Impossible to protect public pay and welfare budgets

ANALYSIS:The Coalition will welcome the recess ahead of uncomfortable decisions in winter as part of the next budget

A WEARY Dáil adjourned for the summer recess without the traditional play-acting by Opposition parties demanding a shorter break while secretly hoping their entreaties would be ignored.

Enda Kenny has called their bluff on this before – and nobody was taking any risk of a repeat. In any case, Government TDs are so exhausted they would probably have broken into open revolt if the Taoiseach even entertained the notion of sitting for another week or two.

The emergence of simmering tensions between Fine Gael and Labour in the final weeks of the session was, in part, a result of battle weariness, but it also signalled the different perspectives of the two parties on some major social issues.

Eamon Gilmore’s declaration that gay marriage is the civil rights issue of this generation would not find many supporters in the Fine Gael parliamentary party. Some of the party’s TDs also resented what they perceived as an attempt to embarrass the Taoiseach, who is on record from the election campaign as saying he did not regard the issue as a priority.

The decision of Fine Gael TDs at their last parliamentary party meeting before the summer to put down a marker with Minister for Health James Reilly on the issue of abortion was a direct response to the Labour position on gay marriage.

“Our supporters around the country are beginning to get the impression that Gilmore is dictating policy on these issues, so we had to send out a clear signal that we are not going to be walked on,” said one Fine Gael TD.

In the longer run, neither gay marriage nor abortion is likely to cause a serious rift in the Coalition. The programme for government outlines the approach to be taken on both issues and nothing is going to happen in the short term.

The framing of next year’s budget in the autumn is likely to prove a more serious bone of contention and one that will test the Coalition’s durability. As on social issues, there are significant differences between the partners, with a growing feeling on the Fine Gael backbenches that Labour is getting too much of its own way.

So far, Labour has successfully protected its public service constituency through the Croke Park agreement and has control of the agendas on public service and welfare reform.

Fine Gael cannot point to anything as concrete in terms of delivery for the majority of the workforce who are in the private sector.

In fact, on the issue of pensions, it has presided over a raid on the already beleaguered pension funds of private sector workers – while the much better off public service pensioners continue to be immune.

However, on the fundamental issue of the economy, both Coalition parties can take credit for stabilising an appalling situation, even if the template for that was laid down in the EU-International Monetary Fund (IMF) programme already in place when they took office.

Kenny’s great achievement as Taoiseach has been to bring a degree of hope that there is a pathway out of the economic calamity that befell the country. He has managed to dispel the air of despair that prevailed two years ago and the importance of that cannot be underestimated.

In order to make it to the promised land – the restoration of economic sovereignty by the time of the next election – a whole range of hard decisions still have to be made. The stimulus package announced during the week will help a little, but it will not work unless the drive to get the public finances under control continues unabated.

The latest observations of the IMF, after its most recent visit to check up on Ireland’s progress towards economic health, provided a glimpse of the kind of things that remain to be done.

“Maintaining expensive universal supports and subsidies is difficult to justify under present budgetary circumstances,” the IMF report stated. “Better targeting of the child benefit, medical card spending, the household benefits package and the expenditure on non-means tested pensions can generate significant savings while protecting the poor.”

For good measure, the IMF also threw in suggestions about broadening the base for PRSI payments, better targeting of income tax reliefs for the lower paid and the introduction of a property tax at “a suitably high level”.

Any one of the objectives outlined by the IMF is capable of generating huge political controversy; getting a range of them implemented in one budget would test the cohesion of any government.

All of the usual suspects in the Dáil denounced the IMF template without offering any alternative way of repairing the public finances, while a range of vested interest groups also waded in to defend the status quo.

The cliché about “protecting the most vulnerable in our society” was trotted out again and again in opposition to the proposals, even though the IMF was clearly advocating a course of action designed to reduce State spending on the better-off.

Fairness was cited as the principle that should underpin reform of our patently unfair and wasteful public spending programmes.

The IMF’s proposed welfare reforms would have an impact on the less well-off, but the objective is to eliminate poverty traps and reduce long-term unemployment – which will help reduce poverty in the long term.

Making the necessary decisions in the autumn will test the mettle of both Coalition parties. It will be impossible to protect both the public pay and welfare budgets. One of them will have to give.

With the Croke Park agreement immune from challenge, it is inevitable that the welfare budget will be in the firing line and Labour will have to take the consequences. Fine Gael will face an equal challenge in selling a realistic property tax to its middle class supporters.

TDs of both Coalition parties should enjoy the break because, whatever about the poor summer weather, the political temperature will be uncomfortably hot before year-end.