Irish budget cuts praised by British Tories but criticised at home

The Irish economy, so beloved of the British Right, is in dire straits compared to our own, with unemployment at 12.5pc, GDP down 7.4pc and deflation at -6.6pc.

As Alistair Darling delivered yesterday’s PBR with the themes of investing in growth, taxing fairly and safeguarding the recovery, quite a different budget was delivered in Ireland.

Finance Minister Brian Lenihan announced further cuts in spending and welfare benefits, at his third budget in 12 months. Large scale tax rises have already been announced.

The measures were praised by Tory bloggers and politicians and gave a taste of what a future Tory budget might look like. George Osborne has long been a supporter of Irish policy, stating in February 2006 that:

Ireland stands as a shining example of the art of the possible in economic policy-making.

“With its vision of a highly-educated, innovative, open, dynamic, low-tax economy, and relentless focus on the long-term drivers of prosperity, Ireland’s economic miracle has shown that it has the right answers to the challenges of the new global economy.”

Iain Dale writes that:

“The PBR the British Chancellor should have delivered, was delivered yesterday in Dublin. Hopefully George Osborne is studying it in great detail.

The results of Ireland’s policy are plain to see:

• Irish unemployment is 12.5 per cent;

• The country is experiencing deflation at –6.6 per cent;

GDP has fallen 7.4 per cent over the past year and 10.5% from its peak;

• And despite the cuts they have still had their credit rating downgraded.

But what exactly are the measures that the Tories are so keen to praise?

Child benefit is being cut by 10%.

Unemployment benefit is being cut by 4.1%, with larger cuts for those under 25.

Public Sector workers are facing pay cuts of 5-8%.

Prescription charges are being increased by 50%.

Other increased health charges including A&E, inpatient and outpatient charges and a higher monthly threshold above which people cannot get free drugs under the Drug Payment Scheme.

The Health budget is being cut by €400mn on top of previously announced cuts

Further departmental cuts will be announced in coming days.

€960mn is cut from the investment budget

All the world’s major economies have had their public finances damaged by the global recession. And now all must take steps to rectify them. Alistair Darling made the tough choices necessary to halve the deficit over the next Parliament yesterday and did so guided by the principle of fairness.

The Irish, egged on by the Tories, have instead opted to attack the poorest in society; as Irish Labour Leader Eamon Gilmore has said:

“This is a budget that is viciously anti-family, fundamentally unfair and socially divisive.

“Everyone knew that a tough budget would be required because of the unprecedented economic shambles created by Fianna Fail over the past twelve years, but few people could have anticipated a budget that would be so lacking in fairness.

“The reduction in child benefit will hit the incomes of most families in the country. An across the board cut in child benefit will hit to [sic] low to middle income families particularly hard and runs the risk of plunging even more children into poverty”

Credit Suisse’s Head of Asset Allocation, Michael O’Sullivan has commented that:

“Arguably the Irish bond market is being saved at the expense of Irish society.”

O’Sullivan, 38, author of a 2006 book on Ireland’s economy, added in the interview at Bloomberg’s London bureau that:

“By cutting spending you lower the trend line of growth and store up bigger fiscal problems down the line.”

The economic and social disaster occurring across the Irish Sea is an important reminder of exactly what Osborne’s plans mean.

39 Responses to “Irish budget cuts praised by British Tories but criticised at home”

  1. Letters From A Tory

    To be fair, I was praising the courage of the Irish government rather than heralding every single policy as the greatest thing since sliced bread.

    They had the balls to stand up in front of the Irish people and admit that (a) they’re screwed, and (b) they need to take drastic measures to get themselves out of this mess. What I would give for the British government to do the same.

  2. Left Foot Forward

    Savage Irish budget cuts praised by British Tories but criticised at home: http://is.gd/5hMKu

  3. Guido Fawkes

    They didn’t attack the poor by putting up VAT though did they? They cut VAT. Darling raised a regressive tax. Anything to say about that?

  4. Paul Smith

    Let us be under no illusion the conservative party exists to protect and promote privilege and the wealthy, all else is window dressing.

  5. Paul Smith

    Guido VAT was not put up its temporary reduction was ended in line with the announcement that cut it. It was Thatcher who pushed it through the roof

  6. Shamik Das

    Guido, weren’t you one of the biggest critics of the VAT cut? (As were the Tories) Don’t recall much praise for Darling when he made it.

  7. Duncan

    Guido,

    The Irish raised VAT and other duties back in April.

