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Gene Kerrigan: Yet another cynical let-off for the elite

Whatever you were doing the day before Christmas Eve, the chances are you weren't reading Circular 28/2009 from the Department of Finance. Which means you missed a little sweetie of a document.

In these perilous times, the Government is embarked on controversial policies -- and it tells us cover stories to get us to tolerate those policies, knowing how grudgingly we do so. For instance, the policy of deflating the economy, slashing services, jobs and wages, has a cover story. This tells us "we're all in this together", and we must "share the pain".

The policy of propping up zombie private banks, at the cost of countless billions from the State, needs a cover story, too. This one is that we must give the banks billions in order to "get credit flowing", which will "kick-start the economy" and create jobs.

Well, Circular 28/2009 put the kibosh on the one about how we're "all in this together". And an interview in this newspaper last week put the tin hat on the cover story about "getting credit flowing". So, just why are we borrowing billions to give to the banks?

Circular 28/2009 is a 12-page document outlining the "Application of pay adjustments in accordance with the Financial Emergency Measures in the Public Interest (No 2) Act, 2009". It's replete with pages of tedious figures ("hourly rates should be rounded to the nearest €0.001"), appendices, explanatory notes and conditional clauses. In short, it's as dense as the average backbencher. What's it about?

In the recent Budget, the Government decided that Civil Service big shots on over e165,000 a year would have to take a pay cut of 12 per cent. And that those on over e200,000 would have 15 per cent lopped off. This showed that we're all "pulling together", because "we're all in the same boat". The disabled and those on lower pay and social welfare are taking a hammering, but at least they know that the big shots are doing their share. And Circular 28/2009 clarifies the Budget decision.

Now, when I say that it "clarifies" the Budget decision, what I mean is it "cancels" it, by order of the Cabinet. Quietly -- while the rest of us were busy preparing for Santa.

Over at the Irish Economy blog, UCD economics professor Karl Whelan noticed the circular. He reckons it means the top civil servants will take cuts not of 12 and 15 per cent but effective cuts of 3 and 5.4 per cent.

This cynical let-off for the highest-paid civil servants was reported, but because of the timing, media schedules, the Christmas haze and the absence of Joe Duffy's Liveline, it got little traction. We're constantly told that we're all in this mess together -- but somehow the elite manage to find loopholes.

Last year, the judges escaped paying the public service levy. The Attorney General noticed that Article 35.5 of the Constitution says that judges' pay can't be reduced. The aim of the Article was to ensure a vindictive government could not use financial pressure to bully the judiciary. If that Article could be used to snooker the levy it could be used to evade taxes -- and it can't be, because the Supreme Court ruled on this back in the 1950s. The whole thing is nonsense.

In a silly attempt to undo the damage, the Government came up with a scheme whereby judges can volunteer 10 per cent of their salaries -- voluntary taxes for the constitutionally protected. Hail democracy.

Politicians themselves have taken just a fractional cut in salaries that grossly exceed the rate for the job. Bank executives and the elite of the private sector continue to be paid multiples of other people's pay -- this is to reward their allegedly superior (though exceedingly difficult-to-see) talents.

None of this surprises us. Fairness and equality are virtues not held in great esteem these days. But, when a government policy depends on the belief that "we're all in this together", you'd imagine they'd do a better job of pretending, wouldn't you? A lot of people are suffering real pain; the elite make meaningless gestures.

There's a far more important cover story that becomes more frayed by the day. That's the cover story for the vast amounts of money the Government is borrowing to prop up dead banks, through Nama and bank recapitalisation. The cover story was the Government must do this in order "to get credit flowing again". Only when credit flows will the economy revive and the dole queues dwindle. As Brian Cowen says of the banks: "The Government has to write whatever cheques are necessary."

Look at the interview in last week's Sunday Independent, in which Jody Corcoran sought to give the Taoiseach all the room he needed to set the public mind at rest. He asked a straightforward question. "When will credit start to flow, that's what people want to know?"

Cowen waffled for 150 words. And Jody had to effectively ask the question again. "When will it be? Will it be March, April, February?"

Cowen replied that Nama will be operational, "in the new year". Now, telling us when Nama will be "operational" is answering a question that wasn't asked. It doesn't tell us when the Taoiseach expects credit to flow.

And, said Cowen, when Nama is operational, "you have the prospect of increased credit available". Not increased credit, but the prospect of increased credit.

Now, he hadn't been asked a trick question, and it wasn't a question that came as a surprise. This is a basic point about the most costly financial project in the history of the State. We're entitled to specifics about what has been agreed with the banks, about what the Government will do if the banks merely use our money to balance their private company books. Which is what a lot of people suspect.

Cowen's vagueness would be surprising if it wasn't the piss-poor standard we've come to expect. "During the course of 2010," he concluded, "we expect to see an improvement in the situation." Not within any credible timespan but "during the course of 2010". And, will we see improved credit flow? No, we'll see "an improvement in the situation" -- which means whatever you want it to mean.

Now, this is the Taoiseach being asked, in the plainest terms, with no hidden agenda, by a journalist making no effort to trap him, with no purpose but to give citizens the information they need, about the results they can expect for all those tens of billions of euro.

And the Taoiseach sounds precisely as you'd expect a man to sound when he hasn't a clue.

Is there anyone who believes this cover story? And if the cover story is not true, why is the Government following this extremely expensive course that has the potential to bankrupt the country?

The answer, I suspect -- and I truly hope I'm wrong -- is that Cowen did a foolish thing back in September 2008.

Terrified that a bank would fail, with no notion of what might subsequently happen, he was convinced by bankers to give all the banks a promise of unlimited support, at whatever cost. And he dare not reverse that policy, for fear of upsetting bondholders. And he'd look silly. Of course, it's possible that Cowen and his cheerleaders have got it right this time. And what's happening isn't a massive squandering of billions of euro we don't have, trying to save banks that are beyond repair.

In which case, perhaps someone would like to admit that the "getting credit flowing" cover story is hogwash. And the real reason we're borrowing tens of billions to give to the private banks is -- eh, well -- what?

Sunday Independent