Budget Fury Grows and Grows

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Ireland Calling with John Spain

Budget Fury Grows and Grows

October 30, 2008

Ireland Calling by John Spain

THEY say a week is a long time in politics. Two weeks can be an eternity. In the two weeks since the budget on October 14, the Irish government has seen its support blown away like the autumn leaves. It is now teetering on the brink. It could collapse within a few months, even a few weeks.

Just two weeks ago, the new Taoiseach (Prime Minister) Brian Cowen and his Finance Minister Brian Lenihan were basking in the praise they received for the confident way they had handled the banking crisis here.

In spite of the difficult global situation, the Fianna Fail-led government with its comfortable majority seemed set to stay in power for another few years, up to the next general election and beyond. The tough talking Cowen position seemed rock solid.

The banking crisis is only one of our problems, however. The other big problem is the huge deficit in the state finances here, which has emerged as the economy has slid into recession.

Tax revenue has collapsed and can no longer pay for our high level of state spending. So a tough budget was necessary to deal with the crisis in the state finances.

Everyone knew this. Everyone knew that the budget two weeks ago was going to hit people in their pockets and that few would escape.

Everyone knew that taxation would have to go up and that state spending would have to be trimmed. There was a mood of acceptance in the air.

But the budget was so badly framed that the public willingness to accept the pain was blown away and the whole country here now seems to be in open rebellion.

The problem was that some of the cuts seemed to be aimed at the easy targets who could not defend themselves, like old folk and young people. Meanwhile, the powerful and the rich seemed to be escaping very lightly. And when people began to realize this, the outrage built up and the fight back began.

The high point of the revolt came last week when thousands of senior citizens from all over the country converged on the Dail (Parliament) in a mass rally protesting the budget measure to limit the automatic entitlement to medical cards (which give free medical care) for the over-70s.

The old folk filled the streets around the Dail, with their walking sticks and zimmer frames and placards that said things like “A Budget to Die For” and “Why Not Just Shoot Us.”

A few hundred had been expected. But thousands showed up to make a huge rally seething with rage which was captured by the TV cameras.

How dare they, how dare they, the old folk shouted, and their fury poured out across the airwaves on radio and TV. Attempts by government junior ministers to address them were shouted down.

Within hours, students from all over the country were at it as well, filling the streets with protests over the budget cuts in education which will mean higher class sizes in schools and higher charges for those in college.

The teachers are also lining up to protest, and this week even the bishops joined in, issuing a damning statement about the education cuts.

Meanwhile, other interest groups are angry as well. The farmers, for example, are furious that some of their guaranteed payments are being reduced.

So it’s a mess, and it’s got worse with each passing day. Caught off guard by the strength of the opposition, the government began to cave in straight away, even before the old folk had their rally.

Cowen, before leaving on a trade mission to China, went on national radio to issue what amounted to a public apology. The new budget thresholds for the over-70s medical card were changed so that only 5% of the over-70s would lose their cards, according to the government.

But it was too late and did little to lessen the anger of the old folk. They still went ahead with their rally.

They were fighting for the principle of universality, they said. No means test. No limits.

Everyone over 70 should get the medical card, regardless of income. If there were limits they could be lowered in future years, the old folk said, and that was why the universal principle had to be protected.

With emotions running so high, the opposition parties had a field day. In spite of the serious budget situation facing the country they played politics very effectively with the feelings of the old folk. And the result was that by this weekend a national poll showed there had been an extraordinary turnaround in the support for the various political parties.

Support for Fianna Fail has plummeted to just 26%, the lowest ever rating for the party since its foundation 82 years ago. Meanwhile, Fine Gael has jumped to 33% and Labor gained five points to 15%.

The figures mean that if there was an election in the morning, the government would lose and Fine Gael and Labor would be in power after so many years in opposition. It is an astonishing turnaround in just a couple of weeks. And astonishing is also the word to describe Fine Gael being ahead of Fianna Fail by seven points.

The speed and extent of the turnaround has scared the life out of Fianna Fail backbenchers, who are fearful for their Dail seats and furious with Cowen and Lenihan for bringing in such a politically inept budget. One of them has already jumped ship; more of them are in open revolt questioning the decisions that were made by the cabinet.

