Stephen Collins on the harsh financial reality. I agree with him.

The Irish Times – Saturday, November 26, 2011 Budget debate ignores harsh financial realities In this section »

STEPHEN COLLINS

INSIDE POLITICS: IRELAND AND the rest of Europe are now on the edge of the economic abyss but there is barely a hint of that terrifying prospect in the ongoing pre-budget debate. Instead some of our politicians and most of the media are behaving as if the various budget cuts being bandied about in the run-up to the budget are optional measures which can be wished away because they are going to hurt.

Yet there is no way around the fact that this country simply has to find savings of at least €3.8 billion for next year and that is the benign scenario. If things outside our control go badly wrong and the euro zone collapses, we will be looking for savings of over € 17 billion for 2012. Achieving that kind of budget adjustment in one year defies comprehension but it is about time that people started to look at worst-case scenarios.

Despite all the hand wringing about the anniversary of our loss of sovereignty the reality is that in the absence of the troika bailout our position would have been far, far worse. Instead of blaming the European Union, and the German government in particular, for imposing austerity, we should be grateful to them for providing the funds to let us make the necessary adjustment over a number of years. The Government has compounded the problem by continually blaming the troika for the cuts rather than pointing out that they are the consequence of policies pursued under Fianna Fáil-led governments.

We will find out what real austerity is like if the whole EU financial edifice comes tumbling down and the EFSF (European Financial Stability
Facility) can’t raise the funds required to keep us and other problem countries going. With the Germans now having difficulty with their own bond sales that is not out of the question.

The level of debate about the Irish budget in two weeks’ time is a poor reflection on our political system and also on most of the media which insists in presenting every potential budget cut out of context as the action of a malign Government intent on inflicting hardship on some segment of society.

All of the potentially affected interest groups from Ibec to the hospital patients association and third-level students to the self-employed have been lining up to say why the budget should not affect them and they have all been given large amounts of air time and space in the newspapers to make their case. However, the imperative is to get our public finances back on track and this is generally overlooked in the debate, which is conducted as if we have the luxury of living beyond our means into the indefinite future.

Taoiseach Enda Kenny is going on television to address the nation next week and he will, hopefully, be able to convey the seriousness of the position and the need for concerted action to get out of our current difficulties and close to a balanced budget by 2015. The Government has not done itself any favours over the past few weeks with a series of leaks about potential cuts in social welfare and health which have only served to scare people without educating the public about the choices that face us as a society.

Minister for Social Protection Joan Burton’s fingerprints were not visible on the kites about potential social welfare cuts but Minister for Health James Reilly made no bones about painting a doomsday scenario for the health budget to the Fine Gael and Labour parliamentary parties. He was clearly hoping to stymie serious cuts in his department by the tactic but it was so ham-fisted that it could be counterproductive in the long run.

The Coalition parties, particularly Labour, are feeling the heat because they will clearly have to abandon many of their election promises. Some of those promises were ludicrous, given the state of the public finances, and it begs the question why they were made in the first place.

Seán Lemass famously said that all election promises are void once an election is over and the current Government should take that dictum to heart because the situation is too serious to worry about what was said in the heat of battle. One of Brian Cowen’s failures was that he was too concerned about adhering to the election promises made by Fianna Fáil in 2007 long after the world had changed.

What can be said in the Coalition’s favour is that it has acted responsibly since taking office, even if that has involved a continuation of the policies it denounced so strongly from the opposition benches.

The budget, though, will be a different matter because it will represent the first major policy initiative taken by Fine Gael and Labour. Both parties need to forget about who said what in relation to tax increases, third-level fees, child benefit cuts and many more issues and get on with doing what has to be done.

It should also be borne in mind that a wide range of State spending does not go to the less well off. Grants for industry, third-level fees and a big slice of the health and education budgets go to people who are reasonably well off by the standards of the rest of society.

One thing that has been ruled out is any breach of the Croke Park agreement. Given that pay and pensions account for 36 per cent of all government spending that limits the Government’s room for manoeuvre.
It also raises the question about why a range of social welfare payments and healthcare provisions for poor people should be up for discussion while pay and pensions are not.

The cost of public sector pensions increased by 66 per cent between
2006 and 2011 and the bill this year will be €2.9 billion. The pensions paid to retired politicians is the tip of the iceberg as far as public service pensions go. Former ministers who get a doubly enhanced pension represent the privileged elite of public service pensioners but retired top civil servants do as well, if not better, while retired Defence Forces personnel, who get full pensions after 23 years’ service and gardaí who get pensions after 30 years don’t do too badly either.

It is long past time for a big shake-up of our public service pension system and we can’t afford to wait 40 years to do it as the Government appears to think.