TAOISEACH BRIAN Cowen will be comforted by the positive reaction of Fianna Fáil backbenchers to the prospect of a hairshirt budget, following two days of discussion behind closed doors in Galway. Having lost the Lisbon referendum and misjudged the severity of the economic downturn, Ministers had expected some internal criticism. But it didn't materialise.
Instead, there was a ready acceptance of the need for harsh measures to get Government finances back on track. Whether that attitude survives the inevitable cutbacks and the public's response to them remains to be seen.
Backbenchers are depending on two "get out of jail" cards. The first involves blaming our domestic woes on the international credit crunch. The second envisages a recovery of the economy in 2009, so as to provide the basis for a successful general election campaign. Neither card is a guaranteed winner. There can be no denying the Government allowed the housing bubble to inflate excessively because of its links to the construction industry and its dependence on stamp duty. Because of that, blaming international events is only part of the story. And while it would be comfortable to believe the economic downturn will be short-lived, a major speaker at the Fianna Fáil conference suggested it could last until 2011. Should that happen, the recovery would be too late to provide a political bounce.
In spite of these challenges, Fianna Fáil backbenchers were in surprisingly good heart. The Mahon tribunal was a distant embarrassment. They would not be affected by next year's local elections. The situation of their party, compared to the Progressive Democrats, was snug and secure. Fine Gael and the Labour Party posed no immediate threat. And the outlook for a new social partnership arrangement had improved. They were happy to see Mr Cowen at the helm.
Two weeks ago, Minister for Finance Brian Lenihan brought forward the budget date and signalled the fiscal situation was deteriorating rapidly. Decisive action was promised. And Ministers were directed to make greater savings. There is still, however, considerable uncertainty concerning the Government's intentions. While undertaking not to "artificially inflate" house prices, Mr Lenihan will help the lower paid to secure local authority loans. Such intervention, in the provision of social and affordable housing, can be justified if the price is right. But in a situation where house prices are falling, it must not be used to artificially support the market. That would prolong a painful correction process and penalise vulnerable buyers.
Measures to help industry export more and improve competitiveness are urgently needed. At the same time, the Government has a tremendous opportunity to push through difficult initiatives. In that regard, any reintroduction of university fees must take account of past inequities, when farmers and the self-employed were largely exempt from charges. There will be difficult days ahead when retrenchment and fiscal reform attract rough criticism. That is why any restructuring of the taxation base must have regard to equity and social cohesion.