We must take pain so our children won’t have to

In 1776, Thomas Paine who was one of the founding fathers of the United States stated: “If there must be trouble, let it be in my day, that my children may have peace.”

This is a warning that our current crop of political leaders should bear in mind as they engage in petty politicking in our Dáil. Indeed, all other interested parties should also bear this in mind. What Paine was basically saying was that it is incumbent on the current generation to ensure they hand a positive legacy to the next generation.

The fact is that if we do not make the correct decisions today, our children and their children will pay the price.

There is an awful lot of debate going on in Ireland about austerity, and there is a belief in some quarters that we should not be pursuing the sort of measures that are being pursued. The Troika is being demonised and some government ministers are more than happy to blame the EU for every hard decision that they have to make. Incidentally, creating that sort of feeling towards the EU might just come back to haunt Government if it is forced to hold a referendum on the Fiscal Compact over the coming months.

The reality is that regardless of the conditions laid down by the Troika in return for the bailout of the country at the end of 2010, Ireland would have to engage in fiscal correction measures in any event. The reality was, and indeed still is, that Ireland spends way too much money running the country and does not take in enough in revenues. In other words, Ireland’s fiscal situation had become totally unsustainable and it remains totally unsustainable.

We borrowed almost €25 billion to run the country last year and, while over €10bn of this was directly related to once-off payments to the banking system, which in itself was a mistake, we would have borrowed around €15bn to run the country in any event.

That is not an acceptable level of borrowing and anybody who believes that we should not be trying to increase revenues and cut public expenditure, should think about the consequences of continuing to run deficits of the magnitude that we have been running in recent years. The main consequence is that we would hand over a level of debt that would act as a millstone around the necks of our children. We should not be prepared to hand over such a legacy.

We have no choice other than to press ahead with restoring order to the public finances. Where there is scope for disagreement, however, is in relation to the quality of the adjustment rather than the quantity. Public sector reform should obviously be the key priority in the whole process.

Real reform of the public sector has now got to focus on areas such as reducing dramatically the number of local authorities, VECs and other agencies that come under the broad umbrella of quangos. We have also got to look at social welfare expenditure to ensure that only those who are deserving, get it. Child benefit payments should not be paid universally and we will have to accept the inevitability of a real property tax and water charges. There is some scope for income tax increases, but that is limited if we do not want to totally destroy the incentives to work in the economy.

There are no easy options and it is totally unacceptable that certain political interests oppose everything. We should never forget the disservice we would be doing to future generations if we fail today to regain financial solvency. Hopefully, as part of an EU deal, we will get some significant relief, but meanwhile we do not have too many options. We should also realise that those who are working and creating jobs in the economy are ultimately those who fund everybody else. Value them rather than demonise them.