Weary citizens deserve not to face full force of another round of cuts and taxes
We have demonstrated sufficient good faith to be allowed to decide for ourselves how to reach the required deficit target
With 419,200 people still on the live register, unemployment remains the single biggest crisis facing the country.
With budget 2014 due to be announced on Tuesday, October 15th, the debate about what the appropriate fiscal adjustment should be in this latest austerity budget is already in full flow.
Kites are now being flown on an almost daily basis about what might be in the budget – especially in the area of social protection – without any regard to the stress and anxiety such leaks can cause to those who fear they will be affected.
Before turning to the scale of the adjustment, I believe the budget needs to be about much more than spending cuts and tax increases. Practical measures need to be implemented to continue to improve our attractiveness as a location for foreign direct investment. Even more important is the need to tackle the issues causing immense difficulties for our SME sector such as crippling local authority rates, Celtic Tiger-scale rents, excessive energy costs and the burden of red tape.
Since July 2008, a mammoth fiscal adjustment of about €28 billion has been implemented. It is little commented upon that three-quarters of the fiscal adjustment achieved so far is as a result of budgets introduced by the late Brian Lenihan as Minister for Finance. In fact, were it not for the decisions Brian initiated between July 2008 and December 2010, our deficit would now be off the Richter scale.
Fianna Fáil is fully committed to bringing our deficit down to not greater than 3 per cent by the end of 2015. Principally due to the restructuring of the promissory notes, there is now some limited scope to moderate the correction of the public finances, perhaps by up to €1 billion over the next two years.
In reality, as a country, we can only say that austerity is truly over when the Minister for Finance is able to stand up on the day and announce a neutral budget where the net total of taxation and expenditure measures is zero.
That scenario is still some time away.
With more than €8 billion in interest being paid this year to service the national debt, the imperative to reduce the general Government deficit remains inescapable. Given that official funding from the troika is now almost fully drawn down, if we were to revoke our commitment to reduce the deficit, I ask the question: how willing would the international markets be to lend money to Ireland at reasonable interest rates? Not very willing at all, I believe. In that scenario, I suspect we would find ourselves in another bailout very quickly.
The memorandum of understanding with the troika does not specify a nominal adjustment for 2014. However, the decision of Ecofin on December 7th, 2010, ratifying the troika programme, requires Ireland, under the excessive deficit procedure, to achieve a deficit not exceeding 5.1 per cent in 2014 and not exceeding 2.9 per cent in 2015.