Fiscal solutions exist, but leadership is absent

MONDAY, 25 OCt

There is an apprehension now that the crowd who have caused such terrible damage to this society over the last decade might be about to go one better and do fatal damage to this society - and they could do this in the next few weeks. By Vincent Browne

There can be no confidence in a government that was talking a few weeks ago at the lock in in Galway about budget adjustments of €3 billion and now are talking about budget adjustments of €7 billion.

The government that was telling us, until quite recently, that the gap that needed to be filled was €7.5 billion over the next four years is now saying the gap is actually twice that.

It is not the size of the gap that matters primarily - although that certainly matters a lot. It is the sense that the guys in charge have no idea what they are doing or where we are going.

It is as though the Galway hangover has hung over ever since.

They are reeling around in a daze, unable to see a straight line, let alone walk one.

And we expect these guys to be able to make the delicate judgments that will see us through the maze.

The delicate judgment is to do enough in the budget to convince the markets we are going to be able to get ourselves out of the morass, yet not so much that we do terrible damage to the economy in ways that make it impossible for us to get out of the mess.

It is not that our difficulties are insurmountable, but they may be insurmountable with this crowd in charge, for surely they are now a large part of the problem.

The really depressing thing is that the alternative crowd may be as bad.

Well, maybe that's not fair.

They couldn't be as bad - could they?

Think of any of the bond market people coming over and seeking reassurance from Enda Kenny.

Or of them seeking reassurance from Eamon Gilmore, who has rapidly become part of the problem with his evasions, his opportunism, his eye on the main chance.

Fine Gael and Labour share some of the blame for the morass, because the leaders of neither of these parties ever uttered a word of warning or even caution about the reckless policies of the government in continuing to boost the economy at a time of high growth and ravishing the tax base at a time of plenty.

Yes, Richard Bruton did express mild concern in his budget speeches about the drift of economic policy, but it was very sotto voce. Kenny, of course, just did the usual bleating about not enough money being spent here and there, and not enough cuts in taxes here and there.

What is required is a credible strategy to start reducing the budget deficit.

This could include, for instance: the removal of private pension tax breaks, saving €3.5 billion annually; a commitment to raise €1 billion in property taxes from 2012 onwards; the raising of €1 billion more in income taxes including the introduction of a new tax rate for those earning over €100,000; the cutting of all public service salaries above €150,000 and reducing public service pay for those paid over €75,000, sufficient to yield €1 billion annually; an increase in the corporation tax rate to 16 per cent to bring in a further €1 billion annually; cuts in public service numbers of one fifth, saving €3 billion annually; and capital budget cuts of €3 billion on a strictly once off basis.

This gives a total of €9.5 billion, plus the €3 billion capital budget cuts.

Then increase old age pensions (to soften the blow on private pensions, while treating people equally) and unemployment assistance (to soften the redundancy transition and again try to treat people equally) costing €2.5 billion.

There's an immediate saving of €10 billion.

That would convince the markets and we could remain vague about the timeframe for the rest.

Of course, the Croke Park deal has to go. That was insidious from the outset, for it copper fastened invidious cuts for those on low pay in the public service.

But there is no justification for paying more than €150,000 to hospital consultants, Nama and NTMA big wigs, judges, cabinet ministers (they should be reduced to €90,000, with the cars and other perks gone) and others at a time of such austerity.

The reduction in public service numbers should be done on a voluntary basis with attractive redundancy offers - the once-off payment of, say €6 billion in redundancy payments would not damage the credibility of the overall package (40,000 to go at €150,0 00 each, plus their pensions). In other words, we can deal with our problems.

The kind of package suggested here would be sufficient to enable borrowing to continue at reasonable rates and, if it conveyed to us that at last we knew where we were going and there was hope, things here would start to pick up. But would anybody believe a word from the present crowd - or from the other crowd?

Bring back Charlie and Garret