The ‘myth’ of economic pain and a grateful public… oh, and some thoughts about whether the public is aware of the ‘economic reality’… July 4, 2009
Posted by WorldbyStorm in Economy, Irish Politics.trackback
Reading Stephen Collins this morning I was reminded of a conversation I had during the week with an acquaintance in the Green Party. First though, what did Collins say?
Whether the €200 second homes tax should apply to mobile homes is utterly trivial in the scale of things, but the heat generated on the issue was a chilling reflection of how many people are still living in a fantasy world where economic reality has no place.
The report of An Bord Snip Nua, as the Expenditure Review Committee has become known, will be the first signpost pointing to the scale of the task ahead. While there has been talk of €5 billion in cuts next year, most people find such large numbers hard to grasp. It is only when the practical detail is spelt out that voters will realise what is going to happen. That’s when the screaming will start.
There is, in fairness, an element of truth about this. Whatever way things develop the reality is we do face a crisis and there are decisions that have to be made as to how to combat this. Taxes will, of necessity, increase, and indeed if the path the government seems set upon is taken then we will see cuts.
The problem, as ever, is that Collins limits the options radically as regards the space for movement by the Government.
While publication will inevitably stir up controversy and give hostages to fortune by enabling pressure groups to mount opposition to many of the specific proposals, there is a lot to be said for getting the report out in the open as quickly as possible.
For a start, it might help to wake the public up to the reality of the choices faced by the Government. The Fianna Fáil-Green Coalition will, meanwhile, have the luxury of being able to say it is not committed to accepting any particular cut until budget decisions are made later in the year. It should also put pressure on the Opposition parties, to say what aspects of the report they would accept. So far, the main Opposition parties have been able to make political capital out of the Coalition’s difficulties, without offering alternative policies. Fine Gael has given broad brush strokes focused on spending cuts rather than tax increases, but has not spelt out the details, while Labour has mainly relied on denouncing every Government initiative.
And he continues…
A feature of the public response to date is that there has been far less resistance to income tax increases than spending cuts. The irony is that while the Government itself knows that the future prosperity of the country requires that the emphasis be placed on getting public spending under control, the softer political option is simply to dip into peoples’ pockets for more income tax.
The ’softer’ political option? It’s hard to think of a more unlikely phrase, isn’t it?After a decade or two of rigid adherence to tax cutting and a fear so great amongst the political classes that even the Labour Party – the Labour Party! – was forced in 2007 to introducing a policy of cutting the lowest rate to 18%.
That must seem odd to him, at least, given his cheerleading over the years for the tax cuts by the Progressive Democrats and others. They might have thought that their ideological preference was now entirely embedded. But as we’ve seen it’s not, or not entirely. That people might find tax increases more palatable than spending cuts which will incur cuts in services and provision is hardly that odd given rapidly rising unemployment where more and more – yea, verily, even of the middle classes – are finding themselves nearing dependence upon those very services and provisions. Suddenly talk of cutting welfare rates seems a little too close to home. Child benefit cuts in the context of wages that have decreased radically since the 2008 Budget are no joke, and so forth.
Indeed, one might argue that it is Collins who seems if anything unaware of the reality that those of us who still have pay cheques coming in weekly or monthly face as we see their value collapse and the prospect of worse to come. I mean, how insulated does one have to be from the very palpable fear that is abroad about how bad the situation is becoming on a personal level for most people in this state that one can glibly talk about ‘living in a fantasy world where economic reality has no place’?
Or perhaps people are intuitively coming to a conclusion as to their preference for how this should pan out and what policy measures should be taken, and it just so happens it isn’t his.
Is it that he can only believe the ‘medicine’ is working if there are protests in the street? Is this the yardstick he seeks?
I’ve stated before that there’s a balance here, that some reforms to our public sector are reasonable, that some expenditures are worth examining closely and stopping where appropriate, but at root if we want services we have to pay for them. And it seems that perhaps that message is getting through.
