Elderly, homeless and marginalised will suffer from the spending cuts

I HOPE you remember that you read it here first. Last March, I told you the cutbacks were beginning. I warned you it would start with stealth cutbacks in the hope you wouldn’t really notice. But as the slowdown in the economy begins to bite, the appetite for cuts within the system will grow.

Nobody took a whole lot of notice of that warning three months ago. But suddenly, the warning signs have started going off like a fireworks display.

Last week we had the minister for finance sounding like someone who has just realised he has taken a real hospital pass.

I don’t know whether he was blaming Bertie Ahern for resigning as Taoiseach or Brian Cowen for handing him the promotion, but there was no doubt Brian Lenihan was suddenly confronted by the horrible reality that he is unlikely to be a popular finance minister.

And then there were this weekend’s Sunday papers. The Sunday Business Post was pretty direct. “The Government is preparing plans for a significant curtailment of public spending,” it said, “involving cutbacks in some areas and the postponement of planned projects amid a worsening economic outlook.

And the lead story went on: “Officials in the Department of Finance are finalising the annual budget strategy memo, stipulating what the Government can afford to spend next year. It will be circulated to ministers in the coming days and formally discussed at a cabinet meeting on July 9, and again a week later.”

But The Sunday Business Post understands that ministers have already discussed the worsening economic situation at cabinet last week “when the prospect of cuts to public spending plans was raised”.

Hidden away in the business news of the Sunday Tribune was part of the reason behind this apparent panic. ‘Central Bank set to slash economic growth forecast’ was the headline and the story went on to say “the Central Bank are set to slash their economic growth forecasts for Ireland to between 0% and 1.5% as the property market and construction sectors continue to decline and bank credit remains constrained”.

If the Central Bank is really looking at a growth figure at or close to zero, that is huge news. It will send shivers through every market, and you’ll see politicians and senior civil servants ageing before your very eyes.

A zero growth rate hasn’t been recorded in Ireland for more than 15 years — a generation in political or economic terms. We simply won’t know how to cope. And then there is the ESRI’s latest quarterly economic bulletin, which is likely to contain more bad news today.

I’m writing this, naturally, before the ESRI report is published, and I seem to have mislaid my crystal ball. But it wouldn’t surprise me in the slightest if every news bulletin for the remainder of the day was dominated by their gloomy, not to say dire, predictions.

By the end of the day, zero growth in the economy — maybe even the dread word recession — will have become a reality rather than a prediction.

What does surprise me is that anyone should be too surprised. The reality is that there’s never been an economic cycle in the history of the world, going back to the bible, that didn’t slow down or stop, if only for a time. Remember the seven years of plenty followed by the seven years of famine?

But if we’re really headed for zero growth, even for a period, the one thing we shouldn’t do is precisely the thing we’re most likely to do. Panic.

We’ve been through zero growth before — even negative growth. And we know what it can do. People are forced to emigrate. Factories close. Investment goes elsewhere. And the poor carry the lion’s share of the burden.

But that happened in different times. We were a poor country that had experienced little except stagnation and recession for the best part of 30 years.

Now we’re a rich country with one of the lowest national debts in the developed world. We have assets beyond our wildest dreams a generation ago. We have more than enough to tide us over a period of uncertainty if we keep our heads.

But we’re not great at that, are we? Our political masters always seem to know only one response when a squeeze comes on. And the clue to that response is in this sentence from the Sunday Business Post story: “Department of Finance briefing documents obtained under the Freedom of Information Act show that officials have been warning about spending pressures in the three key departments of education, health and social welfare.”

Over the next month or so, while the rest of us are trying to enjoy whatever decent weather materialises for the rest of the summer, senior civil servants and their political masters will be engaging in the annual ritual dance known as the “estimates campaign”.

Against the backdrop of all these awful predictions, the Department of Finance will send out its round-robin letter to all the other government departments and key State agencies, like the HSE. It will turn the blood cold in everyone who reads it. But its real message will be that they intend to cut everything they possibly can at the margins of public expenditure.

That’s the key thing. It’s all going to happen at the margins. Perhapa more than 90% of next year’s public expenditure bill is decided before the process even gets under way.

The big projects on which contracts are signed, the vast bulk of the public service pay bill (including public servants’ increments), the amount that is going to be set aside for debt repayments and pension provision, the cost of maintaining most things more or less as they are. All that is settled already and either can’t or won’t be interfered with.

THE estimates campaign, in that sense, is more than a bit phoney because everyone involved knows it’s only the extra little bits that are vulnerable, the bits that are left over.

So what is left over? What’s left is what’s at the margins. Anything new or different. Our allocation to the developing world. Anything that might count as an improvement on a pretty bad service. All that kind of stuff.

And one other thing — services to people whose votes won’t make a difference. Homeless people. Frail elderly people. People with mental health problems. People with disabilities. Lone parents. People in rundown housing estates.

So you can get one thing clear. When you start reading all the predictions about public spending cuts, you don’t need to worry too much.

The services you need — the teachers, the guards, the soldiers, the bin collections, the street lighting — they won’t really be affected. Whatever the Department of Finance says, all that public spending is pretty well committed. You’ll be all right.

Unless of course, you live at the margins, too. Then you’d better get used to carrying the burden for the rest of us.