|
Last Updated: Dec 19th, 2007 - 13:17:15 |
 |
| An Taoiseach Bertie Ahern pictured addressing the Fianna Fáil election rally held at the Party's campaign headquarters in Dublin. |
During the 2002 Irish General Election campaign, the Taoiseach Bertie Ahern and the Minister for Finance Charlie McCreevy pledged that "no cutbacks, secret or otherwise" were being planned to deal with the economic slowdown that was underway since the dot-com bust in the previous year.
The difference this time is that the impact of an economic slowdown is ahead.
By 2008, with the European Central Bank having increased their key interest rate to 4.25%, the SSIA stimulus on consumer spending gone and the slowing housing market beginning to take a toll on tax receipts, while pressure for more public spending continues at a high level, what advice will the civil servants likely offer to ministers?
For those who have short memories, let's re-visit the tune change in 2002:
Fionnán Sheahan, who is now a political correspondent with the Irish Independent, wrote the following in the Irish Examiner, weeks after the new Government took power in 2002:
Health Minister Micheál Martin’s jargon-filled €13 billion prescription to cure the ills of the health service was launched with great aplomb at the end of last year. It was people-centred, multi-disciplinary and would be monitored and evaluated in a designated, cohesive, integrated, focused, coordinated framework and approached with capacity, efficiency and equity.
Anybody remember the Programme for Government? It emerged during the general election, before the World Cup, the Roy and Mick spat, the miserable summer and the FAI’s pie in the Sky deal, and it pledged to target inequalities in the health service.
Yet, just months later, it costs more to get private health insurance, you get less of a subsidy from the Government for your prescription costs and it costs more to go to an Accident and Emergency ward. Monitor and evaluate that for the equity.
And already since the start of the year, it costs more to go to the doctor because GP fees are one of the services identified as having displayed “unusual price increases” during the euro changeover. In other words, family doctors took advantage of the euro changeover to jack up costs per visit, and got caught by a price survey by Forfás.
The VHI premium increase may have captured the most attention as it added up to €400 onto the cost of a family’s health insurance, but it wasn’t the only move that will add to your health care costs.
Last Friday night, when the Taoiseach went to war with the FAI telling them to tear up their lucrative deal with Sky, an announcement that will affect many families quietly drifted out from the Department of Health.
The threshold for the drugs payment scheme was increased by 22%. Minister Martin’s reduction in the State subsidies for drugs means patients with already big medicine bills will have to pay €63 of their monthly cost, a rise of €10. And while we’re dealing with tenners, the charge for attending the Accident and Emergency unit, without a doctor’s note, went up from €30 to €40.
As an aside to the increase in the VHI cost the other night, the minister threw out two other signs that the old coffers aren’t as flush as they should be. Patients will be charged an extra €3 for an overnight or day stay in a private bed in a public hospital, pushing the cost to €36.
And while we’re dealing with round figures, 800 of the 6,000 additional jobs sanctioned for the health service have been scrapped. But most of these were management and administrative positions and their non-appointment will have a minimal impact on patient services, the minister said.
That’s all right then. What difference would a few hundred managers and clericals make anyway? Makes you wonder though, if they weren’t that vital, why were they being appointed in the first place?
Now we get to the interesting part. Basically, despite the pronouncements that health is the top priority for this government, the Department of Health is as prone as any other department to a spot of belt tightening.
In the never-ending quest to balance the books and achieve a small but morally significant budget surplus, Finance Minister Charlie McCreevy has told his cabinet colleagues to slash and burn their budgets.
Apparently, only the health department is exempt from the cost-cutting drive. Strange then that in the space of a week, four separate cost-cutting and revenue-increasing exercises have been announced. Maybe the budget isn’t being cut but it has to be stretched to the limit for the rest of the year as there isn’t going to be any further hand-outs.
Don’t be fooled by the jargon. To put it plainly: There’s a lot of cuts done, more to come
When Marc Colemen, Economics Editor of The Irish Times asked ECB President Jean-Claude Trichet at his Dublin Castle press conference on May 10th, about a hypothetical country which bore a striking resemblance to Ireland in which public spending and credit growth were 25 per cent and 40 per cent respectively over a two year period, and inflation doubling to 5 per cent, Trichet remained the model of discretion.
"I have absolutely no idea of which country you are speaking," he said. But then he said "it seems to me it's a country which is growing rapidly. If this is the case - and I don't know that this is the case - then you have to do on the fiscal side everything, all what is necessary, in terms of regular and sound fiscal policy."
During the general election campaign, the future Irish economy has also largely been hypothetical territory.
On the day that the election was called, I wrote that public service reform had been outsourced to the Paris-based OECD and the yarns on tax cutting were never matched by a challenge not to increase taxes.
Tax policy is easy. This is why no political parties produce detailed policies. That is left to management consultants.
Tax revenue and the economy generally are so dependent on the construction industry which is two-thirds housing related.
17% of direct tax revenue is from property and likely more than 30% when dependent sectors are included.
No party has addressed the scenario where post- SSIA consumer demand slackens in 2008 coupled with a slowdown in the housing market.
The fact that people talk about "tax cuts" just shows the allure in marketing to an electorate, when even journalists do not pin down the politicians on taxes, charges and the overall tax burden.
NO party is promising to not raise taxes - i.e. introduce new taxes/charges etc.
In ten years, the export economy has become even more dependent on foreign firms and overseas investment while exports have faltered and inward investment is increasingly under threat.
So if the housing sector, the motor force of the Irish economy in recent years, falters as forecast, nobody should be surprised that in the absence of public service reform, the easy option for senior civil servants to advise is to the reintroduction of a blanket hiring embargo despite the impact on frontline services, while timeservers will be unaffected.
Besides, the biggest challenge of all when public coffers are no longer flush with money, will be to persuade quite a lot of people, that the free lunch has yet to be invented.
RELATED:
Irish Government has spent up to €400 million on management consultants since 1997
Comment: The job description of the Irish TD in the Twenty-first Century - This article has data on a comparable country to Ireland in terms of population and economic development.
Irish General election 2007 Main Page - access to several relevant reports
