Budget 2013 - Worst fears allayed, jobs main focus

Yesterday’s budget, the sixth austerity package in five years, continued the process of trying to restore some sanity to our public finances without introducing any measures so radical that it might threaten the Coalition’s immediate future.

Whether the package wins the popular support required to give it the moral authority it needs, in an ideal world at least, remains to be seen. However, there is hardly a measure proposed that will facilitate a game-changing salvo from the opposition. Most had been signalled, drip-by-drip, over recent weeks so the potential of any cumulative impact had been dissipated long before the speeches began yesterday afternoon.

The objective was to save €3.5bn next year, with tax changes accounting for €1.25bn of that and the balance — €2.25bn — coming through spending cuts. There was too a significant and welcome emphasis on trying to create an environment where small to medium businesses might sustain if not create employment.

Compromises around a new rate of universal social charge for high earners and a higher rate of property tax on homes worth more than €1m seemed to satisfy each party’s need to give a passing nod to their philosophies and constituencies. It would be a major achievement if this harmony, this ability to play one proposal against another, can be sustained without hindering the kind of deep change, especially and unfortunately around public sector pay and pensions, needed to resolve our financial difficulties. This was acknowledged by Mr Howlin when he said that savings of €1bn on the public service pay and pensions must be made before 2015 in any extended Croke Park deal.

Mr Noonan and his colleague Expenditure andReform Minister Brendan Howlin proposed savings of €3.5bn without increasing income tax or cutting core welfare payments which satisfied the priorities of a great number of people. Changes to PRSI will hit incomes directly as will changes to how tax relief is applied to pension contributions.

So too will changes for high-income pensioners, the group in society least affected in recent budgets. In the context of our situation it is very hard to argue with these changes, especially as other universal benefits for pensioners have not been reviewed.

The decision to cut children’s allowances by €10 is unfortunate and must be seen only as a stop-gap measure until a way to further reduce the payment enjoyed by high-income families and to transfer that saving to low-income families is found. The old excuse, implausible at the best of times, about the impossibility of means testing can hardly be trotted out again. A certain degree of urgency must be applied to this issue.

Though largely symbolic the ending of unvouched expenses for politicians is welcome though the measure may not ultimately mean around politicians’ expenses. Much more needs to be done in this area as some politicians get more in expenses and allowances than they do in salary.

The €250 increase in college registration fees each year for the next three years, and changes on qualifications for grants that may hit thousands of families, will put a further strain on a sector already paying heavily for this crisis. The chip, chip, chip away at middle-class security and confidence has become one of the great obstacles to recovery. Like so many other issues simmering away on a back burner the dilemma of third-level fees will have to be confronted sooner or later.

Earlier yesterday, speaking to a Dáil committee, Social Protection Minister Joan Burton sought a €685m supplementary budget for her department this year. This massive figure puts our difficulties — PRSI take down, unemployment up again — in context but despite this there may be some cause for restrained optimism.

All of the Government’s plans are predicated on growth of 1% to 1.5% and forecasts, though often inaccurate, suggest that this may be achieved. The decline in property prices has slowed, there has been an increase in retail sales and double digit increases in service exports and an increase in general exports too.

A resolution to the euro crisis now seems at least imaginable and the uncertainty of recent years has eased ever so slightly. Yields on Irish bonds have fallen from 10% to 2%. As Mr Noonan asserted yesterday we are meeting our targets and if we continue to do so we might be able to quit the bailout arrangement by Christmas 2013.

Let us hope that optimism is justified because it is difficult to see how many more austerity budgets can be introduced unless significant progress is made on lifting or at the very least adjusting the burden of bank debt immorally imposed on this society.


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