‘The National Ruin Plan 2011- 2014’

Caoimhghín Ó Caoláin

BY KATHRYN REILLY

THE deflationary policies of the past three Budgets didn’t work. They lengthened and deepened the recession which, in turn, defeated deficit-reduction efforts.
Why should we expect future deflationary policies to result in anything substantially different?
The publication by the Fianna Fáil/Green Party Government of their ‘National Recovery Plan’ is a foundation for an economic depression in the 26-County state containing a litany of measures that will shrink the economy.

Four-year plan from a two-month government
Sinn Féin Dáil leader Caoimhghín Ó Caoláin has said the Fianna Fáil/Green Party Government has no right to impose its four-year plan and that there should be an immediate General Election.
Deputy Ó Caoláin said:
“It is a travesty of democracy that a four-year plan should be framed by the most reviled native government in our history - a government whose life is now measured in weeks.”

Servicing banks, not the economy
The Government are discussing selling off valuable state assets to service debt over the coming years while they are busy acquiring defunct banks. This is a blatant insult to the Irish people whose incomes will be mortgaged to pay the loan back.
It defies all logic to claim that adding to our debt will seduce markets back to Irish sovereign bonds. Reacting to the publication, Sinn Féin spokesperson on Finance Arthur Morgan said:
“Even solely dealing with our structural deficit, this plan is in the main a list of deflationary actions that will deepen and lengthen the recession.
“The real issue is that we are about to embark on an insane course of borrowing to fund a failed banking policy.
“We cannot afford this banking policy, we cannot afford this loan. Most importantly, we cannot afford this government.”
However, the publication of the four-year plan is irrelevant and does not represent the current economic situation unfolding in the state. The EU and the IMF are in the process of negotiating an €85billion ‘bail-out’ package the Ireland, mainly to try and plug the black hole that is the Irish banking sector. In light of this, the Government’s plan is not worth the paper its written on as the EU and the IMF will be dictating Ireland’s budget strategy for years to come.
Indeed, it is not the full picture of budgetary outlook for the next four years. This is the plan before the EU/IMF loan has been taken on board and before we begin to fathom the debt servicing costs of that. It doesn’t even cover the terms and conditions attached to the loan. The Government’s four-year plan will pale in comparison to what the apostles of austerity in the IMF will bring.

Pay more, work longer, get less
The Government have repeated claims in the media that it is simply not sustainable that 45% of the population fall outside the taxation system. In this vein, the Government took the ‘hard decision’ to reduce the entry rate to income tax to €15,300. What does this mean for the ordinary worker? Well, coupled with the slashing of the minimum wage by €1 an hour, this means that people struggling to survive on the minimum wage will now be paying tax.
The Government took this disproportionate measure as a means to ‘broaden’ the tax base - it did not make it fairer or more equitable and it blatantly ignored the series of stealth taxes that currently exist and that they intend to introduce.

Cuts by stealth
In 2011 we will enter into a fourth year of a domestic recession - with all the components still going south: consumer spending, Government consumption and investment.
And what are the Government proposing to do?
Cripple the economy further.
A property tax by any other name is still a property tax. Simple as. The Government announced the introduction of a ‘household’ charge of €100 in 2012.
The introduction to increase VAT not only penalises people, reducing their spending power, but it will also do untold damage to already struggling businesses. People will cross the border once more and add to the difficulties of businesses along the border. In their budgetary outlook published at the start of the month, the Government acknowledged that consumer prices would increase next year.
The conscious decision to increase VAT is another covert way for the Government to squeeze pennies from an already beaten group of people who, post-Budget, will be forced into critical decisions such as feeding their families or paying their mortgages.

The emigration initiative
The ESRI said that 120,000 people would emigrate by the end of 2011; the Government themselves based their budgetary outlook on the premise that at least 100,000 people would emigrate in the years up to 2014.
The people of this state have lamented that we could not realise the potential of a ‘smart economy’ if we were exporting our skilled, educated young people.
Sinn Féin has said that emigration was an active policy of Government. But, in efforts to countenance this, Messrs Cowen, Lenihan and Gormley have announced that they are replacing the student registration fee with a flat higher education student contribution of €2,000. The rationale seems to be: we will no longer be exporting an educated workforce because people won’t be able to afford to go to college!
Those that can afford to go to college after these cuts to incomes and education are implemented are likely to remain in the country because, chances are, they are ‘connected’ and they will find a high-paid job in one quango or another.

A better way
The arguments for an investment-based growth strategy remain valid.
We know that the irrational approach taken to date - that you can deflate your way out of a recession - has proven a failure.
The Government’s plan is redundant.
The real issue is that we are about to embark on an insane course of borrowing to fund a failed banking policy.
We cannot afford this banking policy.
We cannot afford this loan.
Most importantly, we cannot afford this Government.