But let’s detach the issue of whether public expenditure control is the central and pressing problem we (or to put it his way, the emphasis must be on it to secure our future prosperity) face from this discussion for another time, not least because Collins himself admits that…
As well as cutting back on spending, there is a strong case to be made for raising more revenue for the exchequer by broadening the tax base. However, if the paltry second home tax is anything to go by, a genuine property tax will provoke the same kind of resistance as spending cuts, particularly if it is designed to raise a significant amount of money.
The report of the Commission on Taxation, which is expected to recommend a property tax, among other things, will form the second prong of the Government’s approach; its report is expected at the end of the month. Along with the spending cuts report, it should help to frame debate going into the autumn, and preparation of the critical 2010 budget.
Yeah, so he’ll stomach tax increases, but to him there’s still only one game in town. Well. We’ll see.
He makes though, a rather good point about the junior partner in government…
Another important element that will feed into budget considerations is the review of the programme for government, on which the Greens are placing a great deal of emphasis. There is an assumption in Fianna Fáil that the Greens will hang in there no matter what, but there have been clear signals that the junior Coalition party is considering all its options.
The decision by the Green leadership to consult party members indicates a willingness to raise the stakes. The problem is that once members are given a say, they may not be all that easy to control. Polls have shown Green voters very unhappy with the Government. This is bound to have rubbed off on a significant number of party members.
The dilemma faced by the Greens is that while they could face a wipe-out in an early general election, the party might cease to exist in all but name if its Ministers sign up to the kind of austerity programme that the country requires in the autumn.
I’m sure I’m misreading him, but is he actually implying that the Green Ministers would go it alone with an ‘austerity’ programme (again, is too he blind to how it is beginning to feel for employed and unemployed people?). Once I’d have said that was unlikely but… now… And indeed I’m not entirely convinced that the GP wouldn’t actually in the majority swing behind the Ministers. Whether though that leads to the same outcome, a wipe-out whether sooner or later is an interesting question in itself.
On that score I was talking to an acquaintance in the Green Party this week and this person suggested that Fianna Fáil after it made the 1987 cuts was actually rewarded for its pains. I pointed out that at the subsequent election it was left in a position where it had, for the first time, to enter an explicit coalition arrangement to which the response was, ‘well it didn’t lose as many seats as it expected’.
Well, that’s true, but I’m not sure it’s terribly useful as a means of gauging their support or that of their policies. What’s interesting is that although opinion polls saw them performing strongly once the campaign was called the health service cuts took precedence locking. Now, they lost 4 seats which was hardly a meltdown, but… there is, perhaps, a more interesting aspect to this because of course the party which most clearly expressed the cuts agenda, the Progressive Democrats saw their numbers fall from 14 to 6 (and it’s worth noting that they had two more seats than the Labour Party in the 1987 election which incredibly pushed Labour into 4th party status on 12 seats). Their decimation would suggest that the appetite for cuts was much lesser than some might think and might also give pause for thought to those who think that smaller parties can somehow buck trends. Indeed, I hope I’m not pushing it when I suggest that a not entirely dissimilar dynamic was apparent at the recent local elections when the Green Party did worse proportionately than Fianna Fáil. I’m aware the utility of the comparison is very very limited. The Progressive Democrats weren’t in power with Fianna Fáil, indeed they were in some respects its most excoriating critics. But by the same token they did pursue the supposed orthodoxy with greatest enthusiasm.
And here’s a further curiosity. It wasn’t just Labour (and Fine Gael) who benefitted, so too did the Workers’ Party returning 3 more TDs. One has to wonder if a similar dynamic will be evident for Sinn Féin and other left and further left parties at the next election as the ‘reality’ of the cuts takes hold.