  8. Duncan Weldon

    RT @leftfootfwd: Savage Irish budget cuts praised by British Tories but criticised at home: http://is.gd/5hMKu

  9. John

    VAT isn’t regressive, this is a bizarre myth which now seems to unite both left and right. Poor people spend most of their money on things like rent, food, heating, bus tickets and clothes for their kids, which aren’t subject to VAT, or else which are not taxed at the standard rate.

    Some indirect taxes are highly regressive (alcohol and tobacco duties especially, petrol to some extent – in rural communities especially – but we accept those for different reasons). Cutting income tax at the lower end would be more progressive than cutting VAT for people in work, and you may wish to adjust benefits accordingly.

    In an economy where we consume too much and produce too little, there’s a really strong argument in the medium term for raising taxes on discretionary spending, and cutting taxes on investment and labour.

    The point stands, though. Ireland’s agenda of cutting its way out of a recession will only work if the world economy recovers and companies move to Ireland. It probably won’t work for them, and it physically can’t work for a large country like Britain where most of our jobs are internal to our economy, and public spending cuts in a recession would just mean more lost jobs in both the public and private sectors, a fall in demand in the economy, a further round of private sector job losses, and a second wave of the downturn.

  10. Liberal Conspiracy » Labour isn’t radical enough on the economy

    […] What’s more absurd is that the government can’t even rebut the opposition. The Tories have been praising Irish attempts to reduce their spending, without acknowledging the deep shit Ireland is in as a result. […]

  11. Thomas Byrne

    What are the tax rises being put in place? It strikes me that if they’ve done things properly, they may be out a hell of a lot quicker.

  12. Liz McShane

    This is what the ICTU (Irish Congress of Trade Unions) thinks of the budget… a slightly different take to the Tories:

    THE BUDGET OF NO HOPE
    Share
    Today at 10:10am

    Congress has condemned Budget 2010 as “too brutal, too quick and utterly without compassion.”

    Congress General Secretary David Begg said: “It offers no hope whatsoever to anyone. It will deflate the economy and will guarantee more job losses. We can also be certain that emigration will once again become a major feature of Irish society.

    “I think they have pushed us closer to the cliff and once we go over there is only one direction we can go. Far from the worst being over, it is almost certain that the worst is yet to come.”

    Mr Begg said Budget 2010 was marked by a “criminal neglect of any serious initiative on jobs and job protection.”

    He said Budget 2010 “attacks working people, attacks the young, the unemployed and the low paid. It takes from those most in need and seeks only a minimal contribution from the wealthiest in society. In fact, changes in the tax regime for the richest act only as a fig leaf for this assault on working people and the vulnerable. It punishes people who are unemployed.”

    Mr Begg said the harsh measures contained in Budget 2010 would do untold damage to the social fabric of the country and contrasts sharply with the practice elsewhere in the EU “where Governments are increasing social protection to maintain living standards. Yet our Government is stripping away layer after layer of social protection at a time when people need it most.”

  13. Anon E Mouse

    Liz – Well they would say that, wouldn’t they?

    Vested interests as usual…

  14. Duncan

    Thomas,

    Back in April:

    The rates of the income levy – which is a way of raising taxes in the middle of the tax year – will double while the threshold at which each begins will be lowered.

    The new rates will be 2%, 4% and 6%, and the new thresholds will be 15,028 euros, 75,036 and 174,980 euros respectively.

    Mr Lenihan said tax on cigarettes would rise by 25 cents per packet but there would be no increase in duty on alcohol or petrol as he was concerned any rise would lead to a loss of revenue.

    And the rates of Capital Gains Tax and Capital Acquisitions Tax is being increased 25%, effective immediately.

  15. Irish budget cuts praised by British Tories but criticised at home … Budget by about

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  16. The Sliver Party

    Irish budget cuts praised by British Tories but criticised at home http://alturl.com/ommg

  17. Liz McShane

    Anon – Vested interests? If you mean representing and protecting the lives & outcomes of lower paid workers etc then yes. But it is hardly the same type of vested interests as big business and certain property developers and bankers who seemed to have escaped to sunnier climes.

  18. Henry

    Let’s remember that in 1979 the Tories spent the election campaign denying they’d vastly increase VAT (a ‘Labour Lie’) – then did precisely that when they formed a government. Attacking the poor, as Guido put it.

  19. Anon E Mouse

    Liz – On the lower paid workers you’re preaching to the converted.

    As for the bankers in the UK escaping to sunnier climes remember our government is the one who bailed the banks out.

    I have a theory Liz. The banks profits/long term sustainability collapses due to dodgy overseas investments. The shares drop in value. They get bought by a more powerful bank.

    It used to be called Capitalism and it’s a shame the markets weren’t just left alone. Then we wouldn’t own banks as taxpayers.

