Facing up to crisis in the public finances
Madam, – I don’t much care how impassioned Brian Cowen’s speech was last Thursday night. I was always told that it’s not what you say but what you do that counts. By his actions, Brian Cowen has shown that he is incapable of making those responsible pay for the mess we are in. And he is obviously determined to make the less affluent pay proportionately more.
As Naomi Klein recently stated: “Governments that respond to a crisis created by free-market ideology with the same bad ideas will not survive to tell the tale.”
Argentina, Iceland, Latvia – we are no different. Cutting public spending to gain favour with the IMF just won’t work. It is a tired old tactic that has been proven to fail, and we won’t fall for it any longer.
I was also told not to throw good money after bad. Propping up a dysfunctional banking system is not an economic stimulus package. We need imaginative and intelligent thinking and I don’t believe Brian Cowen can deliver it. – Yours, etc,
Madam, – Lazarus has arisen. Cometh the hour, cometh the man. Yes, the Taoiseach’s recorded speech last Thursday evening to the Dublin Chamber of Commerce was significant and he deserved the ovation he received. But having listened to him on the Marian Finucane radio show on Saturday morning for almost 40 minutes, one got the sinking feeling Lazarus had once again passed away.
People were quite rightly furious as they contacted the show to express their disgust at the Taoiseach’s defence of the Bank of Ireland’s decision to give staff a 3.5 per cent pay rise when the private and public sector are expected to shoulder a burden that was largely created by the banks. – Yours, etc,
Madam, – I cannot believe the media in this country are so pathetic. National debt is about to go through the roof — assuming we can actually borrow the money. The private sector is indebted well beyond sustainability. Personal and corporate bankruptcy is forecast to escalate. Bank workers take a pay rise not because they are worth it but because they can. Unemployment is galloping towards the 400,000 mark. Discredited bank directors and regulators retire to play golf on massive pensions.
And the media seem impressed because an incompetent prime minister made a 17-minute speech in recognisable English? No wonder the country is in the current morass. – Yours, etc,
Madam, – Mr Cowen has appealed for solidarity in our present difficulties. He has, however, neglected to highlight the principal prerequisite for such solidarity – the elimination of the massive inequalities which have built up in our society. As I understand it, during the past 10 years 30,000 people have become millionaires or multi-millionaires, principally on foot of the property boom. This has in the main not been a case of wealth creation, but rather of wealth transfer — probably the biggest transfer of wealth since Cromwell!
Approximately 500,000 new homeowners have paid vastly inflated prices for their properties over the past years and many will struggle to repay their mortgages over the next 30 to 40 years. How does the Government intend to tackle this problem? How can people be expected to co-operate when such inequalities are not even acknowledged? – Yours, etc,
Madam, – The following proposals would greatly help to set example, restore fairness to the tax system and contribute to the national finances and competitiveness.
1. The Salaries, pensions and expenses of ministers, TDs and senators should be reduced by at least a third. Instead of being pegged to overblown civil service scales, their salaries should be linked to those of politicians in other states of comparable size and status, and having similar parliamentary sitting days.
2. The salary scales of senior professionals in the public sector should also be benchmarked against their opposite numbers in other comparable countries and linked to the average industrial wage. In the interests of fairness, the proposed pension levy should be restructured, as was done with the income levy.
3. As in the US, exceptional salaries in the private sector should be funded by shareholders rather than subsidised by taxpayers. Accordingly, any elements of total salary, bonus and pension contribution exceeding €200,000 should cease to be deductible for corporation tax purposes.
4. The conditions applicable to non-residency for tax purposes should be reviewed so that non-residency means exactly what it says. For a start, tax should be changed on the worldwide incomes of tax exiles in proportion to the number of days spent in the State.
5. Having been introduced to encourage greater participation in the work force, tax individualisation should be phased out to help distribute scarce jobs across more households. Dual-income households with high mortgages that voluntarily become single-income should get special tax credits or be able to extend the term of their mortgages.
6. A new tax rate of 48 per cent should be applied to the 60,000 taxpayers with incomes above €100,000 a year. The annual yield would be about €800 million, and could be higher if allowances for “top-hat” pensions, investments etc. are reduced.
If applied immediately for the next five years, these changes could cover about a quarter of the projected €16 billion shortfall. – Yours, etc,
Madam, – I have been waiting day by day in the hope that one or more senior churchmen or religious leaders would come together and issue a joint condemnation of the Government’s handling of the economic crisis. For this is also a moral and religious question.
