Wednesday 26 November 2014

Decisive first steps to recovery

Published 13/12/2009 | 05:00

IT has taken almost two years but, on the evidence of last week's courageous Budget, the Government is finally getting to grips with the economic crisis that has engulfed the country. For the first time since Brian Cowen became Taoiseach, it is now possible to say that we have reached the end of the beginning of this recession and that there is now a plausible plan in place for the recovery. It will be a long hard road, but Brian Lenihan, the Minister for Finance, took the first decisive steps last Wednesday when he introduced a Budget that tackled head-on the disarray in the Government's finances.

It was, according to the Financial Times, a masochistic Budget, but an essential one. The pain caused by this Budget, and the previous attempt last April, will be felt by everyone in this country. Public servants have been hit particularly hard; already stung by April's pension levy, they must now stomach a pay cut. Their anger is understandable, but the Government had no choice but to cut. Recession has reduced the size of the Irish economy and has forced the Government to reduce the size and cost of the public sector. Total tax receipts this year will not come close to meeting the combined cost of public sector pay and social welfare, so it was essential that both bills were reduced.

According to today's opinion poll, a significant majority of voters now believe that Mr Lenihan, and not Mr Cowen, is actually in charge of the Government. They also believe that the power of the public sector unions has been broken and that the Garda Siochana should not contemplate strike action. In truth, it does not matter who is guiding government decision-making, so long as the right decisions are being taken. Most importantly, the dithering and indecision of the previous weeks and months was replaced by a clear-headed Budget that pulled few punches.

Cowen and Lenihan chose to go for the big targets -- cutting social welfare for the first time since 1924, cutting public sector pay for effectively the second time in a year and cutting child benefit. The next stage in this process of painful recovery must be comprehensive reform of both the public sector and of government itself. Mr Lenihan said that he would need to make further savings of €2bn in current spending next year, less than he feared he would have to make but still substantial.

The trade unions have already identified savings that could be achieved through reform and they now have a responsibility to deliver them. Unfortunately, the unions seem to be too focussed on their own hurt to notice the bigger picture. They are smarting from their failure to persuade the Government to make what would have been a catastrophic choice, and they are threatening to launch damaging strikes against this Government. That is madness.

There is no easy alternative, no pot of gold that can be taxed, no simple solution to a crisis that has wreaked so much havoc in the private sector. Cuts have to be made because the country can no longer afford the cost of the public sector. Those costs will have to fall further next year, and the only way in which the public sector can avoid another cut in pay is if it can deliver savings by embracing reform.

Strikes will achieve nothing but enmity and heartache for those union members who engage in them. This Government cannot back down now, because that would invite ridicule from the international markets and destroy any attempt at repairing Ireland's credibility. Union leaders must show restraint and offer honest leadership to their members. Reform, not industrial action, is the only way forward.

Sunday Independent

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