Croke Park must deliver more for public finances

OPINION:We need even more urgent change to get our public finances back on a sustainable footing, writes IAN TALBOT

AS AUTUMN beckons, policy options for Budget 2013 must focus resolutely on supporting jobs and employment. The Government has to set its mind to continuing to create the right environment for job growth, yet increasingly we are seeing “kites” sent out to test the mood for raising taxes on employment.

In addition, too much of our attention is being distracted away from the core issues by continual references to the bank debt and the implication that this is the cause of all our woes; past, present and future.

The bank debt clearly remains a significant burden for the future, but the reality is that it makes little difference to our current budget dynamics.

The real problem remains the deficit in current spending, and the fact that it takes over €1 billion more every month than is collected in taxes to run the Government.

Even if the bank debt was wiped out overnight, this underlying structural imbalance would be there. This is unsustainable.

All economic evidence tells us that spending cuts rather than tax increases do the least amount of damage to the economy.

This is why further significant and meaningful savings from the Croke Park agreement on public service pay and conditions must be delivered urgently to secure our economic future.

As events at the Department of Health over the weekend have shown, there is very little room for further cuts from non-pay areas. More than 70 per cent of that department’s budget goes on pay. If Croke Park cannot deliver really significant savings now, in health in particular, then ordinary people will suffer as frontline services are cut further.

Any analysis of the agreement would note that it has delivered industrial peace at a time of great change in Ireland. It has also “locked in” previously implemented cost savings such as the pensions levy.

It has delivered enhanced flexibility across the public service in terms of shift timings and locations of employment. These positives should not be underestimated.

The problem is that we need even more urgent change to get our public finances back on a sustainable footing.

While much Government commentary about Croke Park focuses on the real savings achieved since 2008, these numbers do not reflect current economic activity levels, with wealth and tax receipts now at levels last seen in the early 2000s.

We shouldn’t be benchmarking ourselves against the boom-time figures of 2008, but rather against the period before we ended up living well beyond our means, which we clearly were by that year.