AFTER WEEKS of Government scaremongering, the first phase of the budget presented to the Dáil by Minister for Public Expenditure and Reform Brendan Howlin had the consistency of a lukewarm bath.
The public had been so deeply conditioned that relief was the general response. No matter what new charges, deductions or savings were announced, much worse had been threatened before political accommodations were agreed. The eventual package had more to do with conflicting ministerial and backbench demands than economic vision. Correcting the public finances was the central imperative. That had to be progressed within a fiscal straitjacket imposed by the EU-IMF. Mr Howlin stated the predicament bluntly: “We depend on them to pay our way.” So, savings of €1.4 billion had to be secured in day-to-day spending next year and the three largest spending departments were asked to contribute most. Rather than adopting large-scale, universal reductions and charges, however, the approach involved incremental change and the scaling back of entitlements. Pain will be felt and it will persist for years.
There was much talk about the need for job creation but few specifics were provided on how this can be achieved. Mr Howlin promised an “action plan for jobs”. It will complement an existing “pathways to work” scheme. Provision will also be made to provide training places for some thousands of long-term unemployed. It represents an underwhelming approach to a dire situation. Small wonder that Fine Gael Ministers baulked at the notion of employers paying the first four weeks of sick pay for their staff. On the “fairness” front, Joan Burton successfully resisted an across-the-board cut of €10 in child benefit in favour of a range of lesser impositions and smaller overall savings. Education also escaped more lightly than had been intimated, but student supports and grants will be eroded.
In all of this, there was little or no sense of a unified vision. That is unfortunate for both Fine Gael and the Labour Party and for a wavering public confidence in their administrative capabilities. Making fiscal corrections demanded by the EU-IMF troika should not prevent coherent economic and social planning. Cutting public spending and services is harsh but necessary. The process should, however, include clear statements of the expected outcomes. Instead of that, uncertainty persisted and promises of further reviews of departmental efficiencies and expenditure were made in the context of the Croke Park agreement. That uncertainty reflects Ireland’s dependence on export-led growth and growing pressure on the euro. If agreement to deal with sovereign debt is not reached by EU leaders this weekend, budgetary action may become more severe. A referendum on fiscal oversight may be required and Taoiseach Enda Kenny has already set out the Government’s position: “Ireland supports stronger economic governance throughout Europe and particularly in the euro zone”. The outcome of that debate will have more decisive consequences than this budget.