Cowen’s authority has been badly damaged. But ironically, the poll slump is likely to protect Cowen rather than undermine him because the Fianna Fail backbenchers will do anything to avoid an election until the figures improve.

What is even more alarming than Fianna Fail’s implosion is the way that the budget has been undermined. Instead of being regarded as written in stone and unchangeable, the budget is now seen as something that can be picked at and altered to suit different groups. And the people to blame for that are the government.

Almost as soon as the budget was announced the trade unions were demanding that the new levy on incomes had to be changed. The levy was supposed to apply to all incomes under *100,000 at 1% and at 2% above that.

The unions pointed out that low paid workers who pay little or no tax tax should have been excluded. The government gave in.

Then there was the medical cards for over-70s issue and the government gave in again. The threshold which was too low is now too high, so that only 5% of the over-70s will be excluded, even though we all know that much more than 5% of old people can afford to pay their own medical bills. And the government may yet have to give in on the remaining 5%, as the campaign for universal coverage for the over-70s grows.

The hot potato this week is education. There is such widespread anger about the education cuts that the government may try to find excuses to change some of these as well.

The budget, already switched around in several places, could end up in tatters if this continues. What is happening is undermining not just the budget but the credibility of the government as well.

What is really annoying for Fianna Fail supporters and backbenchers is that all of this chaos was avoidable. The civil servants who drew up this budget — and the taoiseach and his minister for finance who approved it — have shown incredible political blindness.

You don’t have to be a political visionary to see that schools and old folks are two areas you do not hit if you want to avoid electoral suicide. Yet Cowen and Lenihan, perhaps because they were so immersed in endless discussions about the deficit and the economy, forgot how ordinary citizens would react to cuts in such sensitive areas.

Some government ministers now think that they have to defend the education cuts, even if we do have the biggest class sizes in Europe. They argue that another cave in will so damage the credibility of the budget and the government that an election would become inevitable. So they are saying the education cuts have to stand and that the coalition partners have to hang together until the storm blows over.

But that does not take account of the huge campaign the education lobby could mount, with teachers lined up with parents and little kids on the picket lines. Faced with dissent on that scale the government would probably cave in again.

And the farmers, seeing the government's readiness to trade credibility for survival, would then be tempted to launch a nationwide campaign to challenge their reduced payments. The tractor convoys could be back.

It could all have been so different if the government had made a serious attempt to get the extra tax revenues it needs from the rich, particularly from those who have done so well out of the Celtic Tiger decade. There are a number of ways this could have been done, through property taxes, much higher income taxes on top earners, closing down a lot of tax avoidance schemes and taxing all state benefits.

Instead of doing this, the budget picked on areas where the old and the young would be hit. It was lazy and stupid.

Cowen's decision to go ahead with his trip to China was meant to convince everyone that it was business as usual. Instead it made him look like he was out of touch, or uncaring ... or even that he was hiding. He now faces a real test of his leadership to rally the party and to convince the country that tough measures cannot be avoided.

Giving the banks guarantees worth billions and then chopping off free medical care for the over-70s just to save a few hundred million is not the way to go about this. If he wants Sean Citizen to swallow bitter medicine he has to squeeze the big boys, including the top financial executives who created the mess here, until they squeal.

Another thing he needs to do is to tackle the public service, the huge number of state workers we now have after the expansion of the boom years. Protected by powerful unions, the state sector workers now live on easy street, with 74% of public servants earning more than the average national wage compared to less than 50% of employees in the private sector. And on top of that they have generous pensions that most workers in private industry these days do not get.

The size of the public service here is now so great that it eats up half of all the tax revenue collected in the state. And the bill is going up. Incredibly, at a time when workers in the private sector are facing a battle to hold on to their jobs never mind get pay increases, public service pay is about to go up by 6% under the national pay deal.

There is huge inefficiency and feather bedding in the public sector here which has to be tackled. Real leadership should be able to produce the same level of service in hospitals and schools and still cut costs by at least 10%.

That's the challenge facing Cowen. If he does not meet it head on, he could become the shortest serving taoiseach and Fianna Fail leader in our history.

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