Severe taxes are here to stay if we want recovery
THERE are two essentials in the recovery scenarios for Ireland outlined by the ESRI yesterday, one which we can control; a second which is beyond our influence.
The ESRI says a recovery is first of all dependant on a global economic recovery, something over which we have little control. The second essential, on the other hand, is directly controlled by the Government.
The ESRI warned that the Government must stick to its stated budgetary targets on taxation and spending. Any deviance from these and we could be in for a very long haul indeed.
As the ESRI warns, the price for failing to deliver on the promised tax hikes and spending cuts will come in the form of lengthening dole queues.
We will all head to the polls some time before the autumn of 2012, right in the middle of the period covered by yesterday's ESRI document.
By then, the temptation will be to loosen the purse strings a little, maybe even row back on some of the austerity measures which the Government has been forced into.
However, if the ESRI is correct, it will be absolutely critical that any such temptations be resisted, even if this means election manifestos which, in short, are both brutal and mean.
The fact is our problems are largely of our own making. During the boom years we were governed by politicians bent on a "low tax" mantra.
At the same time the construction industry was encouraged by a series of expansionary measures which were needless and allowed to run and run.
And all through the era of the Tiger economy the huge revenues garnered from stamp duties swollen by the property bubble and soaring VAT receipts were entirely wasted.
All during the years of the Celtic Tiger, the Government failed singularly to tackle the structural deficit in the economy and spending was permanently out of line with even soaring tax revenues. Rather than rein in its spendthrift ways when we had the extra cash, the Government went on a spending spree.
We are now about to pay the price for those spendthrift days, and what a price it will be.
Anyone thinking that the austerity taxes already introduced, and those coming down the line, will be temporary in nature better think again.
If the ESRI is right, or more precisely if the Government wants the economy to recover, then these taxes are here to stay. We failed to deal with the deficit during the good times and are now being forced to do so in the middle of the deepest recession in memory.
But do so we must. The alternative is a return to our old ways -- not of give-away budgets, but of long queues at the social welfare counters.
- Pat Boyle
