ON POLITICS AND POWER All the am-dram walkouts won’t save us, but cuts to welfare could
POLITICAL tensions around the Cabinet table are set to rise as the Budget looms ever closer. Budget day this year is set for October rather than December so we can satisfy the EU’s timetable. This means the key questions and disputes will dominate summer, rather than autumn, headlines.
Under the Government’s original plan, it was envisaged that budgetary adjustments of €3.1billion would be made.
The question now arises as to whether the size of that adjustment should be reduced in light of the savings expected to result next year from February’s promissory note deal. That deal is expected to cut Ireland’s 2014 interest bill, and thus our deficit, by €1billion. So the argument goes that we can now make a budgetary adjustment of just €2.1billion and still hit our original target.
The Troika appears to be insisting that we stick to the €3.1billion figure. This stance was backed up by European Stability Mechanism head Klaus Regling in an interview this week with The Irish Times. He asserted any application by Ireland for a precautionary credit line from the rescue fund as it exits the bailout would have to be approved by the eurozone’s 17 finance ministers. ‘If the agreed target were not reached I’m sure that would not be well received,’ he said.
But the desire of the Government to have less austerity next year got support from an unexpected quarter last Sunday. The former head of the IMF mission to Ireland, Ashoka Mody, admitted to RTÉ that the austerityonly policy chosen for the handling of Ireland’s EU-IMF bailout had been a mistake.
He concluded that ‘we are now left with only one choice — and that choice is to increasingly make the official financing easier and more concessional’. Professor Mody’s heresy was quickly stamped down by official IMF sources. But it is very telling that a former high priest of austerity should so ostentatiously display such theological infidelity. It is a sign that behind the Troika’s rhetorical wall of prescriptive certainty reigns profound uncertainty and doubt.
Today Professor Mody looks like an isolated figure. In time, he may be joined by others, especially if the dismal economic performance of the eurozone’s periphery persists.
IT remains to be seen how much of a budgetary adjustment we face in October. Don’t be surprised to see a ‘split the difference’ approach with budgetary adjustments of €2.6billion — halfway between the two contending positions. But even this reduced budgetary adjustment would cause Enda Kenny’s government big political headaches.
Remember that last year there was an uneasy stand- off between Fine Gael and Labour ministers.
Eamon Gilmore and his party wanted to extend the 3 per cent Universal Social Charge surcharge to all incomes over €100,000. Enda Kenny and his party argued that this would breach Fine Gael’s pre- election promise not to raise income tax rates. They said that they would consider the USC increase if Labour agreed to a 3 per cent across- the-board reduction in welfare rates. As that would have led Labour to breach one of its key pre- election promises, the notion of a USC increase was quietly shelved.
But before eventual agreement was reached, it was reported that there had been a stand-off in negotiations between the two government parties and that Labour’s representatives had walked out before a compromise agreement was eventually reached.
In recent weeks there has been a recurrence of stories about walkouts. This time it is alleged that Michael Noonan and Brendan Howlin walked out of a meeting with the Troika over the question of the budgetary adjustment for 2014.
Never mind. They got over it quick enough to join the departing Troika team for a harmonious drinks session upstairs in Doheny and Nesbitt last week at the same time as their Cabinet colleague Pat Rabbitte was being besieged by unharmonious protesters downstairs in that pub.
There seems to be more a hint of stage management in these walkouts. They don’t appear to cause any real rupture in relations between Fine Gael and Labour or between the Government and the Troika. Nor do they appear to have resulted in any substantial change to the austerity policies we must endure.
But they do allow Labour ministers to posture and to show how hard they are fighting the good fight on our behalf. That may be their main purpose. For when we look at Labour’s defence of welfare spending, we really have to ask what objective — other than protecting a core Labour constituency — is served by this stance?
Consider some basic realities. Fact: despite all of the austerity over the past five years, this year the Government will still spend some €15billion more than it will raise in taxes, etc.
Fact: in Ireland the basic Jobseeker’s Allowance rate is €188 weekly; in the UK it is £71.70 (or about €83).
Fact: the chief executive of Glen Dimplex, one of Ireland’s most successful companies, has publicly stated that ‘we’ve got ourselves back into a situation in Ireland where there is a disincentive to work, with the way the social welfare system is structured’.
Look closely at the numbers receiving of illness (formerly disability) benefit. Back in 1996, there were just 42,000. By 2010, that figure had risen to over 81,000. Far from general levels of health declining over that period, they had improved dramatically, with average life expectancy leaping from 76 to 81.
And it is notable that there was no increase in the numbers drawing the blind pension over this period. Is that because it is largely a matter of fact whether someone is blind but l argely a matter of opinion of whether they are ill or disabled?
WI TH t his background, it seems clear to me that the Government should be aiming at very substantially reducing Ireland’s welfare payments rather than merely tip-toeing around the problem as Labour appears minded to do. What are we to make of the revelation that, in response to a parliamentary question from Labour TD Kevin Humphreys, the Department of Social Protection said it paid a total of €21million in 2012 for medical certificates and €4million for medical reports? At €8.25 a go, this means that the State paid for 2.5million medical certificates.
It was revealed that one medical practice was paid more than €101,000. If we assume that 84 per cent of that sum was for medical certificates (matching the national split between medical certificates and the more detailed reports) it would mean that this practice issued more than 10,000 certificates last year. That’s an average of 200 a week. Perhaps it’s a very large practice, but these figures seem worthy of some serious consideration.
In fairness to Joan Burton, there has been a sharp fall in the numbers drawing illness benefit in the last two years. The 2010 figure of 81,000 was reduced last year to 64,000. But, l ooking at official statistics, it appears to have been the only welfare benefit to show a significant reduction in recent years. It’s more of this that we want, not less.
It’s not foot-stomping, walk-outs or poorly performed amateur dramatics that Ireland needs from its governing politicians as the Budget approaches. It’s a realisation that we are still an awful long way from budgetary stability and that Ireland must cut its cloth to fit its measure.