How wonderful it would have been if, say, the Catholic and Anglican archbishops of Dublin, the Presbyterian Moderator, the Quaker Clerk of Dublin Yearly Meeting, the Chief Rabbi and the Imam at Clonskeagh had joined forces to tell the Government that what it is doing is wrong, simply wrong. But our religious leaders fail us here no less than our political ones.
And so it falls to me, a Unitarian lay preacher, to issue the following warning. The course the Government has embarked upon, not only in the October 2008 Budget, but also in Mr Cowen’s February 3rd statement, is misguided, indefensible and bankrupt of authority. It will make a bad situation worse because it lacks the defining quality of moral justice.
“Jesus came seeking outcasts, helping the sick and poor. . .We must see as he saw,” a poet wrote. The first criticism of the Government is its failure to do that. Too many of the vulnerable, whether the sick or those on lower incomes, whom it is the Government’s duty above all to help, are adversely affected – indeed deliberately targeted – by Government policy and intentions.
The second major failing is the attempt to “solve” the banking crisis without first finding out, and then telling the public openly, about the scale of the crisis. “Toxic debt” will continue to prejudice the banking system, and confidence in it, until it has been properly and honestly quantified and “taken out of the system”.
Everything, therefore, that has so far been “thrown” at bank rescue is in vain. It would have been better to let all existing financial institutions sink or swim purely on their own merits, and to put all the funds so far made available and promised to the banks into a new National Recovery Bank, which would have the inestimable advantage of then operating, and acting as an agent of regrowth, without the incubus of “toxic debt”.
Above all, Vincent Browne was right, in one of his recent columns, to say that the lower half of society, in financial terms, should have been left entirely untouched by the Government responses to this crisis. All of the burden, whatever that turns out to be, should have fallen on higher earners.
We have a Government that has failed spectacularly and that shows no sign, in its condescending arrogance, of even beginning to acknowledge that spectacular failure. It should go now, before it makes things even worse. – Yours, etc,
(Dr) MARTIN PULBROOK,
Madam, – Our current fiscal meltdown, awful though it is, may yet yield a substantial benefit. The so-called Chicago School of Economics, with its pro-privatisation, anti-union and ultra-free-market emphasis, has been clearly demonstrated to have failed.
It failed here, it failed in America and it buried the economies of several South American countries (see Argentina, for a particularly pointed example). At least the South American countries have some excuse: they were bullied into adopting these suicidal policies by the World Bank and the IMF.
Why did we follow suit? Why, for example, did the State decide to sell off Eircom, leaving us with no dedicated Irish telecoms company capable of bringing the country into the 21st-century communications marketplace? Perhaps a better informed reader may correct me, but it seems to me that we went down this foohardy path simply because it was fashionable at the time.
Maybe the devil really does wear Prada. – Yours, etc,
Madam, – Given the international press coverage of our problems, it seems clear Ireland is now viewed as the financial wild west. This reputation is at least partly due to the activity of Seán FitzPatrick and his colleagues in Anglo Irish Bank.
That the Government prioritised the nationalisation of this bank, when the US government allowed similar such institutions to fail, is incredible. Surely, legislation criminalising FitzPatrick-type behaviour was the immediate priority to restore a positive international reputation.
That bankers like Seán FitzPatrick can walk away without criminal proceeding is amazing. We obviously need laws to prevent such activity in the future. In the absence of such legislation and the sight of bankers behind bars, international institutions will not invest in Irish banks. — Yours, etc,
Madam, – I can readily understand the disbelief and anger felt by the public service employees at the announcement of the pensions levy. It is indeed a very harsh measure.
However, it must be remembered that the actual cost to the State of providing the defined benefit pension which they are guaranteed is significantly in excess of the amount which they currently pay or the new amount which will apply under the levy scheme. Mary Harney has indicated that the average private-sector employee would have to contribute about 30 per cent of salary to guarantee a defined benefits package of the type which public sector employees currently enjoy. Public sector employees must recognise this fact – and the fact that taxpayers (of which they are a part) have to bear the cost.
Is it possible for the Government to restructure the public-sector pension schemes so as to allow employees to opt for a defined contributions system for the money which they currently pay? At some future date those opting for such a scheme could revert to the defined benefits scheme with appropriate adjustment in their contribution.
I also suggest that ministers and junior ministers should immediately give up any pension payments which they enjoy. In present circumstances, it borders on the obscene that such persons draw a pension while in receipt of a salary. – Yours, etc,
Madam, – I wonder which of two performances last week lifted the nation’s spirits more: that of the Irish rugby team in Croke Park; or of Taoiseach “in camera” at the Four Seasons? – Yours, etc,