Any foolish attempt to cut pensions will be attended by the shade of Ernest Blythe

Whatever happens in October’s budget one thing is certain: the old age pension will not be cut. Some cuts in the overall welfare budget are inevitable and the elderly may well be affected by some of them, but the basic pension will remain intact.

The Coalition parties committed themselves in the programme for government to retaining basic social welfare rates, including the old age pension, at their present levels. And there is no sign of any change in that stance.

If anything, there is less pressure to reduce the pension now than there was when the Coalition took office due to the steady improvement in the public finances. While further spending cuts have to be found nobody in Government has any notion of proposing pension cuts.

This has little to do with the merits or demerits of the argument but is rooted in simple political calculation. Pensioners are one of the most powerful lobby groups in the country and politicians fear the vengeance certain to be wreaked upon them if they tamper with the pension.

None of the TDs who were members of the last Dáil are likely to forget the passions that were aroused when medical card eligibility limits for pensioners were changed in 2009. The outrage almost derailed the late Brian Lenihan’s initial attempt to get to grips with the financial crisis.

Going back to the early years of the State, the cut in the old age pension introduced by minister for finance Ernest Blythe in 1924 went into folk memory. It was a potent political weapon in the hands of Fine Gael's opponents for well over half a century. That is a powerful reason why nobody of any significance in the party wants to reduce pensions now.

Mind you, with the population facing another round of budget cuts as the country nears the exit from the bailout, there are certainly valid arguments on the grounds of equity for taking a close look at entitlements available to the elderly.

Detailed figures released by the Central Statistics Office on Thursday showed that the elderly have suffered considerably less in financial terms from the recession than any other age group. They confirmed once again that younger people have borne the brunt of the recession and that the elderly have been largely protected.

Children are at a far greater risk of poverty than the elderly but they don’t have votes. By contrast, not only do the elderly have votes but they are the more likely to cast their ballots than younger voters and so have far more influence over the political system than any other age group.

The lobby groups for the elderly are well organised and adept at influencing the media but, even deeper than that, there seems to be a natural tendency in Ireland for the elderly to receive a more sympathetic hearing from the general public than other interest groups.

Sense of decency
Surveys show that a majority of younger people, who have taken a much bigger hit to their incomes during the recession, are strongly opposed to cuts affecting their elders. This is another example of the sense of social cohesion and basic sense of decency that runs through Irish society but the net result is that cuts do not always fall on the shoulders of those who can bear them the most.

The big political argument in the next two months will be about the scale of the spending cuts required in the budget and the balance to be achieved between cuts and tax increases. Already some clear markers have been laid down.

Tánaiste Eamon Gilmore made it clear last month that he is opposed to the adjustment of €3.1 billion favoured by the troika and by some leading economists.

This week Fianna Fáil spokesman Michael McGrath also came out strongly against savings of this magnitude.

Both men argue that the deal on the promissory notes means the target agreed with the troika of reducing the deficit to 5.1 per cent of gross domestic product next year can be reached without savings of the order of €3.1 billion.

There is no doubt that the promissory note deal has made the overall targets easier to achieve but the question is whether it makes sense in Taoiseach Enda Kenny’s phrase “to take the foot off the pedal” just as the end of the financial crisis is coming into sight.

Throttling back at this stage raises the spectre of the Fine Gael-Labour government of the 1980s. By the end of its tenure that coalition managed to wrestle the public finances back into shape, but because of the long drawn-out nature of the process it got no gratitude at all from an electorate that returned Fianna Fáil, who had created the mess in the first place, back to power.

Finish the hard work
It would make political sense for this Coalition to finish the hard work well before the next election so that it its final budget can be an expansionary one. That means sticking close to the monetary targets which are likely to bring the budget into balance ahead of target.

However, easing of the pressure from the troika, due to the exit from the bailout, and a natural political desire to stop inflicting budgetary pain at the earliest possible moment will probably result in a softer budget than expected.

An adjustment of about €2.7 billion would probably come in nicely below the deficit percentage target while allowing a little easing of political pressure.

However, a much lower adjustment of about €2 billion, as advocated in some quarters, would be dangerous economically and politically disastrous for both parties in government in the long run.

A failure of nerve at this stage is the last thing the country needs.