A Nation in Denial

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Ireland Calling with John Spain

A Nation in Denial

November 19, 2008

Ireland Calling by John Spain

AS the financial storm clouds gather over us, Ireland has become a nation in denial. We’re staring into a financial darkness much blacker than in other countries but we’re still continuing on much as we always have, without changing our lifestyle, our behavior or our spending.

We talk to each other about the financial meltdown in the Irish economy with an air of wise resignation. I told you so, we say. I always knew the boom would not last, we say.

We look at the huge gap that has now opened up between tax revenue and state spending and we tell each other that it just can’t go on. There will have to be cutbacks, we say.

But when anything is done that might affect us personally we scream in protest. And that, in a nutshell, is the problem now facing the government here.

Severe cutbacks in state spending are inevitable. But nobody wants to know.

The problem is straightforward. During the boom, state spending here mushroomed as tax revenues rolled in, mainly from the property bubble. Tax revenue, like the property market, has now collapsed.

But cutting back state spending to a level we can now afford is very difficult because people have got used to the higher levels of services, and state workers have got used to the higher levels of pay they get.

The efforts made so far by the novice Taoiseach (Prime Minister) Brian Cowen and his government to achieve cutbacks have caused a national outcry. One reason for that is they were unbelievably ham-fisted.

Reducing medical care for the over-70s and increasing class sizes in already overcrowded schools was bound to make people revolt. But the other reason for the furious reaction we have seen here to proposed cutbacks is that the population here seems to think that painful cutbacks can be avoided if we keep our heads down and carry on as usual. As I said, we’re a nation in denial.

So at the moment, instead of facing reality we’re blaming the government. Which is why last week a national opinion poll for The Irish Times showed the lowest ratings for Fianna Fail or a Fianna Fail leader since poll records began here.

Fianna Fail’s support has crashed to a miserable 27%, down 15 points. This means that Fine Gael, which saw its support rise 11% to 34%, has now overtaken Fianna Fail to become the most popular party in the country.

This has huge significance because, apart from a very brief period in 1982, Fianna Fail has always been the most popular party here, right back to the 1930s when de Valera took power for the first time. So this reversal of the normal power structure is absolutely shocking for Fianna Fail supporters.

Last week’s poll result mirrors another poll carried out by a separate company in the immediate aftermath of last month’s budget, when the protests about over-70s medical care were at their height. But this new poll published at the end of last week is more significant because it carries the weight of The Irish Times, and because it shows that the anger at the government’s cutbacks in the budget is not abating.

If this poll result was repeated in a general election Fianna Fail would lose up to 20 seats and would be out of power. It shows how the political climate has changed completely here since Brian Cowen took over as taoiseach from Bertie Ahern, with the government’s satisfaction rating dropping by a staggering 28 points to just 18% and Cowen’s personal satisfaction rating dropping by 21% to just 26%. Even President George Bush has never had a satisfaction rating as low as that.

It has been an absolutely disastrous start for the new taoiseach, and at this stage it is hard to see any way back for him. The truth is that the hard decisions have not been faced yet, so his chances of restoring the party’s popularity are slim.

It’s possible to feel sorry for him because the big issues now facing the Irish economy were things that he inherited from his predecessor, with the added difficulty of global economic conditions that are the worst for a century. It was always going to be difficult for him — but the truth is he has made a bad situation far worse by the decisions he has taken.

Ironically, for someone known for telling it like it is and for his willingness to take tough decisions, it has been his timidity in the face of the crisis that has got Cowen into such trouble. Instead of making big, bold decisions, he has made a number of small decisions that don’t make much of a reduction in state spending but have been disastrous on a political level.

The attempt to cut back free medical care for the over-70s is an example. Even before he caved in to the granny demonstrations outside the Dail (Parliament) and substantially reduced the proposed cut, the savings involved were tiny in the context of the overall health budget. So it was always an awful lot of political pain for very small gain.

In fact, the about turn on the over-70s health care cut has been followed by several other reversals of measures announced in the budget. And the result of that has been to make Cowen seem like a tough guy who in reality can easily be pushed around. Confidence in his leadership has plummeted, and he seems more befuddled and indecisive with each passing day.

Meanwhile, sensing his weakness, special interest groups around the country have been holding public protests and marches to oppose cuts that affect them. An example would be the thousands of farmers from the west who converged on Carrick on Shannon last weekend, protesting about minor price cuts. And conveniently forgetting to mention that farm product prices have soared on global markets recently.

Last weekend also saw a massive demonstration in Cowen’s hometown of Tullamore, with thousands of teachers and parents protesting about the decision to increase average junior class sizes from 27 to 28 pupils, as well as other minor changes in education. This provoked almost as much fury as the over-70s health care issue, and the government was accused of heartlessly picking on the very young and the very old.

Listening to the speeches from outraged teachers you would never think that, in spite of the tight financial situation, the government has actually increased the education budget for the coming year by a few hundred million — but it’s all going to give another pay increase to the teachers.

And of course this is the kernel of the problem. By far the biggest component of the cost of state services is pay for state workers. Paying state workers eats up all our income tax.

And in contrast to 20 or 30 years ago when nurses, teachers, Gardai (police), soldiers and so on were all badly paid, most state workers here are now well paid in comparison with their counterparts in other countries and in the private sector at home.

State workers also have two other aspects of their jobs which make them very privileged people in today’s economic environment — they have complete job security and guaranteed, index-linked pensions when they retire.

In the private sector in today’s perilous financial world, such certainty would be priceless. There are so many workers in private sector companies here these days who don’t know whether they will still have a job next year and whose pensions have crashed in value with the stock market.

What Cowen should have done in the budget was announce an across the board 10% pay cut for all state workers earning over *50,000 a year, a proposal already made by Fine Gael. He should have gone on TV and addressed the nation saying that this step had to be taken for the sake of the country until the economy improves again. He would have saved more doing that than from all the other tinkering he has done on health care, class sizes and other things put together.

So why didn’t he do it? Because he’s scared of the unions that are still all-powerful in the state sector and could bring the country to a halt any time they choose. Which explains why they will all be getting their pay increases under the national pay agreement, even though the state finances are in crisis and many private companies will be pleading inability to pay any increases to their workers.

Cowen could still turn this around. No one is better suited to doing so, but he has got to wake up and stop sleepwalking through the crisis.

The first thing he has to do is restore his authority. He can do this by going on TV and telling the country that the gap between revenue and spending next year could be €20 billion (double this year’s likely outcome) and we could be borrowing over 10% of national income just for day to day spending, something that will get us thrown out of the European Union.

He should tell people that to avoid this he is going to take unprecedented measures to curb government spending, including a pay cut for state workers.

If he lays it on the line like that and puts the full facts out there, he might find that people are prepared to make the sacrifices in the hope that ultimately things will get better. It can be done, if Cowen shows real leadership.

Sticking our heads in the sand like a nation of ostriches will get us nowhere.

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