There is a better way — let us all pull together and take a 5% pay cut

DURING the week I advised everyone to stop talking about the report prepared by Colm McCarthy and his colleagues, and to read it instead. I’ve taken my own advice — I’ve read the report in both volumes and as much as possible of the commentary about it.

And boy, am I sorry. If you’re looking for the odd smile or two, or something that might keep you awake, don’t go near the Bord Snip report.

While bits of it are well written, and on the whole it’s not difficult to follow, you constantly feel like locking yourself up in a darkened room and having a good weep while you read it. If this is a cure, you keep saying to yourself, maybe I’d be better off with the disease.

And you know, that’s surprising in a way. If you meet Colm McCarthy in the street, he’ll overwhelm you with his passionate convictions. He’s a man who is absolutely convinced that Ireland is going to hell in a hand basket and that something has to be done about it.

I’m quite certain, although I don’t know him well enough to ask him, that he wouldn’t have welcomed being asked to take on the job of chairing the special ones — because he knew well he’d get nothing but dog’s abuse. But he’d have done it anyway because he would believe someone had to take on the responsibility for some painful decisions.

Seeing that he did, it’s a pity he didn’t have some discussion with the Government about his terms of reference, and I’ll tell you why in a minute. And it’s a pity that neither he nor any of the rest of the special ones was able to inject some sort of persuasive passion into their work.

So it’s certainly no literary masterpiece — all it is, really, is a book of lists. And let me tell you two other things it’s not either — and this is where the importance of the terms of reference come in: it’s not an economic plan and it’s certainly not a national plan.

I’ve heard Colm McCarthy defending his plan since it was published. He says, in effect, something like this will have to be done.

As an economist, I suspect he knows that if his plan were implemented — even if it were implemented in full — in isolation from everything else that needs to be done, the economic consequences would be disastrous. And the social consequences would be even worse.

One of the things that has astonished me is the number of commentators I’ve been reading and listening to who say this is the worst crisis we’ve ever been in and that if we have to cut social welfare to get out of it, so be it. What rubbish that is. Yes, we’re in a hell of a crisis and tough decisions have to be made to get out of it. But for most of the last century Ireland’s economy was stagnant and we were famous for the fact that we exported more people than anything else.

But we were still able to feed and educate our children. I never remember a time in Ireland’s history when anyone seriously argued that because of a crisis in banking, we could no longer afford to pay the old age pension.

And I’m afraid books of lists that stop well short of being an economic plan only add to that sense of hysterical hopelessness. If McCarthy and his team had been asked to come up with an economic plan, they’d have had to address a range of issues alongside the whole question of cutting public spending.

How do we get back to growth? How do we invest in the future? How do we make the taxation system fairer? How do we get the banks involved in the economy again? And so on, and so on…

Suppose, for the sake of argument, we all agreed that McCarthy’s recommendations would be implemented tomorrow, and nothing else. Isn’t it possible the economy would actually go into a tailspin if you took that much money out of it, and if you made tens of thousands more people unemployed overnight?

And isn’t it possible that we would be imposing incredible hardship on defenceless sections of our population, not one of whom can be regarded as being responsible for the mess we’re in? People tend to think about public spending as if it was taxpayers’ money being poured down the drain by spendthrift politicians and incompetent civil servants.

Now, no doubt there is waste, but most public spending is supposed to go towards keeping us safe, educating our children, treating us when we’re sick and providing a safety net for us when we lose our job or have to depend on state support for other reasons (like being elderly or disabled, for instance).

Well, the special ones have identified €5.3bn worth of savings in public expenditure. But more than €4bn of that comes from precisely the things I’ve just mentioned — that’s €4bn from the money that’s supposed to be spent on health, education, income supports and our safety.

And by the way, one of the reasons the Government needs to find around €4bn in savings next year is because the banks will need another €4bn of investment next year. And that’s precisely why a book of lists of cuts, on its own, is of no value. We can’t get out of the mess we’re in without making cuts — that’s for sure. But we’re also going to have to arrive at a point where, in addition to some cuts, those who can afford to make a bigger contribution will make it.

Where some commentators are saying let’s cut social welfare because we have to, I’d like to offer some different choices — like the choice between pay and jobs, for instance.

SUPPOSE, right across the economy, in both the public and the private sectors, every single one of us agreed to a 5% cut in pay right now — and I’m including people who have already taken a pay cut.

How many jobs would that save? How much would it shave off the cost of public services?

What kind of statement would that make about our determination to get out of this mess? What kind of commitment to solidarity would it be?

Why aren’t we being asked even to think about that sort of alternative?

Cutting money out of primary education by increasing class sizes and destroying the quality of special education is both a false economy and a stupid way to plan for the future.

Saving money at the expense of pensioners and people who have lost their jobs is fundamentally unfair.

But we’re told this kind of thing has to be done because no one, it seems, has the wit or the imagination to suggest other alternatives.

If we were all willing to take a hit, then the hit would be a lot smaller for each of us. And the impact on job protection and on competitiveness would be such that the pain wouldn’t last nearly as long. If we all agreed to face our problems together, then maybe we could beat them much quicker.