A fair hand in tough times
R ather than engage in four weeks of wild, pre-budget speculation and cause unnecessary concern to already-stressed families – as happened last year – Ministers have limited their public infighting over revenue-raising and spending cuts to a single week. It represents a small advance and suggests the Government is capable of learning from past mistakes. Of more immediate concern, however, is the accuracy of leaked predictions.
Major decisions have been taken and both Fine Gael and the Labour Party are trying to convince supporters their particular interests have been protected. The truth wil be revealed tomorrow. Ministers for finance have a tendency to spring surprises that send their backbenchers into paroxysms of rejection. Because of that, detailed negotiations involving Taoiseach Enda Kenny and Tánaiste Eamon Gilmore took place in defence of party commitments on income tax increases and social welfare payments. Compromises were reached but PRSI issues and some social payments remain under review. In spite of that, some Government TDs may reject unpopular measures.
The only certainty on the budget is that it will add to the hardship and financial difficulties of individuals and families. The EU-IMF bailout requires the exchequer imbalance be reduced by €3.5 billion next year through spending cuts and tax increases. Even then, Ireland’s deficit will remain the highest in the EU and two further cost-cutting budgets will be needed to bring it below 3 per cent of GDP. A daunting prospect requiring careful handling if key social protections are to be maintained.
Minister for Finance Michael Noonan can hardly be happy. Having asked for additional indicative savings for inclusion in this Budget under the Croke Park deal, the public sector unions did not respond. Funding of public pensions has become critical. The domestic economy remains depressed. High unemployment and lower-than-expected export growth have blighted hopes of an early recovery. In such circumstances, demands from the troika and EU financial rules will require delicate negotiation. Rebalancing the tax system through the introduction of a property charge has been well flagged. The question that remains is whether a higher rate of tax will apply to the most valuable homes.
An ESRI report found that, since the onset of recession, cumulative budgetary adjustments have impacted most heavily on higher earners. That is as it should be in a caring society. It also revealed that the last budget did not maintain that progressive pattern. A socially regressive approach should not be repeated tomorrow. The Taoiseach and Tánaiste promised an equitable approach in correcting the State’s finances. They should not alter course.