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.
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39 Responses to “Irish budget cuts praised by British Tories but criticised at home”
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.
Duncan
Guido,
The Irish raised VAT and other duties back in April.
Duncan Weldon
RT @leftfootfwd: Savage Irish budget cuts praised by British Tories but criticised at home: http://is.gd/5hMKu
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.
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. […]