News Analysis

Tuesday 30 September 2014

Shane Coleman: Raft of little cuts could spell big trouble for Coalition

Published 03/12/2012 | 17:00

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THERE may be trouble ahead. Ministers breathed a sigh of relief as they left Government Buildings and headed home late on Saturday night.

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The spats of the past week – and there were plenty of them – ended at around 10pm when agreement was reached on the spending cuts in the Budget.

But that relief may prove short-lived when the full impact of what has been decided hits home.

The Government has managed to put together a Budget without breaching its commitments not to increase tax rates; cut basic social welfare rates or reduce public sector pay. In doing so, it has avoided the inevitable backlash such moves would have generated.

However, in opting instead for a whole raft of smaller cuts, the Coalition may yet end up with much greater problems, as it found to its cost this time last year.

Albert Reynolds famously said it was the little things that tripped up governments. Plenty of "little things" will be announced on Wednesday. And a few big things.

It seems inevitable that child benefit will be cut by €10, saving €140m. That will cause problems for both Coalition partners, particularly Labour which fought the general election strongly opposing cuts to child benefit.

But arguably more worrying is the €250m of cuts in social spending to be announced on Wednesday. There is no way of doing that without creating political fallout, particularly when it seems some of the savings are going to come from the range of benefits and allowances given to pensioners.

It took a day or two last year before some of the implications of the cutbacks in the Budget hit home. It would be no surprise if the same thing happens when the reality of cuts to the back-to-school clothing allowance, the back-to-education allowance, exceptional needs payments and pensioners' monthly telephone allowance among other targets sinks in.

The apparent failure of the Labour leadership to secure compensating tax hikes for the better off – other than a higher property tax for 'mansions' worth more than €1m – won't help calm the nerves of the party's backbenchers.

The lack of political-proofing of the measures by the Cabinet must also be a source of concern. The Economic Management Council (EMC) – made up of the Taoiseach, the Tanaiste and the two ministers for Finance – monopolised the budgetary negotiations this year. The motivation, at least partly, was to avoid the damaging leaks and "kite-flying" that took place 12 months ago.

IT SHOULD be said that the approach has been largely successful in that regard, but it remains to be seen if enough attention and time have been given to each cutback.

After the medical cards debacle in 2008, Fianna Fail and the Greens made sure the Cabinet met several times a week in the run-up to the budget to go through each measure line by line.

It didn't help save the two parties from electoral oblivion, but the approach did ensure that, despite making huge cuts and tax increases, the political fallout from their final two budgets was actually relatively limited.

The current coalition opted instead to keep matters within the EMC and bilaterals between the Department of Public Expenditure and the other departments. Will they come to regret the decision not to utilise the experience and skills of Pat Rabbitte, Ruairi Quinn and Leo Varadkar?

And if the you-know-what hits the fan later in the week, will the 11 ministers who are not on the EMC be inclined to bat on behalf of the Coalition?

Aside from social protection, most attention is likely to focus on health cuts. With wages accounting for 70pc of the health budget, it's hugely difficult to see how embattled Health Minister James Reilly can come up with the required €650m in savings. Expect the troika to be watching this area quite closely.

There is speculation that the €650m will include hundreds of millions of euro in savings from various yet-to-be agreed reforms. There would be an obvious credibility issue about such a move, particularly given the failure to reach such targets set in last year's budget.

The other big issue likely to come back and bite the Government next year is the property tax. The involvement of the Revenue pretty much guarantees it will be successful in raising money, but it is inevitable that it will cost both parties votes at future elections.

But that's a more long-term concern. The only goal of the Coalition is to get to next weekend without losing any of its deputies or performing any U-turns. The Budget may be agreed, but the hard work of selling it has yet to begin. There may yet be trouble ahead.

Shane Coleman is the Political Editor of Newstalk 106-108FM.

Irish Independent

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