Budget 2009 - Nothing less than was expected

BRIAN LENIHAN ended his baptism-of-fire budget yesterday afternoon by saying his proposals were no less than a call to “patriotic action”.

Though he stopped short of promising we would fight on the beaches and on the streets, or that we would never surrender, there was a new and refreshing thread of something approaching a whiff of egalitarianism in the air. He, unlike some of his recent predecessors, repeatedly emphasised that our entire society is facing tremendous challenges and that every one of us has a role to play in confronting them.

He and his cabinet colleagues, along with some senior civil servants, took the opportunity to underline the gravity of our situation by taking a 10% pay cut.

Nonetheless, there was nothing radical, revolutionary or even anything hugely surprising revealed. Virtually everything was well flagged and the analysis will focus on thresholds and deferred decisions. There will be a concern too that when some of the measures are fleshed out that unexpected costs will be revealed.

Today’s carbon budget will have cost implications though with 8c put on a litre of petrol and dearer road tax, motorists may not be hit again today.

The introduction of a temporary levy on earnings — 1% up to €100,000, and 2% on anything above that — was expected though it is difficult to understand why there are only two levels of tariff. Surely someone earning over €300,000 or €600,000 and so on could have faced a higher levy? This levy, which, if collected via income tax, would be a far higher percentage, is also questionable as it applies to even the lowest paid workers. Surely a family on an income of €40,000 or €45,000 might have been exempt?

Egalitarianism need not be blind.

Though social welfare increases will cost €515 million lobby groups were unhappy, saying that fuel and food price increases far outstrip these improvements.

Mr Lenihan’s growth forecasts look optimistic. Tax revenues are likely to be disappointing until at least the end of next year and the 6.5% deficit means that he has to find €12 billion in the next few years so even stiffer measures can be expected in time.

There is an immediate sense that hard decisions were dodged and that we saw just the tip of the iceberg. This is compounded by the fact that so many issues have been referred to the Commission on Taxation.

There was also considerable rhetoric about public sector reform though few enough decisions. Mr Lenihan did refer to the task force on public service which will report next month and he did emphasise that we “must do more with less”. Yes, he did huff and puff but as of now the public service status quo prevails.

However, Mr Lenihan, and the Government, must know that the support regressive budgets must have to win acceptance depend on how today’s public sector issues are tackled. They have made the noises, now it’s time to tackle the monster. The decision to amalgamate, subsume or just close up to 41 State agencies suggests, at last, that that time is at hand.

The introduction of a €200 levy to help fund local authorities may have been unexpected but some sort of local charge could not have been deferred much longer. Our water and refuse difficulties are such that this levy will increase regularly and significantly. The same prediction can be confidently made about the €200 a year levy on non-principal homes. Those steps should only be seen as precedents as the sums involved hardly make it worthwhile to collect them.

Yesterday’s budget must be seen as no more than the first of a series of packages Messers Lenihan and Cowen — or others — will have to introduce to deal with the impact the international and national economic crisis is having on our country. It must be seen as a response to the profligate, head-in-the-sand, arrogant and plainly deceptive position adopted by our last Taoiseach.

How chastening it must have been for Taoiseach Cowen to listen as his Finance Minister Brian Lenihan launched the lifeboats to rescue an economy he had presided over and assured us was sound not so very long ago. Nevertheless, there are reasons to be optimistic.

The Cowen/Lenihan generation of leaders are being forged in ways their mentors never imagined possible. It is unimaginable that they will again indulge in the delusions of recent years or repeat the same mistakes.

As the opening salvoes in what may be a long campaign, yesterday’s package, the toughest introduced in decades, was nothing more than could be expected. It did not take too much money out of the economy and there was some, albeit limited, help for the weakest members of our society. There are qualifications though — the hints about public sector reform must turn into action and the banks must face their day of reckoning.