Calling time after the budget

The budget last week has been rightly called the worst austerity budget yet. There are so many odious measures in the proposals that have either not been considered properly from an equality and anti-poverty perspective or the alternative, which is even worse, is that conscious choices were made by Fine Gael and Labour to further punish those on low incomes. I would like to believe the Bonaparte statement applies in this case: "never attribute to malice what can be explained by incompetence" but my fears are that this budget is very much the result of planing by Government.

Top of my list of awful measures is the cut to the carers respite grant. Of all the people society should be supporting, those who look after the sick, disabled and terminally ill are amongst the most important. The measure of a civilized society is in how it looks after the most vulnerable, and if we don't properly support those who care for the most vulnerable with suitable breaks and respite, then we are effectively punishing the recipients of this care. For an overall saving of around €25M this measure can only be seen as cruel and miserly.

Next on my hitlist is the removal of the PRSI allowance. Any measure which impacts identically on people who earn €20k and €200k is not fair by any measure. Lower income earners feel the loss of €5 per week a lot more than higher earners. It can be the difference between putting on the heat in the morning and sending the kids to school from a cold house. For better off people (me included) it is the choice of not having an extra pint on a Friday night in the pub.

The introduction of a property tax is to be welcomed but yet again the government have made the wrong choice in the matter. Instead of a site-value tax which encourages efficient use of zoned land, they have gone for a property-value tax. Now when a homeowner invests in double-glazing, an extension or an attic conversion for their home, the have the dubious benefit of increasing their tax liability for all eternity. The property-value tax also has no impact on zoned but unused land. A site-value tax would encourage this land to be developed or rezoned back to non-development status. Instead we still have massive land bank, zoned for residential use, that sit idle waiting for the next boom. I guess most of those are in the ownership of FG voters.

Other measures that are wrong in my view are the cut to child benefit (should be taxed instead), further increases in DIRT (shouldn't we be encouraging saving?), increase in the student charge at 3rd level (the funding of the whole sector needs to be reviewed) and the reduction in the time period in which jobseekers benefit is given.

I'm no economist, but even I can see that the net effect of this budget is further hardship for those at the bottom with those nearer the top getting away pretty lightly. I'm part of a pretty well paid, double-income, single kid, negative equity household and we could definitely afford to have been squeezed a good bit more. Over the course of the recession our lifestyle has changed (fewer pub nights) and our expenses have increased (child care) but we still have enough to get by on quite comfortably. It is not true to say that everyone is feeling the pain equally. Those at the bottom, whose voices tend not to get heard are being punished the most.

This is something that Labour should not be tolerating, let alone being complicit in. Our leadership has failed the membership and those who voted for them. It is time now for the party to take a long hard look at our continued participation in this government. It is clear that our views and policies are being ignored by Fine Gael and it might be best for everyone if they were let run the place as they see fit. Yes, an election in February/March would destroy the parliamentary party and probably see an FG minority govt propped up by Fianna Fail, but it is about the only honest way forward for a Labour Party that has betrayed so many people.

In the future, voting no to coalition in the O'Reilly Hall will be like having been in the GPO on Easter Monday. Everyone will claim to have been part of that faction. Well I was one and at the time I accepted the will of the majority (85%) of the delegates and adopted a wait and see attitude. Now it is clear that our greatest fears have come to pass and no amount of "It would be worse if we weren't there" can make that better. This has been a massively blue budget, just like the PfG was a blue document. We in Labour should stop deluding ourselves to think we can curb the excesses of FG and actually implement any sort of progressive platform with our coalition "partners".

Another call to patriotic duty?

Tomorrow afternoon we get to hear Brian Lenihan's final budget as Minister for Finance. Of course it's not really his budget anymore as the EU/IMF have effectively provided him with some figures to wrap up in English. We already know a reasonable amount of the contents of the Minister's speech, the details on tax credit reductions, tax bands, PRSI reform and some form of property tax are the items I will be most looking out for.

Depending on what Michael Lowry and Jackie Healy-Rae come out with this evening, the most important thing to look out for during the first round of speeches is who exactly is in the chamber. Were Mattie McGrath or John McGuinness to be absent then that sends a strong signal that the election has started. Similarly, Lucinda Creighton's absence can be taken as a sign that the vote will be carried.

It will also be good to hear Michael Noonan giving the budget riposte from the FG benches. One of my favourite memories as a young fella with only a passing interest in politics was Noonan's response to a budget during the 1st Gulf War where he described the various cuts as Scud Missiles fired at the poorest in society. His turn of phrase will be a marked improvement on the humming and hawing of Richard Bruton who despite always homing in on the important figures, never really managed to land proper blows on the Minister.

