DUBLIN—The Irish government delivered its 2011 budget on Dec. 7—one that has been anticipated with some dread since the International Monetary Fund (IMF) announced its bailout loan for the beleaguered country.
The reality of the situation is that Ireland’s public finances were in such poor state this autumn that the lender of last resort, the IMF, had to join forces with the European Union to help ensure Ireland has the resources in place to finance itself.
During his budget speech, Minister for Finance Brian Lenihan said, “This has been a traumatic and worrying time for the citizens of our country. They are concerned that we had to seek external support to help us with our economic and financial difficulties. They are worried about the impact of this momentous and difficult decision on their lives.”
The cuts to public spending that were announced in the budget were wide ranging. One key area affected is a determined effort to draw more lower-paid workers into the tax net. A second area, that is expected to cause the most pain, is the inevitable cut in the enormous social welfare bill that would include the unemployed and mean cuts to family benefits, among others.
“Yet, in fact, even in this most intractable and complex crisis, there are clear signs of hope,” Lenihan said.
The financial crisis in Ireland occurred not because there were problems with the economy as a whole, but instead because of fundamental problems with Irish banks and because of an inflated property market.
Lenihan said that financial activity in the country had now stabilized. He said, “As anticipated, this recovery is being led by exports. Our exports increased by nearly 7 percent in real terms in the first half of this year. Output in the manufacturing sector was up 12 percent in the third quarter, while surveys point to continued strong growth in export orders for both goods and services.”
Although Lenihan had some reason for optimism, the fact remained that his budget cut 6 billion euros (almost US$8 billion) from the Irish economy. It remains to be seen whether the Irish economy can handle such deep cuts—and whether the public will accept them.
The reality of the situation is that Ireland’s public finances were in such poor state this autumn that the lender of last resort, the IMF, had to join forces with the European Union to help ensure Ireland has the resources in place to finance itself.
During his budget speech, Minister for Finance Brian Lenihan said, “This has been a traumatic and worrying time for the citizens of our country. They are concerned that we had to seek external support to help us with our economic and financial difficulties. They are worried about the impact of this momentous and difficult decision on their lives.”
The cuts to public spending that were announced in the budget were wide ranging. One key area affected is a determined effort to draw more lower-paid workers into the tax net. A second area, that is expected to cause the most pain, is the inevitable cut in the enormous social welfare bill that would include the unemployed and mean cuts to family benefits, among others.
“Yet, in fact, even in this most intractable and complex crisis, there are clear signs of hope,” Lenihan said.
The financial crisis in Ireland occurred not because there were problems with the economy as a whole, but instead because of fundamental problems with Irish banks and because of an inflated property market.
Lenihan said that financial activity in the country had now stabilized. He said, “As anticipated, this recovery is being led by exports. Our exports increased by nearly 7 percent in real terms in the first half of this year. Output in the manufacturing sector was up 12 percent in the third quarter, while surveys point to continued strong growth in export orders for both goods and services.”
Although Lenihan had some reason for optimism, the fact remained that his budget cut 6 billion euros (almost US$8 billion) from the Irish economy. It remains to be seen whether the Irish economy can handle such deep cuts—and whether the public will accept them.
Fine Fail’s coalition partners in government, the Green Party, said in a statement that they believed the budget, although difficult, protected the most vulnerable in society.
The Green Party Finance spokesperson, Sen. Dan Boyle, said that his party had sought to protect funding in education, to reduce the cost of the political system, protect funding in support for the homeless, and protect funding in the area of mental health, among others.
Sen. Boyle said, “In all these areas we have either ensured no cut at all occurred, or, that cuts were less than those imposed elsewhere. In education we protected the pupil-teacher ratio, kept capitation reductions low, and ensured that a return to third level tuition fees did not happen.”
“We have also argued publicly and privately that important signals of example must be given to people who are themselves facing tough times. The costs of our political system needed to be reduced, and today’s measures are an important step,” he said.
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The Green Party Finance spokesperson, Sen. Dan Boyle, said that his party had sought to protect funding in education, to reduce the cost of the political system, protect funding in support for the homeless, and protect funding in the area of mental health, among others.
Sen. Boyle said, “In all these areas we have either ensured no cut at all occurred, or, that cuts were less than those imposed elsewhere. In education we protected the pupil-teacher ratio, kept capitation reductions low, and ensured that a return to third level tuition fees did not happen.”
“We have also argued publicly and privately that important signals of example must be given to people who are themselves facing tough times. The costs of our political system needed to be reduced, and today’s measures are an important step,” he said.
