Bruce Arnold

Critic of Public Affairs, writing about art, theatre, music and politics

Lenihan's crisis Budget was political and cowardly

Peter Sutherland spoke well this week in an RTE interview. His interviewer was slightly sycophantic, treating him as an exalted person, missing out on hard questions, particularly the political questions; but Peter knew well how to deal with that. He gave a positive and confident assessment of Ireland's standing in the world, the good future potential for the economy, the resourcefulness of people generally and the positive parallels that exist when Irish circumstances are measured against those of Germany, say, or Belgium. The world, he said, was sharing in the difficulties of the crisis and Ireland would come through.

His confidence was itself a reassurance. And those who love this country, including myself, cannot help but have been heartened in spite of a harsh and unbalanced Budget.

What was wrong in the questioning, and therefore did not come out were the political issues that invade and rightly damage our confidence.

There are two Irelands. There is the broad cross-section of the people who, despite the problems they face and the additional burdens imposed by the Budget, believe we will survive current adverse circumstance.

Then there is the fumbling, hand-in-the-till Ireland that has been distorted and wrecked by those in power being too long there, having done too much to implicate themselves in political distortion and unfairness, and who have no easy way out.

The Budget is political and cowardly. It has not taken a balanced view because Cowen and his party, despite their gross irresponsibility, are still focusing on the local and European elections and avoiding the kind of decisions that are needed.

The best that can be said for it is that it represents a better effort than Lenihan's previous economic fumblings. Nevertheless, there were too many tax increases and not enough expenditure cuts. There should have been a public service pay cut of 20pc. This would have been appropriate, courageous and necessary.

And one of the sobering outcomes is that there will be more tax increases next year; as well as social welfare cuts. The willingness of the hard-pressed taxpayer -- least organised of all in the economy -- to keep paying more taxes to fund public sector salaries, will be a significant factor in the June elections. The public sector pay is unreal and out of line. Taxpayers know the huge social welfare bill can't last for ever. Yet they continue to pay the price for it all.

This putting off is contemptible. It will be compounded by another necessity that is probable: the introduction of a property tax. Put off for political reasons this year -- though the need for it, and the ease of introducing a self-rating scheme is obvious -- it will be a further cowardly burden on ordinary taxpayers designed to sustain public service pay.

Government fear of the trade unions, the main organised opposition to innovative change, was diverted in the Budget to an unfair level of tax increases directed against middle income earners, who bore much of the pain last Tuesday, and should have been balanced out by public sector pay and welfare cuts. It was patently done for the wrong reasons and should be punished severely by voters.
It was done because the Government is clearly more scared of the trade unions than the voters and wants some kind of quick fix with the dreaded social partners. This cowardice is deeply shaming. We are not alone in this political disease. Britain faces the same problems over many of the same issues. Though its government should cut expenditure it will not do so. Brown has his eye on a 2010 general election. He too should be punished for this and undoubtedly will be.

This brings us back to Peter Sutherland and the failure of his questioner on Thursday morning to confront more harshly the bad side of his message. Sutherland made quite an issue out of Ireland having less budget deficit than, for example, the United Kingdom and his belief that by 2024 or so our budget deficit would be lower as a percentage of GDP. But it will be much higher this year than in the UK. This is part of Government unreality.

We are breaching the 9.5pc of GDP deficit target, going to 11pc. Brian Lenihan's forecast of a tax take of €34bn will almost certainly be less, putting the deficit up to nearer 15pc. That is what always happens.

Government fear of the trade unions was diverted in the Budget to unfair tax increases against middle income earners. We are loading the future with further reductions. Since it took three Budgets to cut expenditure by €5bn how will we deal with the further cuts that lie ahead? Well, the answer is more and bigger tax burdens because the cowardice of this Budget will not go away. Next time it will be a General Election looming closer and God save us from what that will do!

Finally, we have to face the imponderable, in Brian Lenihan's blind adventure into banking. He cannot tell us what the details are. He is hiding behind a confidentiality that is being stretched over his body like a hand towel in an Ibiza hotel swimming pool.

But €90bn is lying ahead of taxpayers, and it carries a potential burden that no one can evaluate, except to say it will be greater than we think. It was unfortunate that Peter Sutherland was not questioned rigorously about the real possibility that the good disposition of Ireland and its people will be betrayed yet again. The past and present tell us this will happen. His advice on what we should do about it was missing from his benign words. A pity.