Government cannot afford to be seen to favour the elite
Difficult economic decisions require support of all the public
By The Insider
This time last year Ireland was convulsed – and horrified – by some of the most chaotic political scenes in living memory as the Cowen government disintegrated.
After Christmas everyone knew a general election would be held once the provisions announced in the Budget were given legislative effect. So bizarre were the scenes however – and so insatiable was the desire for that election – that the provisions of the Budget itself were largely ignored!
In early 2012 however things are thankfully far more stable politically. Economic stability however is still a long way off. Against such a backdrop Insider sees other emotions coming to the fore. Frustration at what seems to be never-ending austerity – five successive austerity Budgets endured and talk of four more to come – and ongoing worries about what the eurozone crisis may mean for Ireland, outweigh any feel-good factor which may be felt from positive reports from the Troika regarding Ireland’s progress in restoring budgetary stability.
All in it together?
One interesting emotion Insider has picked up on however is a sense that ‘We’re not all in this together’ and that for all the talk of austerity and belt-tightening there still seems to be a lot of money in some people’s pockets.
Most specifically there is a sense that there are sections of Irish society that are not willing to make the same sacrifices that are demanded of themselves. For instance one long-time political observer mentioned to Insider before Christmas that the feeling now is not ‘Burn the bondholders’ but rather ‘Burn the elites’.
The public sector dragging its feet
This observer cited – and empathised with - the unwillingness of middle and lower paid civil servants to entertain any further adjustments to their pay unless the top levels of the civil service took some real hard medicine.
As we have seen in recent months many of these top level civil servants appear not only to be in receipt of very privileged terms and conditions, but indeed all the stops appear to be pulled out to enable them to retain those terms, even including the option to exit the public service and maintain very generous pension entitlements before changes come into force.
The Government has also endured a lot of criticism for breaking the pay cap for certain ministerial advisers. Insider would caution the Government to heed this criticism. A public fed up with never-ending austerity will find it very difficult to accept having controversial proposals such as property taxes, water charges, and septic tank inspection charges inflicted on them if those inflicting them are cocking a snoot at the concept of restraint when it impacts on themselves.
The private sector dragging its feet
The politicians and their colleagues in the top echelons of the public service are not the only ones guilty of this however as there are other well off groups who seem very quick to find a rationale for changes not impacting on them.
We see for instance lawyers kicking up a fuss over cuts to their fees from the Free Legal Aid Scheme despite the fact many of them earn stunning levels of income from the scheme. Many high income groups claim they have incurred debt and expenses commensurate to their levels of income and so are badly impacted by such changes.
We see property investors lobbying against changes to tax laws on the basis that it will leave them in difficulty in paying mortgages on their properties. We also see them arguing against cuts to Government-funded rental schemes despite the clear need for Government to cut costs.
On a corporate level we have several big businesses close in recent months, giving very little notice to their workers and in some cases not paying redundancy, either claiming an inability to pay or using some technical rationale for not doing so.
Double standards foster resentment
Very often it is these same above mentioned people who claim the need for radical Government action to cut costs and who lecture those on low incomes on the need to take pay cuts and to adjust expectations.
They argue cutting social welfare payments and the minimum wage or increasing VAT rates or income tax for lower or middle income workers is very unfortunate but to ‘look at the state we’re in!’ Yet they can think up a range of excuses for not having to take ‘adjustments’ themselves!
Insider does not deny that taken in isolation many of their points have merit. What many people sense however is that the well-off group in society are seeking a way out of sharing in the pain. This may have a profound impact on the ability of the Government to get people to accept the contentious decisions that are coming down the line.
On the other hand Insider fears that if public resentment towards those with money grows, the danger exists that a sense of unease will set in and that those who can afford to make spending and investment decisions that would benefit the economy and society as a whole will be hesitant about making them for fear of being seen to be ‘flaunting their wealth’.
This however only serves to emphasise how important it is that a sense of solidarity is created and that the public resentment is not fuelled. This is therefore a critical goal for the Government at this time.
Change in public mood: 2012 v 2011
Returning to the change in the public mood from this time last year, Insider would contend that between 2008 and 2010 the public resentment towards the Government introducing budgetary changes was largely driven by the fact that the Government introducing the changes was the despised Fianna Fáil-led government that had led the State into the mess in the first instance.
As a result it was impossible for that Government to introduce any radical changes – can you imagine the reaction if Brian Cowen had tried to introduce a property tax in 2010? – and many of the changes took the form of simple, but often ill-thought out, tax increases and spending cuts.
Now however the opportunity arises to take a more strategic long-term view while introducing changes to bring order to the public finances. The FG/Labour Government has got a mandate to do this but the public will now be asked to accept more radical changes, some of which will involve a change in mind-set.
Therefore the need to have broad public acceptance of the strategy is of absolute importance and the Government cannot afford to have the view develop that some people – regardless of what level of society they are at; top, bottom, or middle - are cosseted from the changes with others left to carry the burden.
The complexity of the Government’s task is further emphasised when one considers that it will also have to balance competing forces such as urban versus rural (septic tank charges and reduction in teachers in small schools), a right to public services versus an obligation to pay for them and be responsible in usage (water charges), and an attachment to property versus the need for a sustainable tax base (property taxes).
A Galway viewpoint
The two Galway constituencies offer an excellent viewpoint of many of these competing forces. In particular Insider would warn that the issue of small schools, and in particular one teacher schools, is a lethal subject in Galway, a county that apparently has more such schools than any other county.
Former Fianna Fáil minister Éamon Ó Cuív made a virtue of saving one-teacher schools during his party’s period in power and is already making noises about the threat being posed to them following the recent Budget. If these schools are to be saved however will it result in cuts to other sectors of education – many of them impacting on Dep Ó Cuív’s very diverse Galway West constituency – as Minister Ruairi Quinn has suggested?
An international viewpoint
Finally Insider would note that it is not only in Ireland that a feeling of unease has set in regarding the sharing of the burdens of the great recession.
In Britain Labour leader Ed Milliband, while struggling in the courtroom of public opinion generally, appears to have struck something of a chord with his identification of the ‘squeezed middle’. In the US we have even seen it said that a key task facing the Republican Party is to connect with its potential blue collar base who are resentful at seeing elites getting bailed out while the rest struggle.
There is plenty for the FG/Labour Government to ponder as it plots its next course. Insider would conclude by pointing out that despite the scale and urgency of the crisis it still has more than enough time to sit down and carefully think through the complexities of the challenges it faces, and ensure that the final product not only meets the major objective of restoring the public finances but is also strategically sound in the long-term and is accepted by the population as a whole.