Finally I hope that RTE do the right thing and finally cover all four of the main speeches rather than cutting away to their panel as soon as Lenihan finishes. The people have a right to see the opposition spokespersons putting their point as one of them is likely to end up being the Minister for Finance in early 2011 who is going to have to implement the mess that the current government leave behind.

Passing the Budget

This is not a post on specific measure that may or may not be in the budget. That will happen shortly. What I want to think about today is the politics and numbers of getting the budget passed in December as any loss of supply on a finance bill requires immediate dissolution of the Dáil and a General Election.

At present things are finely balanced in the Dáil. Jim McDaid's resignation this morning means the government have an 82-79 majority which relies on the 3 un-whipped FFers (Devins, Scanlon and McGrath) and two independents (Lowry and Healy-Rae). When it comes to the budget none of these votes can be counted on by the government side. The two Sligo deputies are the most likely to back Lenihan as they are only outside the party on health issues. McGrath is a complete wild card and unless something specific is promised to Tipperary South in terms of health or investment he could well jump ship. Lowry, with his half billion Tipperary Venue green lighted, is now good to face the electorate. Only Healy-Rae is likely to cling to FF as his seat is seen as the most vulnerable to a Labour bounce in Kerry South.

From the opposition point of view they should all be voting against the budget on a matter of principle and to pile the pressure on the above named wobblers. But a small part of me wonders whether it is in the best interests of FG and Lab to have the budget fail. Say the first vote fails on 7th December then the last possible date for the subsequent general election is Thursday 6th January. With Christmas and the New Year intervening I'm pretty sure the public at large or the foot soldiers doing the canvassing won't thank them.

Secondly, and more importantly, if a harsh budget is pushed through, we then move into by-election mode where the government are going to loose at least 3 of them. If they were to loose all 4 then it is all over straight away as the maths moves to 82-83. So facing this possibility the government may just cut its losses in March before holding the by-elections. Having a spring general election would allow the opposition to campaign on the unfair cuts and taxes imposed by the outgoing government, propose alternatives and still benefit from the savings made for 2011, or at least a period in 2011 before an emergency budget was put in place by whatever grouping takes charge.

Of course, if the High Court come back tomorrow and order the by-elections before the budget then we could be facing an general election sooner than we think.

Budget 2010

I'm going to tackle the budget under a few different headings as there is lots to get through. I'm not going to hit everything, just the bits that jumped out at me while watching the speech yesterday afternoon. Also this is mainly based on the text of the Minister's speech and not on any in depth analysis of the details which I'll leave to cleverer people like Constantin Gurdgiev and Karl Whelan.

Language

The first thing that struck me was the tone of the Minister's language. He was really working hard to sell the idea that his policies were working and that Ireland is on the cusp of another economic upswing. Of course, in explaining how we had come to such a state of chassis, no mention was made of the pro-cyclic policies that had been followed for the previous 10 years by various FF ministers for finance. The presentation was also a far more somber affair than previous budgets with no call to patriotic duty or standing ovation. From the other side of the house, there was little in the way of heckling and considering that most of the details had been leaked over the previous week there was ample time to think up some good Statler and Waldorf routines.

Social Welfare

The minister opened the section on Social Welfare with this gem: "The Government is proud of its unrivalled record in increasing the level of social welfare payments." In other words, we're happy that we've gotten you all addicted to free money that we threw away in a completely unsustainable fashion. Making that statement on the floor of the house takes some balls. He then went on to stiff those who were never going to vote for FF (the under 25s) and protect at all costs those who do (pensioners).

While I accept that the cost of welfare has grown to unmanageable proportions, it is hard to reconcile cutting unemployment for the young to €100 while leaving the OAP and specifically public sector pensions untouched. In fact, public sector pensioners might think they are getting a great deal but now that the link to existing pay rates has been broken, at some point in the future this will come back to haunt them. I would also be interested to see what legal and logistical obstacles there are to means testing or taxing child benefit. This government has no problem in discriminating between young adults with regard to unemployment, 3rd level grants and various other categories so why should child benefit be such a sacred cow?

Public Sector

The wage bill in the public sector has been under sustained attack in the media for the last year, even after the so-called pension levy was introduced. So to see across the board cuts is not entirely unexpected. After the fiasco of the unpaid leave deal last week the cuts became inevitable. But what was not expected was that even the lowest paid in the public sector were going to be hit. Another €1500 from someone on €30k is a huge hit since they will see pretty much all of it disappear from their net pay. For someone paying at the higher rate, being down gross about €5000 will come back to about €2700 after taxes, levies etc. Now where is the equity and protection of the vulnerable?

VAT and Excise

The other main talking point is the reduction in Excise on alcohol and the general reduction in VAT. The first is a handout to the vintners as you can be sure that the price of a pint in central Dublin is not 12c cheaper today. Perhaps it will persuade people to cut down slightly on the Newry exodus but only if they were primarily going up there on a booze trip. If clothing and food was also on the shopping list then the excise reduction will have very little impact.

