Budget 2010 - Very tough medicine for tough times

WE have known for some time that yesterday’s budget would be brutal and that it would do more to reduce the living standards of Irish families and workers than any budget in living memory.

Even though Taoiseach Brian Cowen and Finance Minister Brian Lenihan were no more than true to their word the scale of the cuts was jarring. They naturally provoked anger amongst those who invested so much effort and integrity in last week’s failed pay talks.

Indeed, it is difficult to remember a set of measures so dramatic, so desperate in recent European history.

Anyone dependent on a State income – other than State pensioners – faces the immediate future with less money irrespective of obligations or expectations. Some – just some – of what was yesterday affordable is now beyond reach and may remain so indefinitely if the objectives of this budget are not realised.

Public servants bear the brunt of the cuts. They will feel disheartened and angry in the face of cuts of 5% on incomes up to €30,000 – just under €30 a week. The next €40,000 will be cut by 7.5%, 10% on the next €55,000 and 15% on anything over €200,000.

These are sobering figures and, at the low end of the scale, a tad higher than was expected. It is little compensation to those liable for cuts of 10% or over that they will still earn enviable incomes.

There is no sweet way to say it but these cuts do no more than recognise our desperate situation and are absolutely unavoidable. There is no alternative if we are to avoid bankruptcy and encourage the nascent recovery Mr Lenihan assured us was at hand yesterday.

No one should gloat over these reductions but rather recognise that very many decent, valuable and honourable public employees and welfare dependents will pay a considerable price for a crisis they did not make.

The cuts mean expectations will be challenged and options curtailed. Expenditure will have to be more tightly managed but the vast majority of people in this country remain amongst the most comfortable in the world. It may not seem so this morning but it is true.

As very many private sector workers have realised a cut in income is painful but it need not be catastrophic and it is far, far more palatable than losing a job. The majority of the 222,800 people unemployed in this country would agree too.

Despite the depth of our difficulties we still have over one million workers who pay no income tax. This seems unsustainable and will have to be considered sooner or later.

Though he was uncompromising there was a welcome air of optimism underlying Mr Lenihan’s performance. Especially when he asserted that "the worst is over ... we will return to positive growth in six to nine months". Let us all fervently hope he is right.

There were a few measures that were difficult to understand, especially reduced excise on drink. There are few societies that pay a higher price for alcohol misuse than ours and it is difficult to accept, even at this desperate juncture, that cheaper alcohol is a solution to anything. There was touch of bread-and-circuses bribery about this.

So too was the decision not to reduce some of the high-end pensions enjoyed by retired State employees. Some of these are exceptionally generous and could have easily withstood a reduction. It would have been encouraging too to see some measure that recognised the contribution banks have made to our situation.

Yesterday the British Chancellor of the Exchequer imposed a 50% tax on bonuses above £25,000. Mr Lenihan should do something similar. Had he announced it yesterday it would have met little opposition and made cuts more tolerable. Details of how banks might be recapitalised would have given a fuller picture of our predicament and would have been helpful too.

Mr Lenihan’s commitment on mental health services, though long overdue, was a welcome recognition of how these services have been undermined.

These hard measures represent a first step towards restoring sanity to our public finances but their success depends on how we, especially those facing pay cuts, react. We can consider them a new beginning or the spark to provoke industrial unrest but, at this stage, we all know, in our heart of hearts, that only one of those options leads to a viable future for us all.

Most importantly every one of us should remember why we are in this terrible bind. We should remember who led us here. We should remember the dishonesty and ineptitude, the greed and the lust for power that destroyed our economy and our reputation.

If we do not we are doomed to repeat the errors that regrettably made yesterday’s savage budget inevitable.