independent

Wednesday 23 April 2014

Government's lopsided attitude to spending is bordering on immoral

Another €3.5bn is sought by Government in this week's Budget for 2013. We wait with hope rather than confidence that the ministers Howlin and Noonan will at last show leadership in addressing Ireland's bankruptcy.

As with any farm, household or company in financial peril, the national budget should be about prudent and best use of scarce resources. The Government again next year plans to spend €12bn more than it takes in.

In spending this borrowed cash the Ministers should ask of every item:

nIs it fair and equitable?

nIs it affordable?

nWill it create jobs and wealth which support our future economy?

nGiven Ireland's recent past, will the Budget address the blunders known as Benchmarking and Croke Park and will it retrieve lost competitiveness?

A European Central Bank comparison of public sector versus private sector salary scales across 10 Euro countries shows that the PIIGS (Portugal, Ireland, Italy, Greece and Spain), along with their shared financial woes, also share the fact of paying premium wages to the public sector.

This is in contrast to the situation in well managed countries such as Germany, Austria, France and Belgium. The paper, entitled "The Public Sector Pay Gap in a selection of Euro Area Countries" by Raffaela Giordani and others, also shows Ireland's public sector received by far the biggest pay hikes from 1999 to 2007, with an increase of 64pc.

Over this period the German public sector salaries grew by a mere 6.8pc. Other pay hikes were: Belgium 24.3pc, France 25.8pc, Portugal 30.2pc, Italy 34pc, Spain 34.8pc, Greece 50.2pc.

Ireland's public servants are the best paid in Euroland, and these are the pay hikes and pensions now protected by the Croke Park agreement.

In contrast, there has been widespread breaking of deals and contracts with Irish agriculture and farming. The biggest blows came in 2009 with the loss of REPS, the cut in Headage payments and the halving of the Suckler Welfare Scheme.

But even last year, farm schemes took another 16pc cut.

This brings the total cut in overall farm spending to 40pc since 2009, despite the fact that most of this spend was co-funded by the EU.

This is a case of cutting the spend in a job and wealth creating sector and prioritising the non-productive public sector.

On the Central Bank website I came across an item on the "largest price changes over five-year period from December 2006 to 2011". This shows a dramatic price fall in what could be labelled luxury items.

In contrast, prices of the bread-and-butter essentials, that a good parent must provide for the family, have soared (see table below left).

For those with the higher salaries luxury living is now cheaper than ever.

When it comes to sharing the pain of correcting national finances the leadership given by our Government borders on being immoral.

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