The December budget - None of the choices are attractive

ANYONE who heard Amadeu Altafaj Tardio, spokesman for the EU Commissioner for Economic and Monetary Affairs, speaking on RTÉ radio yesterday morning got a glimpse of what our future might be like if we are not realistic about our public funding crisis.

He was calm and articulate but he was not for turning: his message was simple but unambiguous.

The EU would not tell the Government what to do to cut our budget deficit by 3% by 2014, but the target has been agreed and it must be met.

Speaking about corporation tax, he said the EC did not want to take a position on Ireland’s relatively low but vital 12.5% rate. He assured us that the commission respected “the national debate” on how we should manage our economy, but insisted there would have to be a reduction in the deficit each year.

Not quite a slap on the wrist, more waving a blackthorn stick at frisky bullocks, but most certainly a warning that this is the game plan and that deviations will not be contemplated. Though he wore a velvet glove his message was, like it or not, clear.

Adding to the acceptance that we can, in the December budget, expect measures never before contemplated, much less discussed publicly, Minister for Finance Brian Lenihan, speaking in New York, said that social welfare payments and pensions are “on the table”.

Considering that the Exchequer spent just over €9 billion this year on public sector pensions, as well as those paid through the social welfare system, this seems unavoidable. It certainly seems unavoidable when you consider how some public sector pensions are increased every time the pensioners’ successors get a pay rise.

Though there is huge capacity for reform and savings in how we pay pensions this is a very sensitive area. Huge numbers of private sector workers are members of schemes that will never come close to meeting expectations, though workers have funded them as they were required. It has been suggested that as many as nine in 10 defined benefit schemes cannot meet their obligations. Until such time as a way of narrowing the gap between private and public sector pension security is found private sector workers trying to rebuild retirement pots should not be hit with the double whammy of a collapsed pension fund and higher taxes on any funds committed to rebuilding that fund.

If Mr Tardio was clear about what lies ahead others were not.

The advocacy group Social Justice Ireland, despite all of our terrible difficulties, wants to increase all social welfare rates. Desirable as this may be, to suggest it at this time shows a disconnect that undermines any other arguments you might advance. It shows a kind of thinking so at variance with our reality as to be no more than a counterproductive distraction.

That for all of us, as the December budget approaches, is the challenge. We must separate aspiration from possibility, wishful thinking from pragmatism.

We do not have many choices and none of them is attractive but we must make the right ones or else Mr Tardio and his colleagues will make them for us.