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News : Irish Economy Last Updated: Dec 6, 2012 - 8:37 AM

Irish Budget 2013: Budget Day as floundering government banks on hope
By Michael Hennigan, Finfacts founder and editor
Dec 5, 2012 - 4:26 AM

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Source credit: www.irishnewsarchive.com

Irish Budget 2013: Budget Day at last and a floundering government will be banking on hope that another payback, this year's valued at €3.5bn in tax hikes and spending cuts, will engender optimism that the sunny uplands of the Promised Land of a budget deficit below 3% of GDP (gross domestic product) in 2015, can be glimpsed through the fog. Far away hills are green and in 2015, GDP is forecast to grow by 2.9% and GNP (gross national product -- mainly excluding the profits of the foreign-owned sector) is projected to be  2.1%. The unemployment rate (thanks to emigration) will be 13% compared with a current rate of 14.8% and almost 200,000 people continuously unemployed for 12 months or longer.

There may not be any real growth between now and 2015.

What is most distressing about the current situation is that policymakers and some economists appear to echo the Dickens character Micawber in 'David Copperfield' that "something will turn up," which is the benefit of a recovery in the economies of Ireland's trading partners. However, given the severity of the recession, the end to easy credit and the extent of the public debt in the developed countries, there will not be a return to the mainly high growth two decades that preceded the economic crash.  I wrote the foregoing in June 2010.

So five years after the onset of the international credit crunch, reform if at all, remains at the default glacial speed and the Government presides over a balkanised society.

Google "Irish+reform" and the Irish Reform Act 1832 heads the results listing. It's indeed appropriate that a nineteenth century British Act of Parliament should head the ranking and in 1986, the late UCD constitutional law professor and Fine Gael TD, John M. Kelly, said: "Ireland's political and official rulers have largely behaved like a crew of maintenance engineers, just keeping a lot of old British structures and plant ticking over... The challenge is to evolve structures - - within which the people can be drawn to individual and community responsibility for their own development."

Michael Noonan, minister for finance, will deliver his speech on Budget financial measures from 2:30 pm to the Dáil and he will be followed at 3:15 pm by Brendan Howlin, minister for public expenditure and reform, who will announce spending measures.

The two ministers together with the other key economy minister, Richard Bruton, have squandered their credibility and despite efforts today to promote commitments to fairness, it's too late. Their virtual epitaphs of political impotence and cowardice have already been carved.

This is the first panic, bust, depression or recession since the genesis of the trade union movement more than a century ago, where the trade unions have abandoned the people at the bottom of the economic pyramid and allied themselves with other powerful groups seeking to defend the status quo.

Irish Budget 2013 Page

Two weeks ago, Minister Howlin, a man who should more accurately be termed, minister for the status quo, called for a meeting with public sector trade unions to discuss 'further' efficiency savings of €1bn in public sector costs.

The long-term unemployed would fill more than 2 Croke Parks excluding dependents and the so-called Croke Park public reform process will soon be in its third year.

A group meets every day in a room in South Dublin trying to agree line-by-line on work practices. They will likely eventually produce a modern day version of the Domesday Book. Wonder what will happen in future when the cent drops that something was missed?

People who believe that this byzantine process will produce significant change in a big organisation, likely are also suckers for other fairytales.

Last September, following a 'review' of the estimated 1,100 allowances for public sector staff that costs about €1.5bn annually, Howlin could only find one to cut for existing staff while in time there could be annual savings "in the region of €475m" by cowardly targeting new staff.

One of the biggest Irish indigenous companies today is the defunct former Anglo Irish Bank.

This shuttered rump of a bank is not open for business but has 1,000 staff, 7 executives earning annual salary packages of €500,000+ and 36 other employees being paid more than €200,000. The prime minister of the Netherlands earns €144,000!

Earlier this year Minister Noonan asked Alan Dukes, chairman of the renamed Irish Bank Resolution Corporation, to cut pay by 15%. He was told where to get off.

Dukes, a former finance minister, has a State pension worth €100,645 this year, in addition to the €150,000 in fees for his part-time directorship -- handy earners in a bankrupt country.

