Wednesday 22 October 2014

Marc Coleman: Despite best intentions, the Troika never understood us

Bailout overlords were too busy talking to social partners to see the real pain austerity caused, writes Marc Coleman

Published 24/11/2013 | 01:00

WATCHDOG: The Troika's Istvan Szekely said the better off in Ireland had 'borne the brunt of austerity'

Not before time, Troika man is leaving our shores. When he was here he gave us lots of advice, most of it good and some of it very bad. By way of a thank you, we might reciprocate with some advice of our own. And my suggested advice would be this: before you go to your next posting, go on a good marriage guidance course. For as you learn on any good marriage guidance course there are times when even though you are totally right, saying so is not wise. And even when it is, the way you say something matters.

Last Tuesday was one of those times. In probably his last statement to the media, the Troika's Istvan Szekely told us that the "better off" had borne the "brunt of austerity". Like his colleagues, Szekely is well meaning and wants the best for us. But the EU Commission for which he works is also largely untouched by crisis: EU officials earn significantly more than average EU citizens and pay significantly less tax. Troika man will retire after 35 years of service on 70 per cent of his salary. With Commission pay starting at €1,600 a month and rising to up to €16,000, that means pension incomes above what most of us will ever earn even before we retire. And when we do we'll be lucky if we have any kind of pension, never mind the defined benefit kind the ESB unions want us all to bail out. Like those unions, Troika man works in a sheltered world of protected pay and pensions. He is less likely than us to have worked as a frontline public service worker or in the private sector or to have run his own business. And he has probably never stood in line for a welfare cheque. So, decent type though he is, he has little perception of the world in which most of us live.

Technically, Troika man is correct. Ignoring the fact that even those on relatively high incomes are not necessarily "better off" (many are in chronic negative equity and debt arrears through little fault of their own), data from the Institute of Taxation in Ireland shows that those on higher incomes have indeed lost out more than those on lower incomes.

A one-income family on €75,000 a year took home €56,619 in 2008 and takes home just €51,483 now. That loss of €5,136 compares with a reduction of €1,699 for a similar family on €35,000 who went from taking home €32,554 in 2008 to taking home €30,855 now (these comparisons exclude modest PRSI changes in the last Budget).

So, yes, those on higher income have endured more reductions. But this is no comfort to those on lower incomes: what Troika man ignores is how, as a recent AA survey shows, it costs €16,000 a year to run an average household. And that's before you've put food on the table. Add in an average annual mortgage payment of €10,000 and it becomes clear that on an income of €35,000, taxation is cutting bone and not fat, ie infinitely more painful. And while in continental countries the highest marginal income taxes don't kick in until you are earning real money (in Germany you must earn €258,754 to pay the top 47.5 per cent of income tax) here one pays 52 per cent (55 per cent for the self-employed) on an income of just €32,841 – below the average industrial wage.

Troika man also gets it wrong on property tax. His native Germany/Hungary/ Belgium has one so he doesn't see why we shouldn't. What he doesn't see is the hundreds of thousands of people forced to borrow to pay a lifetime's property tax in the form of stamp duty. Troika man looks to his home country and sees how one can be born, reared and raise one's own family and grow old in a rented apartment. So he doesn't understand why we complain about paying a tax to own property. But we see only an insecure rental regime where – for family life – there is no long-term alternative to buying a home. Troika man sees efficient local government in his own country and doesn't understand why we don't want to pay for the same here. He doesn't understand that we have already paid several times over. Nor how our local government system is inefficient and wasteful compared with where Troika man comes from. Troika man is decent and well meaning and kind. But unfortunately, he doesn't spend enough time talking to us. He is too busy talking to "social partners" who represent a minority – and a privileged minority at that – of us and who are immune from the harsher realities faced by the majority.

Speaking of reality, news of the top-up payments in the health service suggests it has yet to dawn on that sector of our economy. Then again, here we must avoid falling into Troika man oversimplification. This week the head of Crumlin Hospital was criticised for a topping up of a salary of €110,000. But that is below that of chief librarian of a university.

Now I ask you, which is more important, managing books or saving children's lives? Archaic centralised pay setting, dictated by all trade unions, has hampered meritocracy for far too long and the time has come to overhaul and open recruitment and promotion at the top of our public sector. Only that way can we get the management we deserve at pay levels that are fair and beyond media criticism. Finally, while we are speaking of unions, one of them this week threatened to shut the country down. If the Government caves in to this, then Troika man could be back soon enough. And if that happens we might, whatever past differences, cheer his return.

Marc Coleman presents 'The Marc Coleman Show' each Sunday from 9pm on Newstalk 106-108fm

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