So let’s think this through. If the 1987 experience is anything to go by then it appears political parties aren’t rewarded for their ‘courage’ in implementing ‘austerity’ programmes. Quite the opposite. Irish politics, arguably, changed fundamentally with the fracturing of Fianna Fáil as a serious party which could deliver a majority. It has never recovered and the appalling polling and electoral results it has seen in the past twelve months are in a way merely the continuation and exacerbation of that trend. Neither too did the Progressive Democrats. Sure, they went up, they went down. But the underlying direction of their subsequent electoral progress was almost entirely downwards.
I’ll point towards Michael Taft’s thoughts on this period for an economic analysis of the actuality as distinct from the perception.
Oh, one last thing amongst some I’ve talked to in the GP is an odd aversion to the cervical vaccine programme. In part that’s political I suspect, they were badly badly caught out in the backdraft from the Department of Health on that one, and didn’t handle it well. But, political or not, there’s some dark mutterings about the manufacturers of the vaccine, it’s effectivity, the screening programme etc… I guess we’re getting a sense of what price some of them place on preventative medical programmes, these days…
Re the Greens: I heard John Gormley say, when asked about plans to revisit the coalition agreement, that the Greens would not wear any further rises in the pupil/teacher ratio. Through natural wastage and the recruitment embargo, that ratio will rise unless the Dept of Finance allows a resumption of recruitment ( and that’s assuming that Bord Snip doesn’t propose a further erosion of the ratio anyway – I heard Moore McDowell predicting that it would). I’m in Paul Gogarty’s constituency and I know the Greens took a hell of a battering on education when canvassing last month. I’d guess that they’d like the emphasis to be on taxation rather than cuts in services, where possible.
There’s no winning formula in either bumping up taxation or cutting services as far as a ‘grateful public’ is concerned’. Eaten bread is soon forgotten etc. The only real public outcry on reduced spending has been in relation to OAP’s and medical cards. The PS pension levy pretty much failed to provoke a reaction outside the PS, and the embargo has yet to impact on service provision in any meaningful sense (and may not at all – if the departments can introduce a greater degree of flexibility).
Clearly there’s going to be increased discontentment with the double whammy of higher taxation and reduced service provision. The govt know damn well that there’s no ’soft’ political options that’ll produce ‘grateful’ voters anywhere close to three years down the road. I doubt that that consideration is guiding their choices at all. It’s all brickbats from here out.
The mobile home tax backpedaling is a remarkable victory for the Joe Duffy show, but the potential revenues just weren’t worth the PR thorn in the side when there’s bigger fish soon to be fried.
Does it ever occur to the Stephen Collinses that there’s an obvious reason why people would endure tax increases more willingly than service cuts: justice. Tax increases might at least place a greater share of the burden on those who benefited most from the Celtic Tiger; cuts in services will inevitably have a disproportionate impact on those who didn’t.
Of course that depends on whether they cut public expenditure further, which they clearly intend to. But even cutting/taxing child benefit in a context where creche charges, and even the community creches which so far have been relatively low (albeit difficult to access for many), are increasing apace, is going to provoke some sort of reaction.
I can’t though see how they can cut expenditure and not cut provision – the reforms aren’t, as far as I can see from what the OECD recommended or the National Competitiveness Councils 2008/9 report suggested, going to deliver the sort of outcomes in financial terms that some commentators appear to think they will.
Incidentally, you know, I actually don’t have a huge problem with the PS pension levy, particularly if it becomes the first step to compulsory pensions for all.
I think you’re right to an extent Crocodile, but… I’m not sure.
I’m not sure either, WbyS, because the straws in the wind are that cuts in expenditure will consist of pay cuts for public servants who, if they attempt to defend themselves through industrial action, will be accused of hurting those who rely on their services – children, the sick etc.
More pay cuts – in the form of an increased ‘pension levy’ – are on the way for PS workers; there can be no doubt about that. The reason why the pension levy has not created too much hullabaloo among PS workers is that the latter have an acute sense of the economic crisis and are willing to play their part to resolve it. Contrary to what the Collins, Carey, Coleman Axis of Idiocy would have you believe.
