Changes needed fast to stop scenes of weeping parents in Irish airports from becoming iconic image of this recession, writes MICHAEL NOONAN
IT DOESN’T matter how many degrees they have and it doesn’t matter how good their job prospects might be. When it comes to forced emigration, all parents break down and cry as they see their children off at the airport.
I know, because I lived through it in the 1980s as a politician both in government and in opposition. It is one of the great personal and social traumas to lose a generation to emigration. But it’s happening again. The ESRI predicts up to 200,000 people will emigrate between now and 2015.
It is because I have seen and understood the misery of emigration that my number one focus, the issue that drives my approach to my new position, is jobs. Both finding ways to keep people in work and creating conditions where entrepreneurs can generate new jobs.
Driven by this, I have no confidence in this Government’s bank strategy. It is a narrow strategy of writing whatever cheques are necessary to bail out delinquent banks, and then opportunistically looking for the softest targets to cut the budget deficit each year. It is not a sufficiently ambitious or strategic formula for getting Ireland back to work. And it’s not just me saying that. The IMF is now forecasting continued low growth and 10 per cent plus unemployment to 2015.
Brian Cowen’s reckless tenure as finance minister, combined with the €25 billion cost of Fianna Fáil’s bank bailouts, has left Ireland with little room to manoeuvre. Truly, when it came to solving our bank crisis, the bankers pulled the wool over Minister Brian Lenihan’s eyes and left you and me, the taxpayer, to foot a monstrous bill. Nonetheless, we have to fix the public finances and that means making savings of €3 billion in 2011.
Based on international experience we do know how best to tackle this deficit problem. Countries that attempt to fix a fiscal crisis by raising tax rates and cutting public investment suffer longer, deeper recessions than those that cut day-to-day spending.
To date, 55 per cent of the deficit-cutting measures taken by Brian Lenihan have been tax increases or cuts in public investment. The public investment programme for 2010-14 has already been cut by 40 per cent compared to what was set out in the National Development Plan, and the marginal tax rate on a single person with average earnings has effectively been increased to 51 per cent. In short, this was the wrong medicine and instead of making things better, the patient got worse.
But it is a formula the Government seems intent on repeating in 2011. Having failed to lay the groundwork for generating significant savings from public sector re-organisation, the Government now seems set on cutting borrowing mainly through further cuts in public investment and increases in taxes on income. This would be the wrong approach because it would further damage confidence in our economic future and delay investment and job creation.
I am convinced that the key to tackling the deficit is to transform our public sector to deliver more with less. Successful public service transformations in other countries that have faced fiscal crises, like Sweden and Canada, show us the way. In the mid-1990s a Canadian government shaved 20 per cent off government spending within four years to cut its budget deficit from 9.1 per cent of GDP to zero. In Sweden in the mid-1990s they cut 11 per cent from day-to-day spending with no ill-effects on performance. Both countries achieved these savings while also enjoying strong economic recoveries.
The lessons in how to make spending savings are also clear. Salami slicing the budgets of all departments by roughly equal amounts – as our own Government is doing – is a lazy, ineffective and damaging way to make savings. The McCarthy report did however provide a menu of changes that could be made but the Government have only tackled 10 per cent of the proposed measures.
What is required instead is a complete rethink of what services the State is providing and how it is providing them. You see, I believe that in Ireland we are lucky to have so many talented, dedicated and motivated public servants. A key challenge for any new government is to find a way to tap in to and harness that talent and energy.
To this end, Fine Gael has already published its FairCare plan to dismantle the HSE “command and control” system by moving to the proven Dutch “managed competition” model of healthcare. In that system competing health insurers provide affordable insurance to all and drive reform and innovation in the delivery of healthcare, particularly through the expansion of primary care. Where this approach has been brought in it does not cost extra and, in fact, significant savings can be made.
Likewise, Fine Gael’s NewERA policy sets out how we will streamline our semi-State sector in order to accelerate badly needed investments in the infrastructural arteries vital for our economic success – electricity, broadband and water.
More than that, we have set out the relatively costless changes in policy that we would implement – such as the elimination of the travel tax – that could support job creation in a whole range of sectors.
Our focus is on promoting a culture of entrepreneurship and risk-taking, in part by overhauling Victorian laws which still treat Irish entrepreneurs that fail as economic lepers rather than potential wealth and job-creators of the future.
We believe private enterprise, in particular the not-for-profit voluntary sector, should play a much greater role in the more cost-effective delivery of publicly-funded services. And, we have plans for a smaller, more skilled, more competitive banking and finance sector that would once again be the servant of productive enterprise – not the other way around.
History shows that the right decisions by government make a real difference. We have a proud, talented and determined people that are looking for new hope and optimism. We are not getting that from this Government.
Putting jobs and people ahead of bankers and bailouts is central to an approach that I will bring to any opportunity I get to serve. Weeping parents in departure lounges in airports around the country must not become the iconic image of this recession. Unless we change direction quickly my fear is that it will.
Michael Noonan is Fine Gael spokesman on finance