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”
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.
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”
A Party Election Broadcast « Hopi Sen
[…] Jump to Comments Minds far more intelligent than mine are running away with the intellectual ball on the PBR. Perhaps the strangest contrast yestoday was the difference between that the Government proposed […]
Anon E Mouse
Liz – Misunderstood your comment. You’re right and the point is a good one.
Sorry for that.
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!!