Could you imagine the reaction if the government introduced a temporary 5 to 7% increase in corporation tax in the national interest? There’s no need to….
Re CMK’s point about corporation tax, have you noticed how such a move isn’t even being discussed, and neither is any form of wealth tax. Let’s just suppose for a minute we agree that the public sector levy is justified, and so are some public spending cuts. Then for reasons of equity surely the most wealthy people in society should pay a little bit extra. I’m completely puzzled as to why this isn’t even on the table. Having a public service pension may be a perk which sets you aside from a large number of people in the private sector, but so is earning a couple of million a year.
The problem most people have with the various cuts is that they don’t seem to be applied fairly. The caper with the judges is just one example of the whole, “the likes of us don’t have to play by the same rules as the likes of you,” attitude.
I also notice that Cowen, in the last couple of weeks, seems to be writing off massive unemployment as something which is worth enduring as one of the costs of a long term recovery, there’s even been the suggestion it might help drive labour costs down. Which is obviously fantastic news for the people who actually created the boom, building workers. They’ve taken the brunt of unemployment and, unlike the eighties, a lot of them are mortgaged to the hilt and can’t just up sticks and go to England. Though this doesn’t stop the government hinting that they should do just that.
By the way, I love the sadistic, “screaming,” in the Collins story. Make those plebs beg for mercy.
Sunday Tribune interesting today. Usually editor Noirin Gegarty and Shane Coleman at the forefront of TINA slashers, but today an editorial advocating policies that prevent unemployment, a column by Diarmuid Doyle that could have been written by many contributors here, and one by Coleman with no reference to ‘public service reform’ ( surely a record ).
Incidentally, I know the Trib has a small staff – it would be amusing to be a fly on the wall of an office shared by Coleman and Doyle.
That’s interesting, crocodile, I’d love to think that employment would be rising up the agenda.
Fair point CMK. I’ve never doubted otherwise.
Which leads onto…
EamonnCork, that point about the inequity of cuts as they’re applied is something that is angering people. I really wonder how easy cuts wil be to push through.
“After a decade or two of rigid adherence to tax cutting and a fear so great amongst the political classes that even the Labour Party – the Labour Party! – was forced in 2007 to introducing a policy of cutting the lowest rate to 18%.”
I don’t know if I’d use the word “forced” there – didn’t Labour start the bidding on that whole tax cut auction in 2007? The Greens resisted promising tax cuts and had more or less the same election result as Labour (static).
Fair enough, I mean it though in the sense that the LP appears to have thought that in order to appear ‘credible’, ’sensible’, whatever, it had to offer these sort of policies. I’m not sure re the GP that that provides us with an illuminating example given the vote for smaller parties is smaller… Also weren’t the GPs taxes very clearly focussed on environmental concerns, entirely correct and laudable?
Not to my memory WbS. Site Valuation Tax was in manifesto (which we’ll hopefully see rather then flat rates reintroduction) which is more about social then environmental concerns. Capital gains +10pc as far as I remember and indexing tax bands to inflation.
On the general point you return to regularly re commentators & pain is well made and Collins et al are guilty of engaging in simplistic analysis (maybe something to do with copy requirements). However the point that they’re failing to make is made much better by people like Ronan Lyons here – http://www.ronanlyons.com/2009/07/06/an-bord-snip-eile-public-sector-cuts-part-1/
“This year, the State will spend approximately €64bn of taxpayers’ money. A little over €7bn of this is capital expenditure, dominated by social housing and new roads. The other €57bn is current expenditure. Tax receipts for 2009 are likely to be in the region of €34bn. This leaves us, therefore, with a €23bn gap to sort out – and that’s assuming that capital expenditure is being spent on projects that deliver enough social good to pay for themselves over time. If cleaning up the banks ends up costing us about €1bn a year for the foreseeable future, and there is indeed some waste in the capital expenditure, it’s fair to say that the true fiscal gap is in the region of €25bn.”
