Underlying Budget issues will have to be tackled

Inside Politics:Brian Cowen's Budget won't have done Fianna Fáil's chances in the forthcoming election any harm, but its political consequences will probably be broadly neutral, a bit like the financial provisions of the measure itself. It was a Budget that had something for everybody and was designed to offend nobody - with an election so close at hand.

While it is easy to understand why the Minister for Finance was anxious to avoid any political risks in the Budget, there is a lingering sense of disappointment that he did not begin the process of tackling some of the big underlying issues that will confront the State over the next decade, such as public service reform or pensions.

Fine Gael finance spokesman Richard Bruton was right to point up the failure to do anything about reforming a public sector that is gobbling up money far faster than the rate of economic growth, is not efficient and is not delivering to the public.

Some of the most intractable problems facing the State, such as the state of the health services and the slowness in delivering major infrastructural projects, are a direct consequence of rigid structures and a poor decision-making process.

To be fair to Mr Cowen, nobody really expected him to confront powerful vested interests on the eve of an election, but it is something that will have to be tackled in the years ahead and the longer it is put off the more difficult it is going to be.

The slowness of the Government to take on any vested interest, no matter how small, as was the case with the salmon drift-net fishermen, indicates that it is not just at election time that difficult decisions are avoided.

An area where the Minister could have begun real reform, or at least got debate going, was the subject of pensions. While the improvements in the old age pension were certainly welcome, a real problem for the future is that so many younger people in the workforce are not putting anything aside for pension provision. This is hardly surprising with traditional defined benefit pension schemes biting the dust all over the private sector, but in the decades ahead there will be a huge problem of underfunding unless something is done soon.

Minister for Social Welfare Seamus Brennan has been fighting the good fight in an effort to get the Department of Finance and employers to face up to the need for radical thinking, but he has been largely ignored. One of the problems is that politicians and public servants have such incredibly good pensions themselves that they appear oblivious to what is happening to the bulk of the workforce.

It seems the election will have to be got out of the way before underlying problems like these will be faced up to, although everybody knows it would be better to begin tackling thorny long-term issues in the current time of plenty, rather than waiting until the boom is over. In Irish politics, though, it seems that it takes a real crisis to force politicians to face up to the need for tough decision- making.

Mr Cowen's approach to car tax was a clear example of caution born of electoral considerations. He rightly announced that he intended reforming vehicle registration tax to reward people who choose to drive lower-emission cars. However, he deferred introducing the system for a year on the basis that consultation was required.

Of course the real reason for the delay is not the requirement for consultation but the requirement not to lose a single potential vote from petrol-guzzling SUV owners who will object to paying more car tax.

The Budget provision for the elderly was certainly welcome and it was a continuation of a trend that had already been set in train in previous budgets. The fact that the elderly are more inclined to vote than younger people will naturally not have been lost on Mr Cowen but that should not detract from the rightness of the decision to give a substantial increase in both the contributory and non-contributory pensions. Hopefully, the resources will be there to keep pensions increasing by a little more than inflation in the years ahead.

The return of tax-cutting to the political agenda was another measure clearly influenced by electoral considerations. It is less than two years since the Taoiseach announced that the days of tax cuts were over but a combination of pressure from Michael McDowell and a desire to keep voters sweet combined to bring the top rate down by 1 per cent. The pledge to reduce it by another 1 per cent next year was a carrot being dangled in front of voters' noses, as the money was there to do it last Wednesday if Mr Cowen wanted.

One little warning light in the budgetary arithmetic is Mr Cowen's decision to assume the property boom is going to continue at the same pace of the past few years in terms of his tax revenue estimates.

The Minister has been criticised for grossly underestimating tax revenue over the past few years, with much of that arising from stamp duty and other revenue generated by the property boom. There may be a danger he may now have gone to the other extreme and overestimated the continuing revenue for the coming year.

Overall, Government TDs were delighted at the Budget, as the standing ovation for Mr Cowen demonstrated. However, the more experienced of them were not getting carried away with one of the sharpest strategic thinkers on the Government side calculating that the Budget had already been factored into the equation by the public in recent polls. Even if that is true, it still leaves the Coalition in a very strong position with the Opposition needing a lot of luck and determination to make a fight of it in the election.