Tuesday, April 14, 2009

If the axe really fell on Irish Government spending, where would it be felt?

I was listening to Batt O’Keefe TD, the Minister for Education on RTE radio news this afternoon blathering about the government having a "€54 billion spending commitment to be funded by €34 billion in tax revenue" (if they are lucky!) He had been to the INTO conference in Letterkenny where, it is said, he received a ‘cool reception’ - no applause from the delegates.

What would happen if the Government really did swing the axe and align spending with revenue, as they will inevitably have to? Current outgoings cannot be funded by spiralling borrowings, on top of which provision must be made for extraordinary State borrowing to rescue the dumb, profligate overpaid bankers, after their delusionary programme to convert every dungaree-wearing driver of a Toyota HiAce van to become an Aston Martin owner wearing a navy blue crombie with a suede collar, imploded with an unspeakable deluge of bad debts and hand-washing.

The population of Ireland increased by 11% between 2003 and 2008. Our tax revenue increased by 27%. A growth in public spending of this scale may have been sustainable but our public expenditure actually increased by 60% between 2003 and 2008 - only to be surpassed by the emoluments paid to top bankers.

The Department of Communications, Marine and Natural Resources was the only government department which reduced spending in this 5-year period and this was accomplished by spending €50 million less!

Welfare increases, which outstripped those prevailing the neighbouring jurisdiction, were an important component of the overall increase. Welfare spending increased by €3.7 billion in what was a relatively benign environment from a welfare perspective. Unemployment in 2003 was 88,000 and the Live Register recorded 172,414. The labour force expanded from 1.89 million in 2003 to 2.2 million in 2008. We certainly needed to augment and enhance infrastructure to cater for this unprecedented growth.

IBEC advocated a radical cut-back in welfare spending before the budget. Its director general, Turlough O'Sullivan, is to retire shortly. He will be relieved to be beyond the ambit of socially dysfunctional politicians. But when the time comes for him to reside in a room full of geriatrics, who are sitting in a collective puddle of piss, he might reflect on what it is like to be thought of as nothing more than an inconsequential, voiceless 'demographic entity' in the calculus of Ireland's pertnership movers and shakers. There is nothing like the rasping, self-righteous cadence of a Northern Ireland accent on the media airwaves to emphasise this perspective, whatever one might say about the prudence of our generous welfare system. It is the perfect foil to the 'inheritance brats' as defined by Paul Sweeney, economic advisor at the ICTU.

The April budget was designed to raise €1.8 billion to cope with a collapse in tax income but there was very modest cuts in public expenditure.

If the Government was prune up to €20 billion off its spending to match its income and 2003 spending patterns were adopted as a guide the following cuts are indicative of what would be necessary to balance the budget at a departmental level:

  • Agriculture & Food -€866 million
  • Arts, Sports & Tourism -€313 million
  • Communications, Marine and Natural Resources –no change
  • Community, Rural & Gaelteacht Affairs -€235 million
  • Defence -€220 million
  • Education and Science - €3.35 billion
  • Enterprise, Trade & Employment -€409 million
  • Environment, Heritage and Local Government - €847 million
  • Finance / Revenue Commissioners - €284 million
  • Foreign Affairs - €440 million
  • Health and Children - €5.8 billion
  • Justice -€873 million
  • Social and Family Affairs - €3.70 billion
  • Taoiseach - €58 million
  • Transport -€1.07 billion
    TOTAL €18.46 billion!

But as the Live Register now lists over 370,000 people and and additional €4 billion in welfare expenditure has been provided for in the April budget, the foregoing cuts are nonsensical because, in practice, there would be no €3.7 billion cut in welfare spending and the net additional €7.7 billion to fund welfare would have to be obtained through additional cuts, over and above those indicated here, to reach the €18 - 20 billion spending cut target!

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