Its a point I’ve made a few times in comments here and still not satisfied with Michael Taft’s detailed responses. Basic gist again is we built an awful skeleton welfare state on the back of revenues from an unsustainable boom. That has gone and won’t (and IMO shouldn’t) come back. And on that, Jim O’Leary’s piece in the IT last friday is worth a read:
http://www.irishtimes.com/newspaper/finance/2009/0703/1224249965993.html
Those are very very central issues you raise and I’ll get back to you later with some thoughts after my latest bout of wage slavery…
Okay, here goes for what it’s worth. Firstly we both agree that the state has skeleton social welfare service provision, at least in contrast with other EU states. I think that point has to be kept central to this.
I have two major quibbles with Lyons analysis. Firstly his aversion to unversalism in provision of services which I believe is the core of a humane social contract (and is effective, universal child benefit is the best means of combatting child poverty).
Secondly the belief that there are large amounts of monies to be found in the PS/CS in some sort of cost free way which won’t affect service provision.
While he does note that his approach would incur societal strife he seems to have rather more equanimity about it than I would in his position. Moreover he seems to ignore entirely the fact that our PS/CS is small by international standards, ‘modest’ was the word used in the last National Competitiveness Council report of 2008/2009. Is he seriously suggesting that a ‘modest’ and in may respects (bar health) underfunded PS/CS can be stripped down in the way he proposes?
Take away that core of provision and we’re left with each and every one of us as taxpayers and citizens working to no clear purpose. In that context I’d be close to first in line to suggest we merge with another state because our independence would be entirely pointless. Or to put it another way, no taxation without provision.
So he appears to me, at least, to believe that the PS/CS is in essence a cash cow ripe for bleeding now that times are hard. I take precisely the opposite line that the PS/CS is both a facilitator and engine of growth in the economy. I’m not alone in this, from the US to mainstream European Christian Democracy we’ve seen how the centre right has rowed in behind using the state to retain or grow jobs. So why not us and why not now? Because we seem to believe that those figures are a burden. Which indeed they are if the monies aren’t directed towards encouraging and supporting both the public and private sector.
One issue that is also crucial to keep in mind is that the projections from bodies as widespread as the IMF, OECD and indeed the ESRI, agree that within four years our situation will have returned to the status quo ante, in other words we’re back at 2008 levels of growth in the economy. As it happens I’m more pessimistic about that. I’d suspect that we will see lower levels and that has obvious impacts. However, if we take those figures and most seem to accept them, then our task for the next four years is to reformat our tax base, use strongly activist government policies to encourage growth, borrow, yes, because we have no choice one way or another (and NAMA makes all other borrowing near irrelevant).
Part of that will come from monies from incomes, in other words further personal taxation and a further balancing of pension provision across both the public and private sector which yes may indeed necessitate increased pension levies on the PS (but this isn’t no-cost, the deflationary effects are potentially very bad and the knock-on effect in general consumption)… but central to that should also be a clear fund established from the income taken by the state to assist in economic growth and development. Now is the time to be reworking that and education and health entirely and pushing towards universalisation in order to generate economies of scale. And universalisation means retaining universal child benefit payments but taxing them.
If this were a case of we save €3bn per annum through various savings and taxes and in five years we’re home free you’d get little argument from me. But it isn’t that. Instead it’s the effective asset stripping of our PS/CS (and in some cases literal asset stripping such as the suggestion of selling ESBI off when ESBI is a nett contributor to the Irish exchequer).
As a progressive and a leftist, and I know that sounds pompous in the extreme, but feck it, it’s what I believe,
I don’t think that’s a logical or rational approach to this matter at all.
And that said, it’s interesting, to me at least, that Lyons on the 6th of June is far less sanguine about cutting public expenditure going so far as to say in a comment that…
On government expenditure, I totally agree. My only concern is that a 25% cut in public expenditure (and even that would only get us €15bn of the way there) might hit good and bad expenditure and even a 10% cut – such as in Latvia – could be tricky to do overnight. Some support to government cuts will have to come from tax increases.
