Austerity must come with light at end of tunnel
As New Year's Day dawns tomorrow it will bring with it a raft of savage tax increases and higher charges that could end up costing the average family as much as €2,000 per year.
It has become a grim annual ritual. As one savage Budget has followed another, the start of each year is not a time for hope and celebration but for calculating the impact on the family budget of the latest round of tax hikes and increased charges.
Most attention has been focused on the Government's plans to introduce a new "household charge", in reality a proto-property tax, which will come into force tomorrow. While the household charge has been set at a low initial rate of just €100 per year no one is fooled. Most analysts expect that households will be paying an average of at least €1,000 per annum in residential property tax and water charges within a few years.
Not surprisingly opposition to the new household charge has been vociferous.
However, the household charge has served to distract public attention from a wide range of other tax increases and higher charges that are being introduced as a result of the December Budget. These include a 2pc increase in the standard VAT rate to 23pc, higher motor tax, a new levy on non-health insurance policies, higher university registration charges, dearer VHI bills and dearer tolls, which we calculate could cost the average family close to €2,000 extra a year.
Things cannot go on like this. Ever since the bottom fell out of the economy in mid-2008, the Irish people have shown remarkable fortitude. This is despite five savage Budgets which between them have taken almost €20bn out of the economy in spending cuts and tax increases.
Even before this month's Budget, the Institute of Taxation estimated that a family with a combined annual income of just €55,000 had already seen its disposable income slashed by €6,750.
If we haven't already reached the limits of austerity then we must be getting very close. Not alone is there clear evidence that the savage austerity measures are themselves contributing to the economic downturn, public support for our current fiscal policy can only be maintained if taxpayers believe that their current sacrifices will bring eventual gain and that all of the pain will have been worth it.
If the belief takes hold that austerity doesn't come with a light at the end of the tunnel then public opinion could turn nasty very quickly. The Taoiseach's pre-Budget speech notwithstanding, this Government has done a very poor job of explaining its budgetary policies to the Irish people. Why are we being forced to make these sacrifices? If the Government doesn't start to come up with some convincing explanations it might find public support wearing thin well before the end of 2012.