Spreading the pain will prove calamitous

OUR SITUATION is dismal. Not just because the economy is in tatters and the banks are in chaos and maybe not even primarily because of these. But because we have a Government that is so pitifully incapable of addressing the nation’s distress. Brian Cowen’s performance yesterday afternoon in the Dáil was the most depressing of his and his Government’s responses to our predicament.

There was an opportunity yesterday for Cowen to rescue not just the country but himself and his administration from the debacle that has unfolded these past seven months.

Instead he heightened the alarm over our crisis, adding to the collapse of confidence in the Government and in the country’s future.

The scale of our difficulties is immense. There is a hole of €16.5 billion in our public finances and the likelihood is that the banks will sting the State for a further €14 billion, giving a total or about €30 billion. In addition we have deep and extensive levels of poverty – probably a million in poverty next year by any measure that most of us would agree with, that is, incomes of €11,000 or less for a single person or €27,000 for a family of four.

Because of the depth of inequality here 5,400 die prematurely every year. Without action, even more will die prematurely as this crisis intensifies. And then there are those whose lives are devastated by the collapse of their pension funds; the tens of thousands who will be unable to pay their mortgages; the hundreds of thousands who will lose their jobs.

We need several billion more to deal with the poverty issue, on top of the €30 billion to deal with the economic crisis. Maybe a total of €40 billion.

At least.

Were that scale communicated to us and were a commitment made to address all these problems and to use this crisis as an opportunity to create a better and fairer society, we could do it together. Provided the well-heeled, the well-cushioned, the well-to-do and the loaded bore the brunt of the burden and the impoverished were rescued.

We remain a rich society, with national income in the order of €150 billion a year. The medium-term prospects for the country are excellent because the new generation coming on to the workforce is far better educated than the generation retiring, which means our productivity will continue to improve.

Had Cowen announced that, for a start, his Government had attacked its own privilege and had resolved to halve ministerial salaries, dispense with ministerial cars and the Government jet and off-load all but seven Ministers of State, we would be starting to build a consensus on how to remedy our crisis. Then he could have reduced the pay of TDs to €70,000 and the expenses and perks to a ceiling of €10,000.

As we discovered in the 1980s the public will for austerity is short-lived and governments have to capitalise on an initial willingness to take pain. Cowen announced a strategy to do the exact opposite yesterday – seeking just €2 billion now out of a requirement of certainly €16.5 billion and very likely €30-40 billion. No chance.

If yesterday, in addition to the levy on public sector pensions (although that would have had to be adjusted to exclude anybody paid less than €40,000), Cowen had announced a property tax that would raise €3 billion this year and €4 billion next, we would have been on the road to resolving the problem.

He could have announced a further 15 per cent crisis levy on all gross incomes of over €100,000, yielding a further €2 billion a year (or whatever the rate of the levy and the income threshold that would be necessitated by the €2 billion target – and that would be on all income earned in Ireland, which would capture the tax exiles). He could have announced the abandoning of the Dublin metro.

He could have, in short, had a total take of nearly €30 billion in three years, by which time we could expect some economic recovery and a boost in the tax take. If necessary, the 15 per cent levy on incomes of over €100,000 might be modified then.

But the way he has proposed to deal with the crisis, taking the route of least resistance first, is certain to fail. We needed a major inroad into the funding requirement right away, right at the time when the public mood is conditioned to take it. Spreading the pain over five, six, seven years will almost certainly prove calamitous.

The only bright note yesterday came from Eamon Gilmore. Speaking without a script, he was forceful, pertinent and telling. Quite a contrast with Cowen

and also a contrast with Enda Kenny who read from a script someone else had written for him and full of the usual blather. Caoimhghín Ó Caoláin was also good.

It is impossible to see how this wretched Government can remain in office for another year or so. But it is impossible to see how they will be dislodged from government before 2012.

And it is impossible to see how a government led by Kenny could do any better; impossible to see how a bedraggled and increasingly right-wing Fine Gael could do business in office with a confident, vaguely left-wing Labour Party.

It is difficult to be optimistic.