IT ISN'T Armageddon, as Taoiseach Brian Cowen observed last week. But there was a definite "slash and burn" air surrounding the Government's announcement of €440 million in cutbacks in Government Buildings yesterday.
It is a pity that the Government diminishes itself and the Dáil by informing the media, rather than its own elected members, of such an important policy statement. The Government will make payroll savings of 3 per cent by the end of next year. If it succeeds in meeting that target and reduces exchequer costs by about €1 billion, a significant start will have been made on Mr Cowen's chosen project of public service reform. The impact of the announcement will have been affected, however, by the lack of detail.
The joint announcement by Mr Cowen and Minister for Finance Brian Lenihan of the Government's retrenchment programme was cleverly structured. Headline-grabbing objectives were short on specifics and some popular decisions were balanced by potentially harsh medicine. A clearer picture of what exactly is being planned and where the cuts will fall may, or may not, emerge during the next two days in the special Dáil debate. On the basis of declared intentions, Mr Cowen has taken some necessary and tough decisions to protect past economic gains and to provide for the future.
Before he became Taoiseach, Mr Cowen identified public service reform as a political priority. The economic downturn has provided him with the necessary justification to undertake root and branch reform. By postponing pay increases for ministers, judges and top public servants until 2010, he has sent an important signal to the social partners at the national pay talks. But pay is just one of the elements that has to be resolved. Mr Lenihan expects that considerable savings can be made through the restructuring or elimination of a range of State agencies, along with other measures. It is difficult to see where cuts of €440 million can be achieved this year. If the Government is to meet its savings target by the end of 2009, it will require an effective freeze on recruitment across most of the public service.
At a time when the construction industry is contracting rapidly and financial institutions and other businesses are under severe pressure, it is vital that clear and determined leadership is provided by the Taoiseach. Public reassurance is required. Our economic fundamentals are sound. The national debt is at an all-time low and economic growth, outside of the construction sector, has been estimated at 4 per cent. We have been losing competitiveness for years and inflation has not been controlled. These issues will require comprehensive action through social partnership at a time when the old formula of trading wage restraint for tax cuts is no longer an option.
The actions announced yesterday represent an initial phase of measures that can be expected to roll on into the December Budget. By that time, a clearer picture will have emerged about the international economy and the prospects of an early recovery. Delivery by Ministers of these planned spending cuts will dictate whether further unpalatable medicine is necessary. Mr Cowen's authority is on the line.