Haughey banned ‘special pleadings’ over budget cuts

A mood of heavy austerity is evident in the 1987 government files, with many proposed cuts to welfare benefits, including maternity and unmarried mothers’ payments, and the suggestion that a property tax might be introduced.

Economist Colm McCarthy was engaged by the government of then taoiseach Charles Haughey to work with senior civil servants throughout the summer on an expenditure review committee that became known as An Bord Snip.

Cuts to the free footwear allowance, an increase in the school starting age to five, changes to the school transport scheme, and an increase in the pupil-teacher ratio were all on the cards to cut costs.

Sweeping cuts across departments and agencies examined by the spending review group included cutting library and swimming pool services, increasing planning fees and privatising rubbish collections.

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A redundancy and early retirement scheme was also introduced to cut public-service staff numbers.

Even the costs of heating and lighting in Government Buildings came under scrutiny.

A memorandum to department heads from the Department of Finance in June warned that the prospects for the coming year were "very daunting" and managers were urged to adopt an "extremely critical attitude to all spending".

“A balance has to be struck between the overwhelming economic priority of reducing exchequer borrowing to sustainable levels and the scale of budgetary adjustment which is practical in the short term.

“The government have accepted that the absolute minimum adjustment consistent with this balance requires the current budget deficit to be reduced to 6 per cent and the exchequer borrowing requirement to 9 per cent of GNP in 1988,” the memo read.

We do not want a series of justifications of the status quo or special pleadings

Documents from the review of the spending programmes said these targets would, unless taxation were increased, involve cuts of £450 million (equivalent to almost €1.1 billion today) in current expenditure and £100 million on capital expenditure.

Haughey wrote to all of his ministers following a cabinet meeting on May 13th telling them they should consider “all options” to reduce their current level of spending.

‘Overlaps and duplications’

This included the “rooting out overlaps and duplications between organisations”, the merger of organisations, and the closure of institutions which may have “outlived their usefulness”.

Haughey wrote that a “radical approach” should be adopted and that no expenditure should be regarded as “sacrosanct and immune to elimination or reduction”.

“We do not want a series of justifications of the status quo or special pleadings,” he wrote.

Reviews of all departments’ spending programmes included the option to “disimprove pupil/teacher ratio at primary level” to save £18.2 million, ending the practice of non-teaching principals in larger national schools to save £5.2 million and imposing a uniform pupil/teacher ratio of 20:1 in all second-level schools.

The spending review committee also looked at charging students £200 for the second-level cycle, charging repeat Leaving Cert students a fee of £300 and changing school transport rules to save £6 million a year. Arguments in support of these proposals included that they would not affect “the less well off”.

A “virtual freeze” on the primary-school building programme would save £33 million in 1988.

Abolishing the new house grant to save £14 million in a full year and cutting provision for local authority house purchase loans to save £20 million was also examined. A reduction in the rates support grant would save £50 million.

Cuts of some 2,000 local authority workers from the total staff of 35,000 to save £30 million were also discussed.

Politically this appears to be a dead duck, no matter what the outcome of the election

At a meeting held with Department of Finance officials in June at the request of Haughey, the committee discussed the disposal of surplus State property, with the taoiseach saying his aims were to realise “ready cash”.

Among the properties on the list for disposal were the Hospitals Trust building in Ballsbridge, Dublin 4, and property held by CIÉ in the Temple Bar area. The option of selling Agriculture House, the headquarters of the government department, and leasing it back was also on the cards as was the possibility of selling Garda residences and surplus Army property, namely Cathal Brugha and Griffith Barracks.

Tax liability

The possibility of a property tax also reared its head. In September, then minister for the environment Pádraig Flynn indicated that he would shortly be submitting proposals for a property tax to yield between £130 million and £140 million, about half of which would be recouped by PAYE taxpayers as an offset against their tax liability.

Documents from earlier in the year when finance officials began examining Fianna Fáil's manifesto following the fall of the Fine Gael government, indicated the possibility of introducing a "meaningful system of local property taxation" by way of reforming local authority spending.

However, the January note added: “Politically this appears to be a dead duck, no matter what the outcome of the election and even if it were to be contemplated, central government taxation would inevitably be reduced in some format so there would be no gain to the exchequer.”

A letter from McCarthy to Bob Curran, assistant secretary of the Department of Finance, on June 19th noted the proposals for cuts in the industry and commerce area were “a bit feeble, and I believe we should go in harder”.

McCarthy said reductions should be sought in the permitted maximum rate for IDA grants, some grant programmes should be terminated and State involvement in industrial rescue should cease.

Another letter from McCarthy later that month on State research institutes said “value for money considerations” must result in a major cutback in funding of such bodies and there was also scope for a policy redesign.

McCarthy suggested that research institutes “with a problem of institutional ageing” should consider accelerated retirement and voluntary severance programmes and that replacement staff should be on five-year contracts.