Full gravity of situation has yet to sink in
The speed and ferocity of deterioration in finances means cuts and tax increases can't apply just to others, warns Willie O'Dea
Sunday October 26 2008
Politicians are often accused of being out of touch. They are not the only ones against whom this charge can be levied. In the run-up to the Budget, I encountered a number of prominent pundits telling me that the public were in the mood to accept a hard Budget.
As can be gauged from the depth of feelings expressed across a range of issues over the past few days, it is clear that the public are not in that mood yet. The gravity of the situation has not yet taken hold with the public psyche.
This is no reflection on the people concerned. The speed and ferocity of the change in our situation has been dramatic and without precedent. I am around long enough to remember Ray MacSharry's tough 1987 Budget. Back then the ground for the tough action had been prepared by the preceding five years of despair, unemployment and forced emigration.
It is a big contrast with today. Last December, the ESRI was predicting growth rates this year of 3 per cent. Even as late as last spring, the EU Commission was expecting the Irish economy to still grow marginally. Today growth stands at -1.5per cent.
But even these figures don't really convey the seriousness of the situation. The average person does not study stock market trends and international reports. It is hard for most people to get their heads around what has happened.
The best way to try to explain it is to get to the bottom line. And it is this. In 2009 we will need to borrow €90m a week just to keep the country ticking over. This is just to meet our day-to-day bills. The alternative is to have wholesale redundancies.
But we cannot, and must not, be content to keep the country ticking over. We will have to borrow another €160m a week to continue investing in roads, schools and other vital infrastructure if we are to be ready to ride the wave when the international economic upturn happens.
It is a steep learning curve, but people will come to realise that every tax increase and every expenditure cut can't just apply to other people.
We will also have to abandon the great delusion that there is a legion of super billionaires who can bail us out by just paying higher taxes.
The media has a role to play, too. There is no point in the media constantly calling for the Government to rein in spending across the board, and then following that with claims that the cuts being made are heartless.
The public sector is now becoming the whipping boy for many of these pundits. While it is true to say that the amount we spend on the public sector is not outlandish by OECD standards, we will need to get better value for money.
But there is no point in having a dog and barking yourself. Brian Cowen has appointed a committee to draw up a plan for real public sector reform. The sensible thing now is to wait for that committee to report in a few weeks and then act on its recommendations.
Precisely how these budgetary decisions will be implemented will be spelt out in the Finance Bill to be published in a few weeks' time.
There is a world of difference between responding to reasonable requests for sensible changes and caving into sectoral demands. Reacting to calls for climbdowns can only result in meltdown.
Willie O'Dea, TD, is Minister for Defence
- Willie O'Dea
