Irish government imposes austerity budget

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Irish government imposes austerity budget
By Steve James
16 December 2009

The 2010 budget announced December 9 by Ireland’s Fianna Fail and
Green Party government is a declaration of social warfare by a
criminal financial oligarchy, the path for which has been prepared by
the Irish trade unions.

Its purpose is to remove €4 billion from the wages, social benefits
and welfare spending on which working people depend. Revenue saved
will be used to prop up Ireland’s ruined financial institutions,
ostensibly revive its international financial reputation and pay off
its huge public sector deficit while depressing wages in the interests
of potential corporate investors.

Lenihan’s budget measures, the third in just over a year, include:

• €1 billion worth of pay cuts for some 300,000 public service
workers. These range from between 5 percent and 15 percent and come on
top of a 6.95 percent “tax levy” on public service workers imposed
early in 2009. Lenihan insisted that the cuts were permanent. Public
service pensions for new starts in the public service will not be
payable until age 66.

• €760 million cut in social welfare, amounting to an average 4.1
percent cut across all welfare claimants. Child benefit will be cut by
€16 per month, an average 16 percent cut that will reduce payments to
2006 levels. Job seekers allowance is to be cut for under-24-year-olds
to €150 a week, while those under 21 will be reduced to €100 a week.
Disability allowance, widow’s pensions, carer’s allowance will all be
cut by between €8.20 and €8.50 a week.

• Water charges are to be introduced.

• Under-23-year-olds who refuse “training” measures will lose a
further €40 a week.

• A so-called “carbon tax” on fuel will raise petrol and diesel prices
by between 4.2 percent and 4.9 percent, while the charge will also be
imposed on domestic heating fuels including gas, oil, coal and peat at
the rate of €15 a tonne. The measure will raise around €300 million
for the government.

• €400 million is to be cut from health spending, to be paid for by
introducing a 50 cent prescription charge. Hospital consultants pay is
to be cut by 15 percent. Health emergency charges are to be increased
by €10.

• €980 million is to be cut from capital spending, which will impact
most on schools, hospitals and infrastructure spending. Eighteen
percent of allocation for hospital building and equipment has been cut.

• Some 60,000 students will lose around 5 percent of their student
grant—an average of €11 a week—as part of an overall 6 percent
reduction in education spending. Third level colleges will face a 4
percent cut in funding.

• A measure to broaden the base of those eligible to pay tax will be
introduced in 2011 via a universal social contribution intended to pay
for public services.

Lenihan made clear, in line with months of statements from the
government, that further cuts will be implemented over the coming four
years. Currently these are anticipated to be somewhat less than the
2010 cuts, but this is based on assumptions of both worldwide
financial stabilisation and a return to economic growth in Ireland.
Both forecasts are perilous.

Of Lenihan’s 2010 savings, almost all of it will be handed over to the
banks to finance the government’s deficit. Ireland’s state finances
have collapsed under the impact of falling revenue, immense bailouts
to the banks and increased welfare demands caused by a sharp increase
in unemployment to fully 12.5 percent.

The government’s own pre-budget white paper suggested that the 2009
exchequer deficit would be €25.9 billion. The government intends to
reduce this to €21.9 billion in 2010, while charges on the entire
national debt were expected to soar to €4.6 billion.

A new group chaired by Green Party Environment Minister John Gormley
has been set up to examine spending cuts in Ireland’s 29 county and
five city councils. €11 billion is spent annually by the local
authorities.

While all sections of working and unemployed people will feel the
impact of a budget repeatedly described as the “harshest in the
history of the State”, only token restrictions were imposed on the
accumulation of private wealth.

A one-off €200,000 “Irish domicile levy” is to be imposed on those
with earnings of over €1 million, who have more than €5 million worth
of assets in Ireland. This measure, of course, will be characterised
by the lack of seriousness with which it is implemented, and the
droves of tax lawyers mobilised to ensure that the super rich avoid
even this minor incursion into their private fortunes.

More significantly, Lenihan made no change to the 12.5 percent rate of
corporation tax—one of the lowest in the European Union. Additionally,
a one year scheme to exempt start-up companies entirely from
corporation tax was extended to three years. VAT on alcohol, in a
measure specifically designed to prop up alcohol sales impacted by
lower prices in Northern Ireland, are to be reduced.

Lenihan’s statement made only a token reference to the National Asset
Management Agency (NAMA), the government “bad bank” set up to take
over the toxic debts run up by Irish banks at an anticipated cost of
some €54 billion. Lenihan hoped that NAMA would not impede credit to
small business. Although his budget statement noted a “massive state
commitment to the banking sector”, it included no figures for current
and prospective bailouts.

Lenihan’s budget, particularly the direct imposition of public service
pay cuts, was a repudiation of alternative proposals put forward by
the Irish Congress of Trade Unions (ICTU). Days before the budget, the
ICTU called off a second planned one-day public service strike for
December 3. A previous one day strike, November 24, directed against
spending cuts, drew widespread support. Some 215,000 public sector
workers struck, with only skeleton emergency services and flood relief
operating.

Presented with such clear evidence of working people’s opposition to
cuts, the ICTU offered the government proposals intended to save up to
€1.3 billion to protect Ireland as a financial and investment
platform. The ICTU proposed these be implemented by unpaid leave,
flexibility, service re-organisation and compulsory redundancies.

The ICTU called off the strike in the belief they had offered enough
from workers’ wage packets and conditions to restore a “social
partnership” with the government and employers—in which all three
“partners” agree on wage rates and public spending.

With the ICTU, and its leading member unions, SIPTU, Impact and Unite,
making clear their intention to suppress opposition in the working
class, the government and its backers took advantage of the situation.
Lenihan and Green Party leader John Gormley were reported to be
opposed to any deal with the unions, as were numerous business
federations and media commentators. They wanted more.

Irish Times columnist Stephen Collins complained December 5 that the
suggested deal with the unions was squandering the opportunity to
impose pay cuts of between 5 percent and 20 percent “on every worker
in the economy, as well as on the professional fees of doctors,
lawyers, accountants and the like”. With the strike called off, the
government took Collins’s advice.

David Begg, ICTU leader, complained, “Clearly we have been played off
the pitch now by the Government; we have no possibility of achieving
that kind of social solidarity in the budget so it looks as though we
will find ourselves in a position of pretty serious opposition to the
Government in relation to this budget”.

The character of this “pretty serious opposition” has since been made
clear.

In a December 11 statement to executive members, quoted in the Irish
Times, Impact promised “non-cooperation...selective strike action to
be used intermittently...targeting specific areas in response to the
threat of compulsory redundancies...demonstrations and
protests...considerations of a wide-scale strike at a strategic point
in the campaign”.

Impact and its allies will seek to re-establish formal social
partnership by allowing such intermittent, isolated and fragmented
actions as cannot be avoided. If strikes are called they will be
calibrated to facilitate union efforts to get their feet back under
the top tables.

http://wsws.org/articles/2009/dec2009/irel-d16.shtml

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