A large number of well-flagged cutbacks will make for uneasy backbenchers
IT WAS officially billed as the “Expenditure Estimates 2012”. In reality, the 18-page document that Minister for Public Expenditure Brendan Howlin read out in the Dáil yesterday was the first half of the budget, detailing €1.45 billion in current spending cuts.
Howlin won the right to spell out the grisly details of all the budgetary cuts, including a number of embarrassing U-turns by his own party.
He accepted as much early in his speech yesterday: “We have been forced to make difficult and unpalatable decisions.”
And there was no getting away from that. When such enormous cuts were involved – €2.2 billion in total, including €755 million in capital cuts – the pill could never have been sugar-coated enough.
During the very long innings of the previous Fianna Fáil-led government, it was cuts in budgets – rather than taxes – that inflicted the most political damage. The most infamous was the cack-handed abolition of universal entitlement to the over-70s medical card in October 2008. But even in the good years, the last government tripped up over cuts. Then social affairs minister Mary Coughlan was wrongfooted badly in 2003 when cuts in her department were seized on by the opposition, and dubbed the “Savage Sixteen”.
There was no chance of that kind of recoil yesterday.
What was announced may have been hairshirt, but it was well and truly shock-proofed. That was thanks to an extraordinary – and at times cynical – spinning exercise by certain Ministers and handlers over the past month. Not only were most of the details of yesterday’s cuts leaked, so were details of cuts that never were.
Ergo, there were no major surprises. At the same there were a couple of notable omissions. Among the disappeared were several Armageddon scenarios pre-warned by Minister for Health James Reilly (medical card fees; prescription charges; closure of 40 nursing homes). Gone also were cuts threatened for the Department of Social Protection (across-the-board reduction of child benefit; as well as employers footing the bill for the first four weeks of employee sick pay).
That said, when you mined into the detail, there were a large number of less dramatic cutbacks that were nevertheless painful. And in the case of a few of them, such as the deep cuts in disability allowances, it was hard to disagree with Fianna Fáil’s spokesman Seán Fleming that it was a “nasty thing to do”.
In a relative victory for Joan Burton’s brinkmanship, the cuts imposed on her department ended up at €475 million, rather than the assumption of €700 million the Government was working on only last week, and the €822 million that was suggested by the Noonan-Howlin axis only two months ago. The corollary is that the adjustment in health is much bigger than anticipated at €543 million.
There is a sting in the tail here, though. A fair skelp of the savings will come from charging for private beds in public hospitals. That will mean another sharp rise for private medical insurance.
While the Government backed down from general cuts in child benefit, families with three or more children will face substantial cuts, which will eventually cost a four-child family €1,000 per year.
Social protection sees a number of cuts that will affect smaller cohorts, but deeply. In addition to cuts in disability payment, there will be cuts to one-parent family payments; and an unpopular decision to reduce the fuel season by six weeks (achieving a substantial €51 million in savings). Howlin also went much further with the employers’ redundancy rebate, slashing it from 60 per cent to 15 per cent. He said the rebate incentivises employers to make workers redundant and said it didn’t exist in Sweden or Britain. The argument is persuasive but so was the Opposition’s argument that employers may dump workers now before the new statutory arrangements arrive.
That change, together with the dropping of the threat to make employers pay for the first four weeks of an employee’s sick pay, look like the quid pro quo to Fine Gael for agreeing to modify the cuts in child benefit. In education, too, one or two of the flagged changes (the pupil-teacher ratio) did not materialise. But others, such as student registration fees, the ending of postgraduate maintenance grants and school transport fees, will affect hundreds of thousands of households in the State.
A lot of the changes in this part of the budget seem to have been wrought only over the last 72 hours. Though Howlin dismissed it yesterday, there is evidence that backbenchers on both sides were getting cold feet about some of the more unpopular measures.
Politically, Labour will still suffer from its two U-turns on child benefit and student registration fees (they were increased by €250).
But the partial row-back on child benefit, the retention of basic social welfare rates, as well as the last-minute decision to leave pupil-teacher ratios alone, will have done enough to mollify the disaffected who might have followed Tommy Broughan on a short trip along the plank.
