NEVER IN living memory has a government faced such challenges in framing a budget. This should be borne in mind now that the die is cast. The political team to deliver it were new and relatively inexperienced: Taoiseach Brian Cowen, Tánaiste Mary Coughlan, and Brian Lenihan in his first term at the Cabinet table. The choices were grim and the consequences for Ireland’s reputation, both domestically and, more importantly internationally, will determine the future of this State for a generation.
There will be many editorials written about the harshest budget in the history of the State. Suffice to say, on first reading, that the decisions taken rise up to the occasion financially. They were courageous, bold, above party politics, above sectional interest and they appear to have put the country first. Whether they are a programme for recovery remains to be seen. But, right or wrong, as some of them may be seen in coming days, at least there was an attempt to lead from the front.
Some €4 billion in public spending cuts was administered. The political waffle was kept to a minimum. There was a political consciousness that the decisions had to be fair. The high-earners were affected proportionately. The public service pay cuts were scaled. The welfare reductions will make life miserable for those in need. But public opposition may be muted because of the balanced manner in which income cuts have been made.
Mr Lenihan invoked the concept of fairness in justifying cuts and charges. Top earners using tax shelters will now pay a minimum rate of 30 per cent. A levy of €200,000 will be imposed on wealthy tax exiles. The Taoiseach and Ministers will contribute more than other public servants, who will pay according to a sliding scale. There will be new medical charges and cuts in welfare payments. But old age pensioners and child benefits for low-income mothers will be protected. As a package, it is as tough as people had been led to expect.
A formal admission that competitiveness must be regained through adjustments in wages, prices, profits and rents was a central aspect of Mr Lenihan’s speech. But no indication was given as to how prices or profits might be reduced. That same weakness was evident when, having bowed to the drinks lobby by reducing excise duties, he spoke of revoking the concession if customers did not benefit. At a time of endemic alcohol abuse in society, it was a strange decision.
Having failed to take early, remedial action in response to the financial crisis, the Government has finally made the hard choices. How these will play out with the public service unions in coming weeks is uncertain. Mr Lenihan’s declaration that “the worst is over” was designed to enhance public confidence and encourage spending But, should this be treated as a mental reservation? The tax base will, as the Minister acknowledged, have to be broadened. But, equally important, the detail of the cuts for people on disability, carers, medical card holders and others will have to be unveiled before a final judgment can be made on this Budget.