IMF budgetary advice - Impending cuts must be applied fairly

A new culture of convenience has emerged in Irish politics with the coming of the IMF.

As one of the troika paymasters, the International Monetary Fund regularly flexes its political muscle and calls the tune.

In its latest review of the Irish economy, the agency proposes means-testing child benefit payments and cutting the cost of medical cards as part of a “comprehensive targeting of spending” to achieve immediate reductions in government expenditure. The agency also argues that “maintaining expensive universal supports and subsidies is difficult to justify under present budgetary circumstances”.

The approach is part of a well-established pattern whereby the IMF advises Government to take on issues unpopular with influential power blocs. This goes to the heart of a question that people have been asking for some time — who governs Ireland? Fearful, for instance, of getting on the wrong side of pensioners, politicians have been slow to grasp the nettle of means-testing for medical cards or meddling with the potentially explosive issue of free travel for fear of incurring the wrath of the grey vote at election time. Now and again, there have been forays into this hostile territory but thanks to the IMF the scene has now changed overnight.

The strategy of using the rescue agency as a stalking horse effectively enables the Coalition to address matters which have more or less been ruled out of court in Irish politics. But as the public just witnessed, politicians can now conveniently blame the IMF for suggesting that the Government take action on thorny subjects such as child benefit and medical card cuts.

As a result, party members have been freed to talk openly about cuts in areas where the axe has long been taboo. Ironically, the tactic also facilitates government ministers in assuming the role of would-be defenders of the beleaguered taxpayer.

Tánaiste Eamon Gilmore took on that role in the Dáil yesterday when he assured the public that IMF suggestions about cutting child benefit and medical cards for the over-70s were “not specific recommendations” in the context of next year’s budget or part of the bailout programme. He went on to say that the IMF’s commentary were on a “medium to long-term” basis.

Nevertheless, those cuts are now firmly on the cards because the IMF has spoken. The minister was also at pains to point out that in contrast with the quarterly review of the troika, which operates on a short-term basis, the IMF has a long game.

That explains why the household benefits package and spending on non means-tested pensions, are regarded as potential targets to “generate significant savings, while protecting the poor”. In other words, the old-age pension will also be means-tested.

While Fine Gael and Labour wear the trappings of Government, it is the IMF that calls the shots. In obeying its edicts, the Coalition must guard against throwing the baby out with the bath water. It goes without saying that wealthy people, big earners and rich pensioners should automatically be means-tested for state benefits.

The danger is that couples with young families, many struggling to pay mortgages, or pensioners finding it hard to put food on the table, will also be caught in a poverty trap if the bar is set too low. The Government should be wary of getting the IMF to do its dirty work. Above all, it must not abdicate its responsibility to govern.