Lenihan brave to risk unpopularity for country's good

 

INSIDE POLITICS:Bertie Ahern’s populist pandering got us into this mess but Brian Lenihan deserves credit, writes STEPHEN COLLINS

THE CONCERTED recent effort to soften up the public for swingeing budget cuts must mean that the Government has gone past the point of no return and decided to take whatever steps are necessary to begin restoring order to the public finances, regardless of the political consequences.

It seems that Brian Lenihan is willing to take the risk of going down in history as the Ernest Blythe of Fianna Fáil. The similarity of the choices faced by Blythe in 1924 and Lenihan in 2009 are uncanny. The core of the issue in both cases involved the preservation of Irish economic sovereignty at a time of deflation and rising public spending.

Blythe’s solution was to cut the old age pension and public service pay by 10 per cent and it was never forgotten. To a large extent his reputation was destroyed because of the bad job he made of explaining what he had done. By contrast Lenihan is good at explaining himself. If he holds his nerve he may actually achieve the opposite reputation to Blythe and, in time, come be recognised as the man who saved the country from economic disaster.

In the short term, though, it will not be easy for Lenihan or the Government. The depressing lesson of Irish politics is that the steady appeasement of powerful interest groups is much more likely to generate popular support than a genuine attempt to act in the broad national interest.

The scale of the problem now facing the country is a direct result of the way Bertie Ahern’s governments pandered to two powerful lobbies: the construction industry and the public service unions. One led to the banking crisis and the other to an unsustainable increase in spending that has undermined the public finances’ stability.

The world crisis certainly made matters worse but there is no escaping the fact that the underlying problem is stamped “made in Ireland”.

The remedy will involve a lot of pain for everybody and the only thing at issue is whether it will be short and sharp or long, drawn out and possibly fatal.

It will take strong political nerves to ignore the howls of protest that will inevitably follow the budget cuts in the pay packets of public servants and welfare recipients. Some effort by Lenihan to tackle wealthy professionals, who have so far refused to lower their exorbitant fees, might make the cuts a little more palatable for ordinary citizens but it won’t make the pain any easier to accept.

Both the Minister and Taoiseach have pointed out that deflation on a scale not seen since the early 1930s has actually resulted in a rise in living standards this year for those in receipt of welfare payments and has cushioned the impact on workers affected by pay cuts. Selling that message after the budget will not be easy, though.

The crucially important message that Lenihan is trying to get across is that if the pain is faced now, the country will be able to get back to growth and rising living standards in a relatively short time. Lenihan and Brian Cowen have stressed that tax revenues have fallen to 2003 levels but they are only proposing to trim spending back to 2006 levels.

If they can get spending back to the levels of three years ago and, over the course of the next four years, broaden the tax base so that it comes into balance with spending, the country will still be far better off than it has been for most of its history as an independent state.

While the public anger at the way the country was run for the past decade is justifiable, anger itself is not a solution, as Cowen pointed out. The irony is that most of the anger is being directed at those who are trying to find a solution to the country’s problems rather than at those who created such a fool’s paradise.

Labour Party leader Eamon Gilmore has made a habit in the Dáil of denouncing not only the Government but so-called “hardline commentators who wish to inflict more pain on the poor” for pointing out the need to get spending under control if the country is to avoid another 1980s-style decade of depression.

While Gilmore has been strong on rhetoric, he has been very weak on realistic alternative solutions. While that tactic may buy Labour short-term popularity it will leave the party with big problems if it does manage to get into government in the next two years.

Over the past year Fine Gael has made much more of an effort to face up to reality, while still holding Fianna Fáil to account. Enda Kenny took the lead a year ago in pointing up the absurdity of the last national pay agreement but in more recent times he has tended to give the impression that soft options are available. In the past week he strongly opposed any changes in child benefit, without specifying how savings can be made in the social welfare budget. He has promised that Fine Gael will produce detailed policies in the next few weeks and that may make the party’s position more coherent.

While spending cuts remain the focus of the Government’s budgetary strategy this year, it is puzzling that it appears to have put tax reform on the back burner. A significant broadening of the tax base will have to go hand in hand with controlling spending.

It is striking that Fianna Fáil again appears to be funking the task of bringing in a property tax. For 30 years experts have repeatedly pointed to the need for a property tax, on the grounds of equity and economic efficiency. However, the party that irresponsibly abolished rates has stubbornly resisted common sense for fear of antagonising voters. Given that it is willing to risk the public anger at spending cuts there is no reason why it should not at least begin work on devising a rational, fair property tax.

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