I’m not sure how he squares that (and particularly the ‘only’ €15bn) with his most recent piece. Because in the quote above he notes the most immediate problem. That even with all the straining, and potential societal strife, the measures he advocates still don’t close the gap, and arguably with NAMA won’t at all.
Is all this a gamble? It sure is, but it seems to me to be well worth putting monies towards growth and development rather than cutting the public sphere further.
Not much to disagree with in your analysis, WbyS.
A point brought up in yesterday’s Irish Times article about Professor Alan Aherne: did you know that Ireland is the only EU country to have cut public sector salaries in the current crisis?
Good stuff WBS. The agenda behind a lot of this talk about public service cutbacks is that there’s now a chance to get some previously politically unacceptable stuff done under the cover of a recession. This is happening in the private sector too, I suspect that not all of the wage cuts people are being forced to endure are coming about because the company would go bust otherwise.
You’re also right that NAMA dwarfs everything else. There was an interesting piece in the Times concerning the trial of Liam Carroll who is being pursued by the bank for many millions.
Apparently the banks didn’t want to make him sell off his assets because if they did it would prove they were worth a lot less than they were on paper. And the reason this would have proved disastrous for the banks, so the Times implied, would be that if the actual value of the assets was proved then NAMA wouldn’t pay out on the illusory value being claimed by the banks.
Now, if the Times could spot this, you’d wonder why the government haven’t. Because the implication appears to be that NAMA will actually buy assets for more than they’re worth except no-one will be able to prove it if the developers are not forced to put them on the market in the interim. Which makes it sound like a bit of a scam.
And if one of the results of NAMA is that the banks will hold off pursuing developers for the money they owe because the state will eventually pick up the tab, it sounds like a consummation devoutly to be wished for those, both politicians and developers, who enjoyed their time in the Galway tent.
Incidentally I was speaking to someone the other day who’s being hounded to the last by the bank over a few thousand of a credit card debt. That’s going to happen to a lot of people who meanwhile will see the big developers having hundreds of millions written off. The main victims of this will actually be small businessmen in the building trade who will be owed huge amounts and won’t get any of it. The much patronised Breakfast Roll Man in other words.
It really is a terrible mess. Seeing as Crocodile brought up the subject of Ireland in comparison to EU, there was a suggestion that NAMA is such a fantastic idea that every other country in the world was going to copy it. Did this happen? I’m not being facetious, I genuinely don’t know.
Because in the quote above he notes the most immediate problem. That even with all the straining, and potential societal strife, the measures he advocates still don’t close the gap, and arguably with NAMA won’t at all.
There’s a couple of red herrings which repeatedly come into play in this debate.
The first is that NAMA, and the risks/expenditure involved dwarf the other issues, so we shouldn’t worry too much about how we tackle them. Well, I’m not hopping on board that particular bandwagon. No-one (that I’ve seen) has formulated a mechanism for salvaging the bank mess that isn’t loaded with some degree of risk and wrapped up in mega-bucks exposure. The risks of the bank bail-out are no excuse for piling on that bit more to the debt pile than they are for gutting the public sector. If a thing is worth doing on it’s own merits, not because it’s looks comparitively rosey next to a bigger shit-storm.
Secondly there’s this business about cuts not bridging the gap on their own, and potentially adding in some degree to deflation, so why bother? Well, it boils down to choice along a pretty clear axis – borrow in the hope that new markets will emerge before your debt becomes unmanagable, or constrain expenditure in the hope that dormant economic activity will revive and our ‘known’ industrial/economic capacity for growth will pull us out of recession. One side of this axis puts an awful lot of faith in essentially unknown and unproven/un-emeged markets, where as the other concedes across-the-board cuts in income as we build up economic growth to fill the property bubble hole. Cuts don’t bridge the gap, or remove the need for borrowing, but they might well be an unhappy neccesity.
