IT’S VERY much a taste of things to come. Irish taxpayers will have watched yesterday as Chancellor George Osborne wielded the axe in the UK’s four-year spending review and winced in sympathy with their British counterparts. All too soon it’s our turn, and the pain will be even more acute. Ireland’s economy is an eleventh of the size of the UK’s in GDP terms, and Mr Osborne’s radical €94 billion in savings over four years is just eight and a half times the €11 billion Minister for Finance Mr Lenihan is believed likely to seek. Imagine the UK’s Herculean project, and add at least an eighth more effort. And while Mr Osborne hopes to eliminate the UK’s 11 per cent budget deficit in five years, Mr Lenihan will be lucky to get ours down to 3 per cent.
Some 490,000 UK public service jobs will be lost by 2014-15, while economists estimate the same number may also disappear in the private sector as a result of declining public sector demand and lower household spending. Public servants who, with welfare recipients, have borne the brunt of this spending review, also face both a pay freeze for two years, and increased pension contributions.
The additional welfare cuts will claw back an extra €8 billion on top of the €12.5 billion announced in June, including the child benefits for wealthier workers. The state pension age for both men and women will rise to 66 by 2020 although, contrary to pre-budget rumours, universal benefits for pensioners including free eye tests, prescription charges, bus passes, TV licences for the over-75s and winter fuel payments will be maintained. However, the erosion of the principle of universalism, the core value of the welfare state’s founders, is marked. The government is not just cutting welfare, it is remaking the system in a different ideological image.
And although the NHS, schools, though not universities, and development aid budgets have been ringfenced as promised, all other departments face cuts of on average 19 per cent in their budgets over the period – economies that will mean profound reappraisals of core functions.
Scotland, Wales and Northern Ireland will all see small cash rises in their current budgets, although not keeping pace with inflation and necessitating service cuts. In the North a cut of over 37 per cent in the capital programme will cause real pain. Regional governments now face the agonising political price of devolved authority – with power, responsibility, and tough choices about where to apply the cuts that are bound to raise tensions between Sinn Féin and the DUP in the Executive.
Of course the crucial difference between the exercise going on in London and that in Dublin is the political context, and hence the respective likelihood of success in adminstering painful medicine.
The Tory/LibDem government has a new mandate and is far more able to stand down the vocal opposition of unions and poverty lobbies. Fianna Fáil’s prognosis and prescription may be the same, but its ability to adminster the bitter pill is hobbled by its crumbling authority.