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We’ve disgraced ourselves…again. Part 2. October 13, 2016

Posted by WorldbyStorm in Uncategorized.

I mentioned this earlier about the Budget, but Pat Leahy’s piece in the IT (behind the paywall) is well worth a read if you can see it.

It’s not that I disagree with much of what he says, but that which I disagree with I disagree with profoundly. So, for example, I think his analysis here is spot on:

If the inherent instability that comes from its unique composition and parliamentary situation is a fact of this Government, then just as important is that its three components – Fine Gael, the Independents in government and the extramural element in Fianna Fáil – have judged it to be in their political interest to stick together for the medium term at least.
None wants an election; all needed to do a budget.
They needed to demonstrate to themselves as much as to the outside world that they could do it.
The exercise of agreeing and now defending their budget will bind the administration closer.
The Government will become more coherent. But to what end?

But it’s when we get in to a bit greater detail that it begins to fall apart. So he writes;

What was immediately noticeable was that the package was bigger than had been anticipated.
The fiscal space available for the budget-day package expanded by 20 per cent, or some €200 million, in recent weeks.


There are increases in capital spending spread over a number of years, and there will be supplementary estimates later in the year for capital requirements in transport and the Christmas bonus for welfare recipients.
Added to the previously announced spending increases, chairman of the Fiscal Advisory Council John McHale estimates that the total budgetary package, between spending increases and tax cuts, is some €3 billion bigger than last year.


Prof McHale had previously described the Government’s (then smaller) budget plans as “at the limit of prudent policies”.
The council will make its report on the budget in several weeks, but it seems likely to view the actual budget to be outside the limits of prudent policies.

He continues:

…total spending on public sector pay will rise by €660 million, as almost 7,000 more public servants are hired.
During the years of austerity, the number of public servants fell sharply. They are now on the way up.
Some of this increase – recruiting teachers because we have more schoolchildren – is driven by demographics. But not all of it; some of it is just driven by political pressure.

Perhaps it is also driven by the reality that the system was starved for the last decade. What Leahy implicitly seems to argue is that standard operating procedure in regard to PS numbers, etc, was what has prevailed for the past ten years, not anywhere above that. But that’s an absurd proposition because even in the context of the orthodoxy the crisis was a crisis, not a reset. Otherwise why term it ‘austerity’ or ‘difficult measures to stabilise’ matters. But for Leahy clearly that austerity should be the norm, not the opposite.

And then he writes:

And this is the other most conspicuous aspect of Budget 2017 – the extent to which the Government demonstrated its receptiveness to political pressure.
The expansion of the budget in recent days was facilitated by changes in the way Government finances are calculated, but it was driven by politics.

But three thoughts strike here. First there has been a recovery (of sorts). That much is clear – so it is not as if there aren’t resources to apply. Secondly the expansionist aspects of the budget are rather overstated – he mentions the Bertie Ahern years but that is hyperbole. Thirdly of course this is driven by politics. No budget is ever not driven by politics, and particularly in the context of a minority coalition government dependent upon the goodwill of both Independents and FF.

And I think the following is very revealing:

We obsess over how Michael Noonan and Paschal Donohoe will spend the extra billion euro while paying scant attention to how they spend the other €55 billion. And that’s true insofar as it goes, but to leave it at that is to misunderstand the political role of the budget as the primary means of expression of a government’s will, its character, its estimation of its own capacity.

Well either the budget is massively problematic or it isn’t, it can’t be both. One has to choose. To suddenly bait and switch to broader public expenditure is – frankly – a bit late in the day. And yet it points to an underlying conservatism as regards an economic worldview. One where state expenditure per definition is wasteful, unnecessary, too large.

There are good solid reasons to question many aspects of this budget, housing is the most obvious that comes to mind – the concentration on the squeezed ‘middle’, for which read the middle classes, the continuation of a patchwork and partial health service, and likewise in education, the fundamental part private, part public direction that characterises this societies approach to public provision. But his critique doesn’t include them.


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