A government not fit to mind pigs is getting dizzy from all the U-turns

NINE years ago, on December 22, 1999, I said here that the “economy is booming and this country will be enjoying unprecedented prosperity at the start of the new century.

A majority of people may think the Government is doing a good job, but in reality this is probably the worst government we have had since the GUBU administration of 1982, which was the worst government in the history of the State”.

The boom in house prices was being fuelled by people borrowing up to €1 billion a month to buy houses. The average price of a house in Dublin and elsewhere soared. House-owners were delighted, but it was only of value to them if they had another place to live. The people who gained most were the property speculators who bought places, helping to force up prices and then sold those places before the bubble burst.

Prices climbed faster than earnings, which was the recipe for a bubble. Normally a price rise slows demand, but in a bubble it generates buyer enthusiasm and leads to increased demand thereby forcing prices to rise even higher until the bubble eventually bursts.

It was a recipe for economic disaster. To pay back exorbitant mortgages, people were going to have to earn more, which meant prices would inevitably go up, and this would undermine our competitiveness.

“We will have more job losses, with more people drawing unemployment assistance and fewer people paying taxes. Government will then be compelled either to cut services or raise taxes, or both, and these will likely compound the problems,” I wrote in July 2003. “We are already on the slippery slope.”

This was just commonsense. Nobody needed to have studied economics to recognise what was happening.

Britain suffered a classic bubble in the late 1980s. House prices soared by 35% in one year and then they crashed, leaving many people with negative equity — owing more for their houses than they were worth once prices fell.

During the 1980s the property market provided the greatest returns in Japan. By 1990 Japanese property was worth four times the value of all the property in the USA.

The grounds of the imperial palace in Tokyo were worth more than all the property in California or the whole of Canada. To purchase a house, people had to take out multi-generational mortgages.

In the 30 years since 1960, Japanese property prices increased by a multiple of 50. Credit and debt rocketed. Billions were lent to people to buy property, so prices spiralled. Property was held only for its capital appreciation, not its productivity. The richest 20% saw their wealth quadruple during the boom, but then on Christmas Day 1989 the finance minister announced a rise in interest rates. Within four days the stock market began to fall. By March it had lost a quarter of its value. By September 1992 stocks were down by 65%.

House prices held up at first. But this was a false price that merely reflected the asking price; property was not actually selling. Then in 1992 it plummeted by 60% and it lost a further 20% in the next eight years, with the result that house prices were 80% lower by the turn of the century.

Prices in this country probably went up by more than a multiple of 50. Charles Haughey bought Kinsealy in 1969 for £144,979 and sold it for around €45 million, or more than 240 times the cost.

There are now too many vacant houses around the country, and the Poles and other east Europeans who were coming here in search of work have begun to go home. The bubble has burst, but the Government came to the rescue this week by providing €5.5 billion in recapitalisation funds for the banks, which will have to loan 30% of those funds to first-time house buyers.

This might help prices, but it is hard to have confidence in the Government that allowed the country to get into this mess.

In recent months it has been doing so many U-turns that it appears to have become dizzy.

There was the medical cards fiasco and the 1% levy, the fracas over the substitute teachers, the toxic pork and now the about-face in relation to Aer Lingus and the Shannon-Heathrow route. The Government reportedly put pressure on Aer Lingus to reopen it.

Why did it not take that stand in relation to Heathrow at the very outset? Does this mean the Government is now effectively taking over the running of Aer Lingus. This is a recipe for disaster because they have already demonstrated that they are not fit to mind pigs.

Maybe it was lucky there was a war-weariness in relation to Northern Ireland that allowed Bertie Ahern and his colleagues to persuade the country to endorse the Good Friday Agreement. For that they certainly deserved enormous credit. But they used that credit to obscure their failings in relation to crime and the economy.

After losing his overall Dáil majority in 1961 Seán Lemass announced that, if re-elected, he would implement Fianna Fáil policy and would not negotiate with anybody for support. He led possibly the finest government in our history.

Twenty-one years later Charlie Haughey negotiated the infamous Gregory Deal before regaining power. The ensuing Fianna Fáil government gave us the GUBUs and probably the worst administration in our history.

By the late 90s the Government seemed prepared to pay any price to retain power. Benchmarking was one of the greatest confidence tricks in Irish history. It was supposedly introduced to ensure that public servants were paid on a par with those in the private sector, but in fact they are now being paid 20% more.

IN addition, the public sector enjoys much greater pension benefits and security of employment, which guarantees a job to some of the greatest wasters in the country.

Everyone can name a waster who is employed by the Government but effectively does no work. They are kept on the payroll like the Government has been keeping the useless voting machines as monuments to stupidity. Some in the public sector are allowed to claim expenses that really amount to tax-free income supplements.

And there was also the extravagant junketeering that was recently exposed in Fás. That was probably only the tip of the figurative iceberg.

Obviously the Government is going to have to cut back on spending, but the politicians need to demonstrate leadership for a change by cleaning up their own act and leading by example. They are among the worst abusers of the expenses racket.

It’s time for some proper example, for a change.