Share, , Google Plus, Pinterest,


Largesse, after austerity without reform

Cynical pandering to voters by this (like every) government explains why the Fiscal Advisory Council is ignored

There is no greater telltale sign of an election in the offing than when a government starts pledging to give your own money back to you. The Fine Gael-Labour Coalition has promised no less than €3bn between this year’s budget and 2016 in extra spending and tax cuts.

Commentators often decry ‘auction’ politics. However, without an auction or choice, voters would have nothing to go on when it comes to casting their vote. Governments typically inveigle their electoral promises into the budget or two before the general election. In the boom years, under Bertie Ahern, new schemes, lower taxes and generous handouts for the elderly played their part in the winning of at least two general elections. Charlie McCreevy and Bertie contrived an unbeatable mix of lower taxes and higher spending, as it turned out in defiance of the iron laws of economic gravity.

The Taoiseach Enda Kenny still insists that it was he and his party who saved you, the electorate, from reckless Fianna-Fail-led government. The story about the army patrolling the ATMs exemplified the threadbare nature of this particular narrative. The Fine Gael-Labour government has largely continued the austerity fare offered up by my late brother Brian Lenihan, when he was Minister for Finance. Michael Noonan is now getting almost exactly the same plaudits from the commentariat, who share a deep love for sound money and fiscal rectitude.

In the boom years economic growth was so pronounced it was easy for Bertie, and the government I served in, to dismiss those who predicted it would all end in tears. Those who wisely suggested what goes up can also come down could easily be dismissed as being negative or at some level unpatriotic. It was precisely because of this herd-like instinct that the current government established the Fiscal Advisory Council as a source of impartial and independent criticism when the state itself begins to stray from the right path.

It was depressing therefore to witness the subdued public reaction to the warning by Professor John McHale of the Fiscal Advisory Council about the proposed level of spending about to be delivered by this government. McHale and his colleagues believe the spending is wrong and unsustainable. The government appeared to have got away with this huge inducement to vote the right way. Of course, the public is weary of seven years of austerity, cutbacks and higher taxes. This time though the government cannot pretend they were not warned.

A full 70% of all state or public spending is devoured by three distinct departments: namely health, education and social welfare. Well over 50% of spending increases are devoted to salaries and wages for people who work in the public sector, with this pay bill disproportionately high in the social services. So, it is very clear, extra public spending spread across the areas it usually goes to offers little in terms of improved medium-term productivity but is intended to keep people happy, or at the very least inoculated from their normal negative feelings about any government.

Over the past five years there has been a golden opportunity, because of the global nature of the downturn, to take an axe to public spending but also to create long-term and sustainable reforms to the structure of the state itself.

In my last few years as a Minister up to 2011 I made the point constantly that Ireland has 21 third-level colleges and institutions, 34 (now 31) local authorities and 29 hospital emergency departments. This is public provision on a grand scale, utterly at odds with what you would expect from our population size.

Since as far back as the 1980s political parties have fought like dogs about the level of provision in health- care. This government, like others, promised a lot but appears to have wilted in the face of the vested interests and the costs involved. Health has become a metaphor for the inefficiency of public provision in Ireland. There is a serious neglect of the cause of reform, in our public system in Ireland, and until the voters see zeal on this front they will continue to regard the main or traditional parties as more of the same.

Conor Lenihan

Conor Lenihan is a former Minister for Science, Technology and Innovation. For the past four years he has worked in Moscow with the Skolkovo Foundation. He is a board member of San Leon Energy, a company quoted on the London Stock Exchange (AIM).