There’s no real compelling pitch for expenditure constraints, other than it’s not pilong up as much debt as the alternatives. Borrowing for ’stimulus’ is a much sexier proposition, what with retaining higher incomes, and all that ‘green recovery’ and new technology/information age – driven emerging industrial capacity. Who wouldn’t want a piece of that action? Trouble is that without the success of said ‘emerging industries’ (they, eh – emerge, prove their value as exportable commodities, employ a bunch of people, and contribute 20% to GNP in a matter of, say, a decade), then the ’stimulus’ package is just going to throw good money after bad.
Obama and Brown have a different set of cards on the table in terms of stimulus packages. In countries that have strong indigenous export markets as well as large domestic consumer bases, and natural resources, and long-term investment in design, R&D and cutting-edge technological development, you can afford to gamble on emerging markets – because you’ve the scale, experience, and leverage to make the most of the emerging markets that do have potential for growth. The risks for Ireland would be much greater.
So, a pragmatist will look at the proposed new model markets that stimulus would be directed towards, and make a judgement as to whether they are likely to be; A. Something more than vapourware, B. Viable in the competitive exports market, and C. 20% GDP territory revenue generators. If you’ve your doubts about the first two, or think that we fall far short of C, then you have to question if borrowing on the back of that gameplan is more harmful than benefitial.
WBS, one explanation for the current enthusiam for cutting public services is the belief that perhaps the private sector could step in and pick up the pieces. I know that this is a long standing aspiration for EU elites (Right, Centre Right and, by default sadly, Centre Left) and this objective has inpired some jiggery-pockery in parts of recent EU treaties etc.
I’d be astounded if the current advocates of cutting public sector expenditure, and by implication PS provision, had any serious ideological objections to the wholescale privatisation of public services. Certainly, Collins, Coleman and Lyons wouldn’t and, so long as it didn’t impede farming subsidies (handouts or dole, to give them their more accurate description), I’m sure Carey would have no objections.
I’d be equally astounded if there weren’t a whole slew of well connected ‘entrepreneurs’ currently lobbying FF/GP/FG/Lab politicians to the effect that ‘X service is costing Y local authority/government department too much, and my company can provide it far cheaper, with the benefit that outsourcing it my company will reduce public expenditure’. Needs must in the current climate, and all that.
The ideological mood music is there for justifying a wave of small scale and not so small scale privatisations in the name of cutting public expenditure and ‘efficiency’. Alas, I’m certain Labour will be key proponents in this process.
To end with an anecdote which touches on previous CLR debates about the levels of customer service provided by the PS compared with the private sector. I’ve had years of dealing with a private company providing a privatised service and the levels of incompetence, arrogance and cyncial (ab)use of the legal system are breathtaking and would never be tolerated in the public sector. The Principal of this company is very, very well connected with FF. We can expect more of these companies providing public services in the future. Most will probably end up being subsidised by the State at a great cost than direct state provision – as is widespread in Britain.
NAMA is clearly impacting on the public debt and tellingly Lyons himself doesn’t disentangle the two… If that’s the case then it’s necessary to see this in the round. It might be nice to try to disentangle the two, but that’s not how the public sees it and I think they’re actually right in their instincts. This is a clear case of those who should have shouldered the risks being underwritten by the state. I don’t think that’s correct and while I can understand that to some extent the state will be involved in resolving the issue I see no reason to not say so.
Which leads us to the public expenditure side of the equation. I’ve noted above that I doubt that the curtailment of expenditure that Lyons proposes in his more recent piece is feasible in political terms, or, as he seemed to suggest in his earlier one, in economic terms. I’ve never said there’s no space for savings (look at what I say about child benefit). I’m arguing that his ones are a recipe for trouble and worse that we will then derive no benefit from them, indeed given the ESRI studies on this the alteration to the deficit will be fractional. But if we are doing this then I want to see it done for the right reasons which is the rebalancing of public provision mentioned above. I think you’d get relatively few people demurring from that.