    I want my taxes to pay for hospitals, schools, armed forces. police forces – whatever. I do not want to own any banks.

    Your main point though – I disagree with the union opinion. We don’t live in a Soviet state – hard to believe with Brown at the helm I know but how long can we keep recklessly racking up the debt?

    The poor will have to pay it back Liz I guarantee it.

  20. Anon E Mouse

    Henry – Quite agree with you. Most people don’t realise (overall) taxes were higher and went UP under the Tories…

  21. Liz McShane

    Anon – re the bankers & property developers – I am not talking about a bail out as per the UK but key individuals close to high level people in FF who had a penchant for using lots of brown paper envelopes etc. Loop holes in the law have allowed them to remain scot free on the Costas while others pick up the slack.

  22. Laban Tall

    To be fair, had there been an election coming up in Ireland we might have seen something more like Alistair Darling’s fudge. “Give me fiscal continence, Lord, but not yet”.

    “By cutting spending

    a) you lower the trend line of growth and

    b) store up bigger fiscal problems down the line.”

    a) in the very short term, yes. Whether growth is lowered over a longer period depends on the productive forces, pretty much all non-governmental, in society. You’d expect these forces, all things being equal, to get stronger where the state is soaking up less cash. Within limits, of course.

    b) CAN Ireland create bigger fiscal problems with what it’s doing than it would have if it continued spending money it hasn’t got ? If they’d stayed as they were they’d have been unable to redeem debt at repayment time except by issuing new debt – and the new debt would have to be issued with a high interest rate because of the perceived increased risk of default. Those extra interest payments would themselves impact on govt finances and increase the risk of default – a vicious spiral.

    “Alistair Darling made the tough choices necessary to halve the deficit over the next Parliament yesterday”

    No he bloody didn’t ! What he announced won’t go anywhere near ! Michael Saunders of Citigroup :

    In our view the PBR seeks to create a fiscal fiction that the deficit can be resolved solely by tax hikes on a relatively small share of the population (’the few, not the many’) and without painful public spending cuts. The revenue forecasts again look over-optimistic, and there are no public spending plans after 2010/11 — only vague forecasts. The Chancellor pledged to protect spending on health, schools and the police, but gave no sign where the axe will fall. Given the record of recent years, this lack of clarity is likely to fuel scepticism whether the Chancellor really is committed to spending restraint.

    What distresses me is that this Labour administration has overseen a collapse in UK manufacturing which dwarfs that which took place under Thatcher. The latest closure, of the Corus plant on Teeside, seems to be wholly driven by

    a) the value of the EU carbon credits Tata/Corus can sell off (or transfer to their Dutch plants)

    b) the value of the UN carbon cash they can get for building plants in India with identical carbon footprints to Redcar.

    Labour’s motto is “Globalisation in One Country”

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  24. Anon E Mouse

    Liz – Misunderstood your comment. You’re right and the point is a good one.

    Sorry for that.

  25. Liz McShane

    Anon – i also meant to add the relentless number of tribunals involving business people and high lvel politicians over the years and to top it the revelation that bertie ahern didn’t have a bank account!!

  26. Helena

    Some of the budgetry measures you have in your blog are incorrect.
    Below is a link to the full Budget speech for the correct version.

    http://www.budget.gov.ie/Budgets/2010/FinancialStatement.aspx

    btw, I loved your successful effort at relief during your assessment, as in “The Irish, egged on by the Tories, have instead opted to…. etc. etc.” Luv it! :0)

  27. Anon E Mouse

    Liz – Ahern didn’t have a bank account.

    Perhaps that’s why he had €50,000 in a brown paper bag that he gave to his daughter – what else was the poor man to do?

    The thing stinks!

  28. Liz McShane

    Anon – read this. It may just be an urban myth re Ahern’s lack of bank account – but it has been reported quite widely and not just in the red tops… but it seems staggering beyond belief given that he was also Minister of Finance before he became Taoiseach.

  29. Anon E Mouse

    Liz – Where abouts in Ireland are you from?

  30. Liz McShane

    Co. Down

  31. Anon E Mouse

    Liz – Never been there I’m afraid. My family’s from the other side of the border – Tipperary – but I got friends from the North, worked there once or twice and to be honest, religion aside(which I have no time for), people to me seem to be the same the world over.

    Have a good weekend woman (I just know that ‘woman’ bit will grate!) and I’m sure we’ll be disagreeing again next week.

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  33. Liz McShane

    Anon – what border?! Been down south loads inc Tipp.

  34. Anon E Mouse

    Liz – Nice point well made…

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