Saturday 1 November 2014

Richard Curran: Debate on level of cuts in budget overshadows what it all means

Published 17/09/2013 | 11:53

Michael Noonan joined the Taoiseach in Killenard for Fine Gael's annual think-in
Michael Noonan joined the Taoiseach in Killenard for Fine Gael's annual think-in

The debate about whether the government would, could or should implement less than the full €3.1bn budget adjustment in cuts and taxes has overshadowed much of the debate about what it all means.

Some economists have argued that the government would be mad to use some of its gains to implement a softer budget and that we should try and get to a balanced budget as quickly as possible.

Others, mainly politicians, interest groups and quite a few citizens, say we are completely fatigued with austerity and any easing of the “foot off the throat” would help us all feel a little better.

Well it now looks like Michael Noonan will not opt for the full €3.1bn adjustment.

He indicated that his primary goal for Budget 2014 is to achieve a primary surplus in 2014.

Speculation is that he might opt for a €2.8bn budget.

We need to put this in perspective.

A €2.8bn budget is still pretty savage regardless of anything else. It will be painful and difficult.

The government will try to emphasise how a couple of measures in it will be positive for people in certain ways.

They will also focus on how they didn’t go for the full €3.1bn used the opportunity to ease up a little.

In reality, taking €300m less out of the system that they might have done, might temporarily help some people in some situations, but it will not make a noticeable change in the population’s general circumstances or their level of confidence.

 The government will therefore, also emphasise that this is the last big austerity budget on the horizon – the final push.

I am not so sure that will make people feel any better about it either, but at least it is something to cling to.

Since Brian Lenihan began making spending cuts in July 2008, the cuts and tax increases have been relentless. Cuts to capital expenditure don’t hurt as much because they are a reduction in what the government had previously intended to spend rather than an actual cut. But if they are included in the cuts in the last five years the cumulative adjustment of tax hikes and cuts has been around €28bn.

Lest we forget here are some of the numbers on a full-year basis:

 

July 2008 - €1bn

 

October 2008 - €2bn

 

February 2009 €2.1bn

 

April 2009 - €3.5bn in tax, €1.2bn in current expenditure and €600m in capital spending

 

December 2009 - €3.1bn cut in current, €961m in capital and €126m in tax increases.

 

December 2010 - €2.1bn in current spending, €1.9bn in capital and €1.4bn in tax.

 

December 2011 - €3.8bn total of cuts and tax

 

December 2012 - €3.5bn total in cuts and spending.

 

In one sense we are punch drunk and no longer capable of being shocked. But in another sense, it was important for the government to get the figure below the €3bn mark. We also have some wider economic tailwinds and improvements in job numbers, spending, tourism and the property market.

But these cuts have taken their toll.

The head of the HSE Tony O’Brien said earlier this year, that spending on health had been cut by 22pc since 2008. The pain has been widely felt. State funding to tackle young homelessness has fallen by 66pc since the economic crash.

We are not out of the woods yet and the pain of this budget will be felt throughout 2014.

 

 

 

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