Budget 2012 - The real challenges lie ahead

“THE first half was even and the second half was even worse” was how the late Moss Keane described a pretty dour, unentertaining game of rugby.

His analysis may not be a perfect fit for our two-day budget but it resonates perfectly with the grey mood of the country.

Finance Minister Michael Noonan yesterday unveiled his contribution to Budget 2012 and, as was expected, published plans to raise another e1.6 billion in taxes and though income tax rates and bands were untouched — a harvest for another day — every family and business will feel the pinch of Budget 2012.

We can argue about details, perceived inequities and missed opportunities but the frightening truth is that the really hard decisions have been, like that battered can, kicked down the road. One sobering figure proves this. Apart from the liabilities forced upon us by Anglo’s gambling, Government will have to borrow e13.5bn — e50m each working day — next year. That we are still so dependent on borrowing after five very difficult budgets, which took nearly e20bn out of the economy, reminds us all that Ireland remains utterly and dangerously insolvent but we are, as the Croke Park deal suggests, still behaving as if we were not.

So precarious is our situation that if unemployment rates increases by even a point or two then all of the welfare savings announced on Monday will be wiped out. Sooner or later — sooner if Friday’s EU summit reaches its expected conclusion — we will have to face a colder reality and if that seems depressing then the alternatives should be considered.

But there are some things we can and must do.

Budget 2012 must be the very last one where a minister can say that child benefits or any other income cannot be means tested. It is a matter of ridicule and shame that it took over a decade to organise integrated ticketing for Dublin’s public transport and someone, somewhere seems to think similar pace can apply to providing means testing. The same can be said about medical cards for the over 70s. It must be means tested and those who can pay must do so.

One of the most revealing things in Monday’s publication was the amazing and dispiriting admission by Reform Minister Brendan Howlin that a request he made, presumably with Cabinet support, that each department identify how it might save money, met with a very inadequate response. “There have been very considerable delays in the commencement, drafting, completion and publication of some reviews,” was how he described the stonewalling.

Presumably some of the people who enjoy the protection of the Croke Park deal are at the root of this obstructionism. Equally, some of the department secretaries retiring on Lotto-plus pensions had a leadership role to play in delivering information essential to planning State finances. That a minister had to publicly criticise government departments suggests that some did not but, as is usual, there are no consequences.

It is amazing too that a country that will have to borrow e13.5bn next year can allow the Croke Park deal stand. Indeed, one of the most preposterous contributions to the budget discussions was Energy Minister Pat Rabbitte’s declaration that he was offended by what he described as efforts to drive a wedge between private and public sector workers. How has be become so deluded? The wedge exists and it was created by governments past and sustained by the incumbents. There’s hardly a private sector worker — or their family — who would not face Christmas in a considerably better frame of mind if they were told their pay and job were guaranteed. So polarised are the two groups that even mentioning this great state-sponsored inequity, now a core policy for Labour, is to be accused of being anti-public service.

Guaranteed wage protection and pensions disparity are not the only issues, maybe not even the primary ones because no one wants to cut low-paid workers.

However that group, who in a different setting might be called the officer class, who have multiplied over the last decade and who are rewarded very, very well, cannot expect to ride out the storm without further pay and subsequent pension cuts.

The real issue with Croke Park is that under it change seems to be regarded as a gift rather than an obligation — as Minister Howlin found when he sought proposals on departmental savings, as the Government found when it sought means testing of child benefits.

The deal seems to sustain the mindset that believes reform is a bargaining chip to leverage benefits rather than a basic survival tool. Until those attitudes are confronted and defeated then draconian budgets are just tinkering at the edge of the problems facing all of us.