INSIDE POLITICS:If the pain of next month's budget is equally spread, things may not go as bad as many FF deputies fear, writes STEPHEN COLLINS.
DELIVERING A budget on April 7th that is tough enough to save the country from bankruptcy is an awesome responsibility for Brian Cowen and his Government, but it could also be a liberating experience to throw all political caution to the winds and stake everything on one bold move.
The Government’s problem since last summer is that it has been too slow to face up to the truly staggering scale of the problem with the public finances.
International capital markets have lost confidence in the Government’s ability to deal with the public finances, and the April budget is the last chance to restore it.
While it is true to say that no government, anywhere, has managed to get to grips with the combination of a banking crisis and the economic downturn, the fact of the matter is that the Irish response is regarded as one of the worst in the developed world.
That is reflected in the fact that it is costing Ireland more than any other European Union country to raise borrowing.
The only way that the State’s solvency and its ability to function can be guaranteed is if the April 7th budget cuts deep into the level of public spending and raises significantly more tax to plug the yawning gap between income and expenditure. The tragedy is that the Coalition’s authority was severely weakened by the budget decision on medical cards for the over-70s last October.
It resulted in a humiliating climbdown on an issue that went nowhere near the core of the problem, and the controversy only served to obscure the nature of the choices that have to be faced if the country is to preserve its financial sovereignty.
Preserving our economic independence is far more than a matter of pride. The consequences surrendering our economic sovereignty would impact directly in the lives of every citizen, particularly those depending for their incomes on the State.
Huge cuts in welfare rates as well as in the pay and pensions of public servants would automatically follow intervention by the European Central Bank or the International Monetary Fund. That is why the controversy over the public sector pension levy is so futile. In the scheme of things the measure is relatively mild and reasonably fair. While it understandable that the people affected don’t like it, they must know that it is necessary in order to avoid far worse.
The attitude of the Opposition parties to the levy is incomprehensible. If they don’t know the measure is the minimum necessary first step towards righting the public finances they are unfit for office; if they do know then they have demonstrated a short-sighted and cynical approach to what is a national crisis.
Since the full-blown collapse in tax revenue developed in the middle of last year the Government reaction has consistently been too little too late. Cowen has appeared constrained by the fact that the budgetary policy he presided over as minister for finance has simply unravelled. As tax revenues based on the housing bubble plummeted in the autumn of last year it became clear that the level of Government spending had spun out of control and was no longer sustainable.
The three attempts to get to grips with the problem, in the shape of the savings package of last July, the October budget and the pension levy in January did not get near the heart of the dilemma at the centre of the crisis – that the current level of public spending cannot be sustained.
The situation is now so bad that Cowen and his colleagues have nothing left to lose by going for broke and bringing in the toughest budget in living memory.
Outrage and indignation will inevitably follow but, if the pain is spread equally, it may not be as bad as many Fianna Fáil TDs fear. Whether it is or not, the only strategy left is to do what is necessary and hang the consequences.
There is a school of thought that it would be better to wait for outside forces to take control of our affairs and let them implement the kind of cost-cutting measures that would make any Irish government unelectable. However, such an abdication of responsibility would certainly come back to haunt the government of the day and throw serious doubts over the future survival of the political parties involved.
In the Dáil during the week Cowen had the appearance of a man resigned to doing what is required. While the hysterical reaction to the October budget doesn’t give him any great grounds for optimism about the electorate’s ability to understand its own interests, in the short term Fianna Fáil’s best option is still to do what is necessary and hope for the best. In any case, there is no other choice.
One stumbling block in winning public support has been the Government’s strange reluctance to make decisive cuts in the cost of the political system. The creation of 20 junior Ministers after the last election was widely regarded as taking political patronage to absurd levels.
During the week Fine Gael came up with a plan to cut the number of junior Ministers, abolish paid committee perks and reform the political system in a number of ways. It was a welcome move from the main Opposition party and the Government would be crazy not to adopt the proposals in its April 7th budget.
While the potential savings are small in the overall scheme of exchequer spending, the moral authority gained through leading by example would be a priceless political asset in the difficult days ahead.