Ministers must lead way by taking plenty more pain

INSIDE POLITICS:THE ASTONISHING decline in tax revenues over the past six months has left the country in a truly terrifying dilemma. Dealing with it will not only test the political system to the limit, it will pose a challenge to society as a whole that will determine the course the country takes for the next generation or more.

The scale of the problem with the public finances is simply illustrated by the fact that, in advance of budget changes on April 7th, projected tax revenue for this year has dropped to just €34 billion, while public spending will come in at close to €60 billion on current trends.

Getting those figures back into some sort of balance, even with the help of substantial borrowing, will require a monumental effort by the Government and the demonstration of practical patriotism by every citizen of the country.

There are signs that the political system is at least preparing itself to face into the storm ahead. After almost a year of trying to grapple with the problem, but failing time after time to do enough, the Government appears to have made up its mind to do what is necessary, come what may. Getting the right balance between massive new borrowing, spending cuts and tax increases will test the Coalition to the limit, but Ministers are facing into the process under no illusions about the scale of the problem.

Another ray of hope is that the main Opposition party, Fine Gael, has demonstrated in recent months that it has a broader view of the country’s problems than mere party advantage. Apart from recognising the need to clamp down on the public service pay bill long before the Government, it has produced a succession of well thought out and courageous policy documents, the most recent coming two days ago.

The acknowledgment by Minister for Finance Brian Lenihan of the “constructive level of engagement” by Fine Gael is an indication of a fundamental change in political attitudes. In the Dáil, Lenihan also acknowledged that the Fine Gael finance spokesman, Richard Bruton, had hit the nail on the head by focusing on the structural nature of the deficit in the public finances.

What this means is that the current structure of our tax system is no longer capable of raising enough revenue to keep public services going at anything like the level we have come to expect.

Broadening the tax base to bring in all property, including family homes, is just one of the measures that will be required to put the tax system on a sounder footing in the years ahead.

Further deep cuts in public spending will also be needed and no item of public spending, including welfare payments, will be immune in the longer term, whatever the decisions made in relation to the budget on April 7th.

On the political level, the consensus between Fianna Fáil and Fine Gael about broad targets is unlikely to extend to specific cuts, as Lenihan also acknowledged, so the budget will be a stern test of the Fianna Fáil-Green Coalition.

Both parties know the imperative of hanging together rather than hanging separately, but that won’t make it any easier to agree on precisely what should be done.

There was a considerable degree of tension between the two parties on the issue of overseas development aid in advance of the January cuts package, and the Greens won the day on that occasion. With everything back on the table again, this is just one area that could lead to a serious rift between the parties.

On the Opposition side, the Labour Party has taken a more traditional and aggressively negative attitude to the Government than Fine Gael. That is paying political dividends in terms of rising support for the party and its leader Eamon Gilmore, but something more will be required if the party is serious about facing up to the country’s problems.

The Government’s biggest disadvantage is that it has been in office too long. The team that presided over the policy errors of the later Celtic Tiger years is now trying to rectify its own mistakes. It is hardly a surprise if there is so little understanding or appreciation for what it is attempting to achieve now.

Another problem about building a national consensus has been the response of the “fat cats” such as hospital consultants and judges, who draw their income from the public purse. The new contract for hospital consultants is outrageous in light of the collapsing public finances, while the behaviour of our pampered judiciary in so far refusing to take the same pay cut as the rest of the public service is reprehensible.

The Government’s apparent helplessness in its dealings with such wealthy public servants has done nothing to persuade people on ordinary incomes to take pay cuts without complaint.

The Government has also failed to convey to the public its own genuine anger at the behaviour of leading bankers like Michael Fingleton and Seán FitzPatrick.

The failure to express that anger adequately and be seen to try to claw back some of the unwarranted bonus payments has done nothing to create social solidarity in the face of the crisis.

What the politicians can do is give a lead themselves. The Fine Gael proposal to cut the number of junior ministers and abolish extra payments for Oireachtas committees is the minimum that needs to be done.

On taking office back in 1932, Eamon de Valera achieved immediate moral authority to lead the country through tough times by introducing substantial pay cuts for himself and his ministers.

Although the Taoiseach and his Ministers have already taken pay cuts both in the October budget and in the savings package in January, on April 7th they will have to demonstrate a serious appetite for reform. A real shake-out of the perks and privileges of the political world including expenses, State cars and numbers of Ministers would send a signal that they do actually understand the pain that everybody else will be feeling.