Friday 19 July 2019

Lenihan's bid to boost confidence

LET us hope that Brian Lenihan is not overstating the case when he says we have turned the corner and that the worst is behind us, but it sounds good and if it raises public confidence, as is his stated intention, then all the better.

Introducing Budget 2010 yesterday, the Minister for Finance pointed to signs of recovery here and abroad and predicted positive growth in Ireland within six to nine months. His message was strong on optimism and his confident delivery answered the question 'who runs the country, the Government or the unions?' Sitting quietly beside him, Brian Cowen will have regained some of the authority lost during a tortuous and aimless dialogue with the public service. Mr Lenihan has handed the Taoiseach a little moral compensation.

Anyone taken by surprise by the austerity of some of the measures fails to understand the gravity of the crisis that grips the country.

It is true that there are small signs of recovery and that some countries appear to be emerging from recession, but we are still in the throes of a worldwide emergency and simplistic tampering with the domestic economy would not produce a miraculous recovery here, as imagined by some, while much larger economies see the need to maintain massive stimulus measures.

Moreover, if the world economy were to be hit by the dreaded 'double dip', Ireland's situation would deteriorate accordingly.

Mr Lenihan appears to have got it about right.

There are few, if any, surprises. This budget, the most crucial in living memory, was also the most comprehensively leaked.

Public service workers will have to bear cutbacks, as predicted, but the higher paid will contribute most. There have been cuts in social welfare too, but a falling cost of living will balance them somewhat and the minister promises that the worst affected will be compensated.

Public service pensions are to be rationalised and the seeds of a property tax have been sown.

In short, unpopular but essential measures have been adopted and necessary reforms have been initiated.

When the minister intimated in recent days, that this would be the toughest budget, it was interpreted by some as a hint that he would be seeking to raise more than the stated €4bn. But no, Brian Lenihan really believes that recovery is under way and that future budgets will not need to be as severe as this one.

Judging from pre-budget comment and analysis, most economists might be expected to approve of most of the measures introduced, although some have already identified what they see as a number of lost opportunities.

The €960m cut in capital expenditure programme will do little to create jobs by stimulating he construction business; and abolishing stamp duty might have helped revive a dormant housing market.

Britain will soon raise its value added tax level to 17.5pc, a fact which seemed to present the minister with a perfect opportunity to equalise our rates and help stem the flood of cross border shoppers. The half percent reduction in VAT looks puny by comparison, but will still cost the country €140m next year. Perhaps it was judged that the country simply could not afford a greater cut.

Instead, the attempt to plug the cross border revenue drain by reducing the price of spirits, beer and wine sends mixed messages about sensible drinking and looks a little bit like a bad Irish joke, but it will certainly stimulate one sector of the economy.

The car scrappage scheme should create some stimulus too. It will be short term, but may help some businesses survive.

Brian Lenihan was only too aware that taking too much money out of the economy would increase deflation, while not taking enough would lead international markets to doubt the Government's resolve.

But the Government appears to have faced up to its task and done the best it can in bad circumstances. It has sent out a message that the Irish are determined to repair our economy.

Here at home, we have to start believing in ourselves again and in our ability to recover.

Irish Independent

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