Colm McCarthy: Let's benchmark public pay, this time in public
With more cuts and tax hikes inevitable, the real challenge is finding the fairest path, writes colm mccarthy
Published 12/02/2012 | 05:00
The last year of the Irish Bubble was 2007. Government revenue had already begun to weaken as the world financial crisis intensified with the collapse of Northern Rock in the UK in September 2007, followed by the Bear Sterns bank in New York in March 2008.
Serious concerns had also begun to emerge about the Irish banking system and bank share prices were sinking rapidly. It was pretty clear that Ireland was headed for a sharp rise in the budget deficit and the first expenditure cuts were introduced in July 2008 following Mr Ahern's departure as Taoiseach. The banking system began to implode in September and policy has been dominated in the period since by austerity budgets and efforts to rescue the banking system. The combined task exhausted the credit-worthiness of the State and Ireland had to resort to official lenders, the EU and the IMF, at the end of 2010.
It is hard for people to accept that after almost four years of expenditure cuts and tax increases so little progress has been made in eliminating the budget gap. In 2012, the deficit will still be at the quite unsustainable level of 8.6 per cent of GDP. The gap has failed to close partly because the level of economic activity, and hence of tax revenues, has weakened so much. Total employment is down almost 300,000 from the peak.