The VAT decrease will make no difference at all. This time last year retailers absorbed the 0.5% increase and so it is probable that the reduction will not be passed on as it is really a return to the status quo ante. Finally, the increase in excise on fuel, or Carbon Tax as they are spinning it, is again going to hit the less well off most as irrespective of the size of your income, you still have to heat your house in the winter and keep a car on the road.

Good News

The one item of good news was the Irish domicile levy for the super rich who have moved their wealth offshore to avoid taxes. One wonders if that was a last minute addition in response to Newstalk's pontificating on the day before the budget. It does strike me as a bit of a two finger salute to Denis O'Brien and Bono in particular but one to be welcomed if it hits the pair of them in the pocket a little.

Calm before the Storm

Tomorrow afternoon Brian Lenihan will give his budget address to the Dáil for 2010. At this stage a lot of the potential cutbacks have been leaked in one form or another but there is still scope for surprise. Remember back a few years when Charlie McCreevy stood up in the chamber and announced the decentralisation plan without having discussed it with Cabinet, without costings and with no regard for the spatial strategy that had been announced only a few months previous? I doubt that Lenihan will have a trick that big up his sleeve but it will be interesting to see what unleaked measures there are.

The main thing that I'm going to be looking out for is the reaction from FF back benchers during the speech and in the immediate aftermath. The early budget in October 08 was greeted with a standing ovation from the government benches after Lenihan's call to patriotic duty, yet within days TDs were scrambling to distance themselves from the medical card cuts. Having learned that lesson, the FF crew kept to their seats in the supplementary budgets in early 2009 where the increased income and pension levies were introduced.

It will also be interesting to watch the responses of the other parties. Richard Bruton's speeches have always been a bit disjointed compared to those of Joan Burton and even Arthur Morgan. Perhaps the others have the benefit of the time that Bruton is on his feet to plan out their thoughts a bit more carefully. However, it always seems as though Burton is the one landing the punches on the government both through cutting wit and hard facts and figures. Needless to say, RTE and the other media outlets will cut away from the Dáil before the opposition speeches are complete to allow the talking heads get in their tuppence worth. There are times you wish there was a CSPAN type broadcaster in the state. Luckily I'll have the whole "debate" streaming to the laptop so I won't miss a thing. Twitter won't know what hit it either.

Mandatory Unpaid Leave

I think I give up at this stage. The government committed to permanently reduce costs on public sector pay by €1.3B in 2010 and the trade unions committed to not letting the wages of their members be reduced. That seems like a fairly solid impasse to me, at which point some leadership could have been shown by government by holding its ground and letting the unions call for strikes and then wait to see who blinked first. Each day of striking was saving around €50M according to reports so it wouldn't take long to come to a resolution.

Instead the partnership fiasco seems to be coming back from the dead with the introduction of the unpaid leave scheme that is being touted at the moment. While the details are sketchy, it seems as though all public sector workers will have to take 12 days of unpaid leave next year.

The first question to ask is how much of a percentage pay cut is that equivalent to. Is it 12 days out of 365 (about 3.3%) or is it 12 days out of 365-104-24-9 = 228 (about 5.3%)? Depending on the specific contract, public servants are employed on an annual basis or on an hourly rate. In the former case it is likely that workers will loose 3.3% of pay, the latter getting stuck with 5.3% and of course it is the lowest paid who tend to be on the hourly rates. Score one for the fat cats over the cleaners and security staff.

Secondly, you have to ask will there be an impact on service given? In my section there is always a backlog after returning from holidays so I would think there will be some impact. If it is the case that this leave will not affect service in some areas then you have to ask why isn't the fat cut from the system first. Also in frontline services such as nursing temporary staff will end up being hired as cover which will end up costing more to the tax payer in the long term.

Thirdly, there are rumours already doing the rounds that while the cost will be cut in 2010, the leave will be spread over 2011-2013 to reduce impact. That to me sounds very much like this is a once off event that will be reversed in the 2011 budget. So much for the permanent reduction in costs. And if the scheme is continued we'll just end up with more and more deferred days so that by 2020 or so, most staff in the public service will have a serious backlog of days off that they have already had taken from their pay.

Finally, who gave the unions the mandate to agree to such a hairbrained scheme? I certainly don't remember it being on the table before. If the deal is announced in the budget next week is that it or do the union's have to have another ballot? I'm sorely tempted to bail from SIPTU if this is the sort of carry on they get up to.

This entire process is a sop to the retired and about to retire section of the community. After last year's bad press with the medical cards, the govt will try to do anything to avoid a repeat scenario even if it means dumping even further on the lower paid and junior workers in the public sector. The lump sums and final wages must be protected at all costs and to hell with everyone else.