We’re not just gambling on emerging markets. The OECD, etc figures are clear. One way or another we return to growth within the next five years, perhaps a little longer (although the ESRI is far too optimistic in my view on the situation in the event We’re talking about a stimulus plan that engages with current markets and current business as well as promoting new ones, that ensures that our infrastructure etc on all axis is suitable for current FDI which seems set to continue. Lyons doesn’t as it happens see increases of corporation tax by say three or four per cent as damaging our ability to attract that. Indeed Lyons, and indeed Ahearne both seem to point implicitly to our ability to generate revenues through indigenous enterprise through exports as being surprisingly resilient.
We can, of course, and should be more rather than less cautious on these matters, but we shouldn’t simply assume that we’re headed for the worst possible scenario. And with that in mind protecting the public sphere (and I’m not talking about CS wage standards, or even numbers – although Lyons is himself averse to job cuts in the PS/CS for obvious reasons – I mean that in a much broader sense ) is central.
Otherwise I’m simply working and paying taxes to sustain the status quo ante, or in fact something considerably worse than the status quo ante, a diminished public sphere. I want that public sphere strong and healthy and engaged and acting precisely as a bridge across the next four to five years.
Addendum to the above, we’re cutting capital expenditure, one area that I think we can ill-afford to for future growth and one area that doesn’t depend on putative rather than actual areas of enterprise such as the ‘new green jobs’ which seem attractive, but may as you rightly say alastair be the equivalent of employment vaporware. That’s precisely the sort of area I’d expect monies from savings to be diverted to.
‘Makes Nama sound like a bit of a scam’ – EamonCork.
I was told recently on good authority about a property developer who currently owes the banks a few dozen million and is in no position to pay it back. He has managed to get the banks to reschedule the loans for two years. In the meantime he hopes to get a job with NAMA as a ‘property valuation expert’.
We’re not just gambling on emerging markets. The OECD, etc figures are clear. One way or another we return to growth within the next five years, perhaps a little longer
Returning to growth (per se) isn’t really the concern. We’ll return to growth in lots of sectors once foreign markets start buying, and domestic consumer confidence recovers (on solid grounds or otherwise). The problem is that while there’s a need to return to growth in ’solid’ sectors, there’s additionally that awkward property bubble to fill. Look back over any series of Celtic Tiger years and estimate how long it took to grow the economy by 20% -removing revenues from the construction boom. That’s the only route to repaying the loans and preserving incomes – and it’s patently not going to happen. We don’t, and won’t have a plan for that missing 20% of GDP in any sort of short order – we didn’t have it when the country was awash with cash and optimism, and I doubt we’ll do better on the back of borrowed money and desperation.
Rebuilding our taxation system for greater equity and social provision is entirely laudable, but I’m not seeing this scenario as a means of getting there. There are opportunities alright, but mostly opportunities to avoid making things a whole lot worse. We may not be “doomed, I tell you!”, but there’s precious little room for positivity in filling that bubble.
Even with a return to growth there will be a change in many ways. For a start the minimal qualifications and skills needed to make a reasonable living or get a job will have changed. I feel there is a great complacency about how good we and our education system is.
The levels of illiteracy is still the same as a decade ago. We have huge problems in a globalised world.
I agree with you Jim, people within and without the education system make claims for it that can’t be borne out. Functional illiteracy is running at something like about 25% apparently. At the higher end of the spectrum, standards are incredibly lax. Lecturers marking their own students papers, little/no double marking in many departments, higher degrees going through kinda on the nod if the graduate has been ‘helpful’ with research and tutoring, marking papers up so fail rates don’t look bad – it’s all going sadly to the dogs. I’ve heard of people getting PhDs within a year. Academic staff within the NUI are among the most oppressed and fearful workers in the country – shocking employment practices keep them docile if they want to keep their jobs. It’s pretty bad.