Monday 24 October 2016

Economic growth will be proof we are on right road

Published 06/12/2012 | 17:00

At the outset of his Budget speech yesterday, Finance Minister Michael Noonan said that the "real measure" of success for his proposals would be a growing economy.

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One might say as much about any Budget, in any circumstances. But the statement was particularly pertinent at this time.

Mr Noonan is struggling to bring a monstrous deficit under control. He has the support of the EU-ECB-IMF bailout troika – by all accounts, support which includes nudges in the right direction. At the same time, he was aware that the country expected widespread pain.

The pain was delivered on cue. It brought few surprises. Everybody knew the savings, a total of ?3.5bn, required by way of tax rises and spending cuts. Indeed, everybody knew most of the details. Subsequent questions therefore had much less to do with specific measures than with competence, fairness and effects on the economy.

The Coalition labours under a self-imposed handicap. It has pledged not to increase income tax rates or reduce headline social welfare rates. Mr Noonan stood by the pledge while taking more from taxpayers and giving less to social welfare recipients. Not the prettiest of sights, but within the rules of the political game.

Many of the details, too, are austere in the extreme.

There has been loud controversy over property tax, and another round will follow the announcement of a 0.18pc annual charge, more for owners of houses worth more than ?1m. But the universal social charge, a manifestly unjust tax, is worthier of protest.

PRSI contributions will rise by ?261 a year. Students will pay an extra ?250. Child benefit will be cut by ?10 per month, and maternity benefit will be treated as taxable income. Evidently the Government is willing to offend mothers.

It is also willing to offend a much less popular group – the rich, especially bankers. Mr Noonan appears to be outraged by the fact that taxpayers have contributed to diamond-encrusted pension pots. So well he might be. A cap on such costly privileges was long overdue.

Also overdue were the reduction in the Dail and Seanad "leaders' allowances", which apply to one-man parties as well as real parties, and the elimination of unvouched expense claims for politicians. These would have been all the more welcome if accompanied by further cuts in ministers' salaries.

An early estimate of the overall outcome puts the annual loss to the average family at more than ?1,000. How many of us can afford it? Too many of us are already close to being overwhelmed by debt.

Could it have been avoided? Quite simply, no. Yesterday in the Dail the Public Expenditure and Reform Minister, Brendan Howlin, made his own speech following that of Mr Noonan. He said that when the Government took office last year it faced a "governance crisis". It also faced a debt crisis, which must be resolved.

The measures would have been more bearable had they shown more signs of coherence.

It is impossible to avoid the impression that the key ministers – and their respective parties – have picked here and picked there instead of considering the interlocking effects of all the moves.

But there is a much bigger question. Will this latest batch of austerity measures devastate our already fragile spending power, and therefore our growth prospects?

Mr Noonan made a low-key Dail speech, then changed his tone radically towards the end. He produced a list of favourable statistics and told us to look to the future with confidence.

But people cannot feel optimistic, and will not feel optimistic, until they see signs of firm economic growth.

Mr Noonan has done his best, but a sceptical – and soon to be poorer – Irish public waits to be persuaded.

Irish Independent

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