The Government is broke. This year, it will borrow at least €22 billion to pay its bills. The economic situation is dire. Some 400,000 unfortunate people may be out of work by next year. What happens? The Government ignores proposals for a fairer taxation system from its own commission. Public service unions threaten industrial action to stop the Cabinet from reviewing the pay and conditions of their members. Neither of those positions is tenable. There has to be dramatic reform. The situation can be made bearable in the context of social fairness, effective leadership and a clear and convincing recovery plan.
The blame game is pointless. It is over. Whatever about the greed and mistakes that brought the country to this low point, urgent action is now required to plug the hole in the public finances, protect a damaged economy and provide a framework for future growth. Taoiseach Brian Cowen told the Irish Congress of Trade Unions (Ictu) on Wednesday of the need to cut the public service pay bill by €1.3 billion this year as part of an overall savings programme of €4 billion.
Reductions would not necessarily involve across-the-board salary cuts, but could come from scaling back the numbers at work, while reducing payments in respect of overtime, premium rates and special allowances. For their part, trade union representatives want to spread the pain over a longer period and to introduce higher taxes for the wealthy.
As things stand, the Government appears determined to find the necessary savings through reductions in social and capital spending and by cutting the public pay bill. Suggestions for a broadening of the tax base, by way of a higher income tax rate and a property tax, have been long-fingered by Minister for Finance Brian Lenihan. A carbon tax is planned that, while justified, would almost certainly be regressive. In that broad scenario, it is difficult to see where common ground can be found for a new social partnership arrangement, even if the will was there.
There is no doubt the various parties would prefer ‘jaw-jaw to war-war’. Industrial action is usually a reflection of failure and we have had enough failure in recent times. Trade union leaders, particularly in the public sector, are under enormous pressure. Their members are in denial concerning their exalted pay rates. They are furious over the pension levy. And, from the comfort of their permanent and pensionable positions, they are determined to resist any further loss of earnings. It is a volatile situation. Street protests may defuse some of that pent-up anger and industrial action is being planned by a group of service unions. Ictu will organise a general day of protest for November 6th.
Our economy is no longer competitive compared with our international counterparts. Excessively generous pay rises agreed in good times contributed to that. If we are to stop the economic rot and encourage job growth, that imbalance has to be corrected. But if the pain involved is to be broadly accepted, a fairer taxation system is required also.