To compound the unreality, Tánaiste Eamon Gilmore described the pay levels at the bank as "unacceptable" and said the Government has appointed consultants to advise on how wage levels at IBRC can be reduced.

Gilmore said consulting firm Mercer was probing what action could be taken. Inspiring, surely??

Ballymagash may have faded from public memory but alas, it is an enduring brand.

In Sweden in the early 1990s, in response to a financial crisis, state guarantees of employment were ended and all workers were given equal rights and protections.

In the 1850's after administrative incompetence during the Crimean War, British civil servants were given guarantees of employment. It was a time when most of the private workforce were serfs.

Two examples of how this British Empire legacy works in Ireland despite pay and pensions premia, were provided last month 1) The Irish Times reported that Eamon Foley left Aer Rianta International (ARI), a unit of the Dublin Airport Authority, in November 2011 after serving 19 years with the company, 12 of them as director general. His generous exit package comprised a lump sum of €437,000 and a payment of €68,000 annually for 6.3 years to bridge the gap to retirement. The DAA confirmed that Foley now worked as a paid external consultant with ARI and served on the boards of certain subsidiaries. 2) When Dún Laoghaire Vocational Education Committee, a State quango/agency will be abolished next year, Carol Hanney, the chief executive, who is wife of Eamon Gilmore, the deputy prime minister, will move to a newly created position for her at the Department of Education on her current pay of €117,000 plus pension.

The lot of the typical SME worker who loses his or her job this week will be basic redundancy, no occupational pension to provide some cushion against poverty in old age and if at an age from middle age up, the prospect of never working again.

Why should citizens like Ms Hanney have such special priviliges while new entrants to the public service and workers in the private sector are treated as lesser citizens?

"Qu'ils mangent de la brioche"!

The original Domesday Book, that was commissioned by William the Conqueror in 1085, could have been the first written tax document. Some centuries after the Duke of Normandy had added England to his fiefdom, another Frenchman provided cunning inspiration for modern finance ministers.

Jean Baptiste Colbert (1619–83), minister for finance to French King Louis XIV reputedly said: "The art of taxation consists in so plucking the goose as to obtain the largest possible amount of feathers with the smallest possible amount of hissing."

Today is payback time and the working of Irish politics, which by default only responds with other than glacial speed when a crisis becomes dire, brings to mind quotes from Frenchman Alexandre Ledru-Rollin (1807-1874): “There go the people. I must follow them, for I am their leader,” and American comedian Groucho Marx (1890-1977): “Those are my principles, and if you don't like them... well, I have others.”

I recall some years ago a Frenchman who was trying to improve his English, pointing out some quote to me in an English language book of quotations that he regularly checked.

I noticed another quotation on the page opposite, from Winston Churchill: "It is a good thing for an uneducated man to read a book of quotations."

I was too discreet to point to the Churchill one as the Frenchman was my boss!

With history in mind, I present a quote from one of the failed Irish politicians who had strong public support before the soufflé deflated.

Mary Harney said in the Dáil Budget debate in 1998: "Cutting taxes has been the key to Ireland's tremendous economic performance.

We have cut taxes on labour, on capital, on companies. We have given huge tax breaks for investment in films, in urban renewal, in the development of tourism.

Socialists don't believe in low taxes; they believe in high taxes. Right now the biggest threat to our continued economic prosperity comes from Socialists, European Socialists who are envious of our low-tax regime and who want to foist on us the kind of punitive tax rates that have saddled them with massive unemployment. Socialism has never been very popular in this country and the last thing we want to do now is import it from Europe.

This Budget is another major step on the road to tax reduction and tax reform. As long we in Ireland keep on that road we will continue to prosper."

Harney spent all her working life on the public payroll.

We now know, as some of us did forecast then, that the biggest threat to Ireland's prosperity, came not from Socialists but from Mary Harney and her colleagues, who later brought the misery of "massive unemployment," to tens of thousands of people. Her fairytale economy was built on a property boom and an exporting sector where mainly American firms were responsible for 90% of the total, while the derided Socialists, such as the Finns, Swedes and Danes, were building their own world-class exporting companies.

Irish Budget 2013 Page

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