in five mortgages are actually in arrears. The lack of any major initiative on this area yesterday was striking.

As Fianna Fáil has set out in its pre-Budget document, the measures announced yesterday are not inevitable.  They are the product of political choices between parties manoeuvring for position – and they are bad choices.

They will increase the already rising sense of unfairness about who is bearing the load of reducing our deficit.

They will damage the confidence which is vital for a return to growth in our domestic economy.

They will make our country less safe by withdrawing community policing from large sections of the country.

They are being introduced without any overall strategy for growth or job creation other than hoping that something will turn up in Europe.

One of the most unmistakeable traits of this budget is how it so lacking in new ideas or a major initiative.  Many small things are being done so that claims can be made to visionary leadership, but the difference between the rhetoric and the reality is growing every day.

The only significant departure in this Budget is that the government has doubled-down on its policy of implementing profoundly regressive cuts.

No matter how often you claim that you are about fairness and job creation the public won’t buy it.