It's far from the end of the road
No government would cut civil service pay if it had a choice in the matter, but Lenihan has to be a constant gardener and keep pruning public spending
WE have long memories, to be sure, to be sure. There are no shortage of recent Google references to the cutting of a shilling (4¢) off the old age pension by finance minister Ernest Blyth. In 1924.
He was a minister in the party which later became Fine Gael. When Fine Gael was in government, it provided a regular taunt from Fianna Fail TDs. Which might have something to do with the fact that pensions were left untouched in the Budget, apart from a curious cut to the pensions of widows under retirement age.
Could there have been a memory of all those insults hurled at Mr Blyth's successors down the years? Perhaps the thought of being associated with that sternest of pro-Treaty warriors was just too much for Fianna Fail to stomach.
Whatever about that, there was plenty else to stomach. Ministers may have been fearful about cutting public sector pay, but it is only fair to say that they would have been horrified at having to cut social welfare.
Such things must have a reason, and the reason given is the need to keep the country solvent. As it happens, last week was a good one to make that argument. There was something close to a panic on the markets which trade government debt, as the difficulties in Dubai were followed by gaffes in Greece and slippage in Spain.
No one knows how, or by whom, the debts in property-crazy Dubai will be paid. The Greeks, it turns out, have not been telling the truth about their borrowings. And the Spanish government's decision to stimulate the economy, rather than concentrating on deficits, has led to another possible downgrade on its credit rating.
Ireland's present rating is "appropriate", said the man from Moody's -- the biggest ratings agency. That is encouraging, and there were other nice comments about how Ireland was doing more than most, but it is not yet making our borrowing much cheaper.
If there is a reason for that, it is probably the banking crisis.
Behind the €20bn annual borrowing, and the €85bn debt, is that €54bn pledged to buy property loans from the banks.
It is a funny kind of debt -- not quite the same as that being used to pay public servants and social welfare -- but the two together mean Ireland is still one of the scariest prospects in the EU-15.
Athens must show willing, but Dublin must keep trying. Despite Mr Lenihan's soothing noises, the striving is far from over.
The trouble with cutting public spending, as has been pointed out so often, is that pay and welfare are where the money is.
Over a third of it goes on paying the wages of those who provide public services (and the pensions of those who used to), while an even bigger proportion -- almost 40 per cent -- goes on the social welfare payments.
This proportion is rising rapidly, as unemployment climbs. The social welfare bill itself was not cut in the Budget. It rose by €700m, even after the €780m "adjustments".
Public spending is like a vigorous shrub. You have to keep cutting just to stop it getting bigger.
That is all the Government plans to do. The Budget documents show day-to-day current spending at just under €56bn this year. In 2014, it will be just less than €55bn. What could be simpler? Except that the implications of that for the public service are profound, in terms of pay, numbers and future increases in welfare and pensions.
But so are they for taxation. While spending on running the country is frozen for six years, the cost of the national debt will rise by €5.5bn. Taxes will have to close the deficit we started with and cover those debt costs, expected to hit a total of €7bn a year more by 2014.
The Government hopes a lot of that will come from growth -- and so do we all. It probably cannot be done unless the hoped for recovery gets under way next year. But it is certainly not feasible unless government spending is frozen over coming years, and rises by less than 5 per cent a year thereafter.
The "cutting" will go on, and so should the debate about how and where. The unions say they can do it without pay cuts, but are summoning their troops because the Government would not play ball.
This makes no sense. Those numbers are there for everyone to see. No sane government would ever choose pay cuts over equivalent savings, if the savings plan had been worked out -- and approved by the membership of the unions.
But they have not been fully worked out, and they most certainly have not yet been approved.
No sane government would take a chance on that being delivered in the current febrile state of financial markets. But the idea that Wednesday was the end of the road, in any sense, is plain daft.
- Brendan Keenan
Originally published in
