Many TDs swallowed the medicine - but will public?

 

ANALYSIS:Politicians showed an acceptance of our precarious situation. We shall now see if such a view is widely shared, writes STEPHEN COLLINS

IF THE sombre response of Government and Opposition TDs to Brian Lenihan’s Budget speech in the Dáil yesterday is any reflection of the public mood, the dominant reaction to the cuts will be one of resignation rather than indignation.

The steady stream of barracking from Opposition TDs that normally accompanies a Budget speech failed to materialise. However, if Lenihan escaped the usual jeers, there were no cheers either, and the traditional standing ovation from the Government benches failed to materialise.

One of the reasons for the muted response, to what had been billed as one of the toughest budgets in the history of the State, was that it was so widely leaked in advance. There was virtually nothing in the speech that had not been anticipated by the media in the week before the Budget.

Probably more important, though, is that the political system is only too well aware of the precarious state in which the country now finds itself. Given the yawning gap between Government spending and tax revenue, things could not have continued as they were and everybody in the Dáil chamber was aware of that, to a greater or lesser extent.

This Budget was Lenihan’s third attempt to get to grips with the scale of the problem confronting the country and there was certainly a sense of acceptance on the Government side of the Dáil that it was time to swallow as much of the tough medicine as possible now.

Whether the wider public, and particularly those who have suffered direct cuts in their income, will take the same view is the big question. Income earners outside the public service are largely immune from pain in this Budget and while there will certainly be a strongly negative reaction from those who have suffered a loss of income, the scale of it will be crucial.

“Which group will be occupying Westland Row church this year,” asked one Minister immediately after the Budget speech, referring to the agitated gathering there of the over-70s who lost automatic entitlement to the medical card in the budget of October 2008.

That protest so spooked the Government that pensioners have been treated with kid gloves by Lenihan in his latest Budget. Not only those dependent on the old age pension, but retired public servants on very generous pensions have been exempt from cuts this time around.

There is no rationale for exempting some of the best-off pensioners in the country, while disability benefit and carer’s allowances are being cut, child benefit slashed and lower-paid public servants being forced to accept cuts of 5 per cent. However, the Government made a political decision not to offend a substantial lobby which votes in large numbers at every election. One message that could have longer-term negative consequences for the Government is that loud and aggressive protest, no matter how unreasonable, ultimately pays off.

One consolation for the Government is that social welfare recipients are not nearly as cohesive a group as pensioners and the changes in welfare payments will have a different impact on the various categories of entitlement. Overall Irish welfare rates will remain among the highest in the EU and that may blunt the impact of the inevitable protest.

The same applies to child benefit. While women’s groups have expressed strong opposition to the cuts, the rates of child benefit remain high by international standards and again those affected may not be able to mobilise significant political clout.

The impact of the cuts on public servants, particularly those on lower pay, will certainly provoke a negative reaction. By contrast with the kid-glove treatment of existing public service pensioners, big changes in the regime for the future were signalled by the Minister. It remains to be seen how the public service unions respond but they have difficult decisions to make about the kind of action that is appropriate in the circumstances.

Given the failure of the talks between the unions and the Government about public service pay the unions will also have to make up their minds about the future of social partnership. The Government also has decisions to make about whether the model that has developed since 1987 serves any useful purpose in the changed circumstances.

One measure clearly designed to assuage the anger of unions and those affected by the pay and welfare cuts was the decision to introduce a €200,000-a-year domicile levy on tax exiles whose income is over €1 million a year. While the measure may not raise a significant amount of revenue it is a welcome symbolic gesture.

Not so welcome is the decision to continue to exempt judges from the cuts in public service pay. The respected former High Court and European Court judge, Donal Barrington, repeated during the week his opinion that the decision to exempt judges was based on a misinterpretation of the Constitution. At the very least the Government should have included their lordships, who would have been perfectly entitled to challenge the decision in the courts if they wished.

Looking to the future the Minister announced his intention of broadening the tax base in the years ahead. One move will be to end the current position whereby 50 per cent of income earners pay no tax and another will be a property tax. Interestingly the changes to bring more people, mainly those on lower incomes, into the income tax net are promised for next year but there is no timescale for the introduction of a long overdue property tax.

A surprising feature of the Budget was Lenihan’s assertion that the worst is over and Ireland is now on the way to economic recovery. Until very recently the Minister was saying that an adjustment of €4 billion in this Budget would be followed by a similar one next year and the same again the year after that.

Whether his new-found optimism is based on tangible evidence of improvement or is simply bravado designed to keep up the morale of his TDs only time will tell.

With the Social Welfare Bill due to pass all stages in the Dáil by tomorrow evening the Government is hoping that its backbenchers and Independent supporters will be insulated from pressure when they return to their constituencies at the weekend.


Stephen Collins is Political Editor

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