Saturday 21 September 2019

Colm McCarthy: Austerity yes, but where is reform?

Budgetary tightening without overhaul of the system is not what people voted for, writes Colm McCarthy

A PROGRAMME of budgetary tightening, austerity for short, is inevitable in Ireland into the medium term. This was Irish policy before the EU/IMF rescue and will be the policy if Ireland graduates from the programme on schedule, but also if the Government is unable to avoid a second bailout.



The Government may succeed, as it deserves to do, in persuading European partners to ease the burden of paying off creditors who invested in banks which have gone bust. It may fail in achieving some burden-sharing. The negotiating strategy consists of seeking help, while maintaining that things are going wonderfully well without any, and this may turn out to be too puzzling for our French and German colleagues.

Whatever outcome is in store, the budgetary options are unaffected. Those who think that there exists a strategy which can avoid tight budgets in the years ahead are selling snake-oil: there will be higher taxes and more expenditure cuts in Ireland in any plausible scenario.

The Fine Gael/Labour Government was elected to deliver austerity. No alternative was on offer at the general election and none is available now. But there can be austerity with or without reform, and the Government seems to have lost its mojo when it comes to reform.

In opposition, both Fine Gael and Labour produced thoughtful documents on restructuring Irish politics and public administration. The failure to push ahead with implementation is disappointing but this Government has even reversed some of the few and modest reform decisions taken by its dismissed predecessor.

During the week the National University of Ireland, a pointless outfit that costs €3m a year and which was abolished by former minister Batt O'Keeffe, arose miraculously from the quango necropolis, its officers appropriately attired in shrouds, to confer a piece of paper on President Michael D Higgins, who chose the same gear for the occasion.

The ponderous speech was witnessed by ponderous bureaucrats, photographed and reported faithfully in ponderous and uncritical newspapers. The Government apparently took a decision, as early as last March, to de-abolish this outfit, scrapped by the previous government, at the behest of Batt's successor, Labour minister Ruairi Quinn.

Unfortunately, the pattern is being repeated in more important matters. A critical agenda item is the restructuring of the water industry, an antiquated and ramshackle Victorian appendage of local government.

Environment Minister Phil Hogan has invited the general public to participate in a public consultation exercise which concludes at the end of next month. He commissioned a study of the industry from PricewaterhouseCoopers, the consulting firm, but has decided that their financial calculations cannot be exposed to the public gaze because of, would you believe, commercial confidentiality.

Public monopolies do not have competitors, actual or potential, and it is codswallop to hide important studies behind assertions of commercial sensitivity. There are knowledgeable people who have decided not to participate in the public consultation unless the PricewaterhouseCoopers document is made available, on the reasonable grounds that they could be wasting Mr Hogan's time by talking through their hats in ignorance of key data. Meanwhile, the airwaves are polluted with a daily diet of whinging about fairness, equity and septic tanks.

In private, senior politicians often complain about the absence of informed public discussion of key policy questions, and about the rampant populism of the media. There is no likelihood that these public consultations will improve matters until ministers accept that the public discussion needs to be informed, and led, by the Government.

If austerity is unavoidable, which it is, the true choice is between austerity with reform and a hapless belt-tightening with sclerotic political and administrative structures preserved in aspic.

The memorandum of understanding agreed with the EU and IMF in November 2010 contains, in addition to budget balance, a reform agenda. It is not comprehensive and was negotiated in haste and under duress, courtesy of the ECB.

In opposition, both Fine Gael and Labour acknowledged, in a series of impressive policy documents, that Ireland needed reform as well as budgetary correction. There has been dutiful execution of the budgetary adjustments (cuts and tax increases, in plain English), which were government policy anyway. But there has been back-sliding at every hand's turn on the reform agenda.

Mr Quinn's decision to resume wasting €3m a year on a useless quango, notwithstanding its convenient abolition by his predecessor, is symptomatic. Having promised to reform the unique Irish upward-only rent review system, the Government backed off without explanation.

The reform of local government requires decisions rather than analysis. How about the re-unification of the national territory of Tipperary, for starters? The Croke Park Agreement offered the public service trade unions valuable concessions (no pay cuts, no redundancies) in exchange for serious cost-cutting reforms.

There is a new government department tasked with public service reform, which is fine as a statement of intent. What about the reform? There has been no evident delivery on Croke Park. The Government's policy on the semi-state sector remains a work-in-progress.

There are no concrete proposals to redesign Ireland's dysfunctional two-tier pension system, which consists of a public sector Ponzi scheme and private-funded pensions which the Minister for Finance appears to regard as a piggy bank. Four years after the crisis emerged there is still no clarity on what kind of banking system the Government would like to see.

Unjustifiable capital spending commitments, which never made sense, have been deferred apologetically, citing lack of funds. The railway line from Ennis to Athenry cost €106m, loses €3m a year and carries eight passengers for each train (eight, not 80 -- this is not a misprint).

The Government has deferred, not scrapped, the plan to extend this line northwards into the equally unpromising markets of Roscommon and Sligo. In Dublin, the Government has wisely chosen not to proceed with Metro North and other grandiose and unaffordable rail schemes. But the reason given again is lack of funds, never an acknowledgement that these are leftovers from the bubble which never stacked up. There has been no public inquiry into the costly over-runs on Luas and the Port Tunnel. It is embarrassing that these schemes were supported by Fine Gael and Labour at the time. Indeed Bertie Ahern's government was upbraided for stinginess in the capital programme by the then opposition.

Where public spending, capital or current, is unfocused or downright wasteful, there is no need to be apologetic about cuts. The Government continually creates the impression that the elimination of waste is an unfortunate obligation imposed by external circumstances. If national economic sovereignty could somehow be re-attained, they seem to believe, the waste would be resumed with gusto.

The last decade has exposed a pattern of failure in politics and public administration which cries out for reform and the electorate, unless I am grievously mistaken, endorsed that view at the General Election a year ago. The natural party of government and the repository of public trust for generations got an unambiguous P45 from the voters.

Perhaps the public was crying out for business-as-usual interest-group politics supervised by an alternative bunch of politicians -- but I doubt it. They voted for, or thought they were voting for, a reform Government. Austerity without reform is a pitiful prospect -- and reform means having to say you are sorry for sins committed in opposition.

Sunday Independent

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