News Analysis

Tuesday 16 September 2014

James Downey: Government needs some new year resolve for drastic reform

Published 05/01/2013 | 05:00

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EAMON Gilmore welcomed in the new year this week with a forecast of economic recovery by the end of 2013. Let's hope he's right.

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The Tanaiste does have some evidence to back up his prediction. Our shattered public finances have improved a little bit. Live Register numbers have fallen marginally. The news from the United States and Europe is fairly good, or at any rate not too bad.

Let's glance at this news for a minute. At the very last moment, the American Senate looked over the "fiscal cliff" and stepped back. It was not such a victory for Barack Obama as it appeared. Indeed, the Republicans could have claimed a victory on taxes for the ultra-rich, but they seemed too dim to realise it.

Mr Obama has many more battles to come, with many more late nights and many more unsatisfactory compromises. Remind you of anywhere else?

Yes indeed. The event strongly resembles the EU's approach to banking union. That will happen, but only after much complex argument and after everybody has forgotten what principles, if any, drive the project.

In fact, the really good news from Europe related to a different issue.

A year ago, some of the world's most respected pundits forecast the death of the single currency. They thought its survival was impossible. Some predicted the break-up of the EU itself. But the euro, and the EU, have muddled through.

Irish public affairs are conducted, if one may use such a positive word, on very similar lines. And there are arguments in favour of the method.

Democracy is a messy business. It gets messier with size. Managing a country or a union with a population of 300 million or 500 million is no joke. But it can be very messy in a small country too, and in few countries more so than in Ireland, where everybody knows everybody else and everybody has access to persons of influence.

You will have read about the flood of representations to ministers, often on the most trifling matters. Usually they result only in a waste of some official's time. Infinitely more damage is done when secret influence is exerted by the countless vested interests.

And that influence casts a shadow over the very sensible words of Brian Hayes, Minister of State at the Department of Finance. Nothing new about sensible words from Mr Hayes. He is a junior minister with a senior minister's workload. He is a stout and eloquent defender of the Government's record, no easy task.

Yesterday, he told us that the Government had almost exhausted the possibilities of raising more revenue from taxation and that henceforth we must rely on reform.

Absolutely right. But can we rely on this Government for the sweeping reforms we need?

January 2013 is not a favourable time to begin radical thinking and radical action. The time to start was March 12, 2011, the day after the Government took office. What has been the record?

A few examples will serve. The Croke Park agreement continues to protect overpaid senior officials. Quangos still proliferate. The mortgage crisis grows ever more ominous. The new insolvency legislation has not aroused much enthusiasm.

The tiny cuts in ministers' pay and pensions are disgraceful. But they are nothing compared with the behaviour of the banks. We poured billions into them to prevent them going under. Our reward has been promises of more lending. Now, instead, lending to households continues to fall. The economist Alan McQuaid says this will impede recovery. Doubtless every economist in the country would agree. Proverbially, he who pays the piper calls the tune. Not in this case. The taxpayers pay the piper, but the banks call the tune.

It seems to me that if ministers have put their minds to the subject at all, they have decided to wait for the new European banking regime. That would be very much in line with the Government's attitude to many other pressing issues. Most unfortunately, it would also be in line with its lack of any firm and coherent policy.

We may indeed begin to recover by the end of 2013. But unless we plan for the recovery it will be weaker, and the long-term consequences will be worse. Ministers should ask themselves if they are content with a 10-year prospect of a 2pc growth rate, unemployment still in double figures, and small businesses struggling to stay alive.

If that is indeed the prospect, they will be rightly accused of having wasted a good crisis. I wish them, and everybody, a happy new year, but to make it happy they must stop muddling and start thinking.

Irish Independent

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