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Many organizations disagreed with the government that the most vulnerable were protected.
Candy Murphy, policy manager with One Family, a provider of specialized support services for one-parent families, said, “Today’s many cuts—coupled with increases in taxes to be paid by those on low incomes—will have a devastating effect on one-parent families, many of whom are already living in poverty and struggling to combine work and caring responsibilities. In the absence of any clear jobs strategy, the government has clearly not met its commitment to protect the most vulnerable from the effects of the crisis.”
The Services, Industrial, Professional, and Technical Union (SIPTU) General President Jack O’Connor, said that the budget presented by Minister Lenihan “insulates the rich and targets low- and middle-income earners.”
O’Connor said, “There is no provision for wealth tax. There is no provision for a tax on asset wealth, trophy houses, etc. The top marginal rate of income tax is to remain unchanged.
The Teachers Union of Ireland (TUI) claimed the budget had cut the education system back to the bare bones. TUI General Secretary Peter McMenamin, said, “The ferocious cuts outlined today must be considered with those already foisted on a skeletal education system now truly hacked back to the bare bones. Over the last two and a half years, this government has laid waste to education provision at all levels, and once again the most vulnerable will suffer the worst.
“In a shameful fiscal sleight of hand, it has been clarified today that third level funding will be slashed by 7 percent, despite the four year plan indicating a 5 percent cut. Cash-strapped students and their families will be expected to make up this shortfall by way of the increased 2,000 euros (US$2,652) levy. Needless to say, this increased ‘back door’ fee will offer no improved service to students.”
According to Anne Costello, spokesperson for the Community Platform, an umbrella group representing 30 national organizations, “Cutting social welfare, the minimum wage and child benefit will not only have a devastating impact on the most vulnerable, it will also have a damaging impact on consumer spending, resulting in even more job losses and a further shrinking of the economy.”
It wasn’t all bad news for the government as Age Action Ireland said they welcomed the government’s move not to cut the state pension.
Although the Irish Business and Employers Confederation (IBEC) welcomed an Internship program proposed by the government, they were broadly critical of the budget.
IBEC Director General Danny McCoy said, “The scale of the budgetary adjustment is required, but how it is achieved is just as important. More should have been done to reduce current expenditure, which remains too high given the major fall in tax revenue.”
Candy Murphy, policy manager with One Family, a provider of specialized support services for one-parent families, said, “Today’s many cuts—coupled with increases in taxes to be paid by those on low incomes—will have a devastating effect on one-parent families, many of whom are already living in poverty and struggling to combine work and caring responsibilities. In the absence of any clear jobs strategy, the government has clearly not met its commitment to protect the most vulnerable from the effects of the crisis.”
The Services, Industrial, Professional, and Technical Union (SIPTU) General President Jack O’Connor, said that the budget presented by Minister Lenihan “insulates the rich and targets low- and middle-income earners.”
O’Connor said, “There is no provision for wealth tax. There is no provision for a tax on asset wealth, trophy houses, etc. The top marginal rate of income tax is to remain unchanged.
The Teachers Union of Ireland (TUI) claimed the budget had cut the education system back to the bare bones. TUI General Secretary Peter McMenamin, said, “The ferocious cuts outlined today must be considered with those already foisted on a skeletal education system now truly hacked back to the bare bones. Over the last two and a half years, this government has laid waste to education provision at all levels, and once again the most vulnerable will suffer the worst.
“In a shameful fiscal sleight of hand, it has been clarified today that third level funding will be slashed by 7 percent, despite the four year plan indicating a 5 percent cut. Cash-strapped students and their families will be expected to make up this shortfall by way of the increased 2,000 euros (US$2,652) levy. Needless to say, this increased ‘back door’ fee will offer no improved service to students.”
According to Anne Costello, spokesperson for the Community Platform, an umbrella group representing 30 national organizations, “Cutting social welfare, the minimum wage and child benefit will not only have a devastating impact on the most vulnerable, it will also have a damaging impact on consumer spending, resulting in even more job losses and a further shrinking of the economy.”
It wasn’t all bad news for the government as Age Action Ireland said they welcomed the government’s move not to cut the state pension.
Although the Irish Business and Employers Confederation (IBEC) welcomed an Internship program proposed by the government, they were broadly critical of the budget.
IBEC Director General Danny McCoy said, “The scale of the budgetary adjustment is required, but how it is achieved is just as important. More should have been done to reduce current expenditure, which remains too high given the major fall in tax revenue.”
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