Slugger’s budget (and pre budget) blogburst…

Kicking off with Guido who has interests (both financial and familial) lie on both sides of the Irish Sea and he (unsurprisingly for those who know him) thinks Lenihan’s budget has done what Darling’s has failed to do: ie foreground the pain sufficiently to give the country the chance to get out from under its debt burden that much faster… (though it should be said that he got hammered for largely forgoing the need to effect ‘Public services efficiencies’ by Richard Bruton on Prime Time last evening)…- In the Telegraph Rosa Prince gets to the nub of how Mr Lenihan got to where he did yesterday:

Britain’s deficit is around the same as Ireland’s, but, unlike the United Kingdom, Eire has seen its credit rating cut and must bring borrowing under control immediately to avoid further damage to the economy.

– Yet as Duncan Weldon notes the two countries are currently in two very different states:

– Irish unemployment is 12.5 per cent
– the country is experiencing deflation at -6.6 per cent deflation
– GDP has fallen 7.4 per cent over the past year (and GNP by 11.6 per cent).
– And despite the cuts they have still had their credit rating downgraded.

– And the national mood is hardly turning more ugly than it already was but is turning even more sullen than it was before

– Even the irrepressible Karl Deeter was in resigned mode before the budget…

– Worth noting too that on RTE’s Prime Time last night the economist Moore McDowell generally approved of the trajectory of Lenihan’s budget but added the important caveat: “This is not the kind of action you want to take in a recession, but Ireland doesn’t have the money to increase expenditure.’

– The ever level headed Stephen Kinsella notes that in fact the harsh nature of the budget is the one thing that people should have expected

– The Irish Times Leader today says simply it is time to grin and bare it

– But John McGuirk has a very interesting line on a misalignment in the Minister’s speech between the political mission and the economic realities:

At the moment, the recurring theme in Irish politics is that the Government are callous, uncaring, and hopelessly blind to the problems faced by ordinary people, while the opposition at the very least empathise with families and businesses. The other story, which is waiting to be told, is that the Government are the ones putting long term prosperity ahead of politics, whereas the opposition have sacrificed an economic strategy in favour of a political one. I didn’t hear a single line in the Budget speech that pushed that message. In fact, I didn’t hear a single criticism of the opposition, and that’s just malpractice.

– And Brendan Keenan is perplexed by what’s not in there, suggesting Cowen/Lenihan have dumped a great deal of An Bord Snip recommendations

– Business and Finance have most of the headline facts and figures… Irish Election made all the documentation available shortly after the speech…

– There was considerable difference in the style and manner of the two men charged with delivering a difficult measures to their respective countries… Lenihan charged through his speech with the customary (with three budgets in 18 months we’re getting familiar with his style)… whilst as Nick Robinson put it “Alistair Darling unveiled it in the low-key, no-nonsense, business-like manner of an undertaker striving not to add to an already distressing and painful experience.”

– The early reaction in the City was not far removed from Vince Cable’s line that this was a party political PBS, not one for the country…

– Chris goes into some detail about the spending squeeze and notes that the real cuts will come in net investment… This he says is bad news for any incoming Tory administration intent on substantial public sector reforms (despite all of Margaret Thatcher’s noises about it, the civil service grew under her administration)… He cites two reasons:

1. Low spending rises – which imply low pay rises – antagonize public sector workers and so increase hostility to reform. People who are scared for their jobs are rarely enthusiastic about innovation. When Nye Bevan introduced the NHS he famously overcame doctors’ resistance by “stuffing their mouths with gold.” This won’t be an option.

2. Some desirable reforms require higher spending, at least initially. For example, if parents are to be given genuine choice among schools, there must be an excess supply of school places; if not, schools will choose pupils, not vice versa. But how can this be achieved with real spending almost frozen?

– Peston’s view is that the budget has had a neutral effect on business

– And Mike points to rather ominous odds on the UK losing its AAA rating… from, you guessed it, Paddy Power… For now, it looks like an expensive way to advertise…

– And finally, today’s leader in the FT:

Mr Darling did show some seriousness in tackling aspects of public spending, notably the planned two-year pay freeze. Public sector unions are already up in arms. Yet with the public sector pay bill representing half of departmental spending, restraint was the only option, especially given the private sector has already adopted freezes and cuts. Bringing public sector pensions a step closer to private sector provision is welcome too. Meanwhile, efficiency savings and squeezing low-priority spending programmes raise relatively meagre sums. They underline how hard it is to wring painless cash savings out of the public sector – and how much more there is to do.

The bulk of rebalancing must come from cutting back public services. The parties need to set out choices about what the state provides and what it does not. The government should take the first step in this debate, but on Wednesday chose not to do so. Instead of explaining spending priorities and what savings would be generated in the medium term, Mr Darling took refuge in claiming that, “as long as extraordinary uncertainties remain in the world economy”, it would be unwise to set out detailed plans.

This is hard to swallow. The Treasury often changes its mind about tax and spending decisions. It would be far better to know what action Labour would take if growth were to follow the Treasury’s own published estimates. Voters and bondholders deserve fuller answers from both main parties.

  • Mack

    Thought John McGuirk’s blog was very good, but also think Lenihan’s real audience was not a domestic one, but the international money markets.

    In that sense we probably are over the worst and on the road to recovery (hopefully not in reverse) – with the worst of the banking crises dealt with.

    Politically, he could have sugared the public sector pay cuts bitter pill for a local audience by pointing out that annual service increments will still be paid and thus the per centage cut this year is much smaller. Within 13 months, they may be undone for lower paid workers. That message wouldn’t suit internationally, and he projected the iron chancellor taking tough decisions instead.

    In effect he seems to be sacrificing his local standing with the goal of reducing the interest payments on our debt. Fair f*cks to him for that..

  • Ulster McNulty

    “Here are some of the reasons Guido thinks Ireland will bounce back faster than the UK:………
    Politicians’ pay will be reduced in line with public sector grades
    Savings of over €1bn on public sector pay bill.”

    ??? That doesn’t come close to sounding like a “reason”.

    What was the differential between public sector pay in RoI and UK before the budgets, what is it now? Did I not hear some time ago that, comparatively speaking, the Taoiseach got paid more than the pm’s in countries like France and Germany (remember those “basket case” economy countries of 2.5 years ago?)

    The ebb and flow of positive/negative, UK/Ireland comparative economic commentary (which is generally uninformative) is getting as tiresome as the hot air and bullshit that characterized the Celtic Tiger era.

  • “A time to grin and bear it”

    I love that headline, it is the type of think politicians and their media gofers say in war time, “we will fight to our last drop of blood” when what they really mean is the last drop of someone else blood.

    Out of interest will TD’ and government ministers be suffering a pay cut? I take it as read journalists and editors will not be.

  • Mack

    Mick –

    They will, 15%-20% I think, though that includes their voluntary 10% pay cut from earlier in the year.

    I’m think all Indo staff have taken pay cuts this year.

  • Ulster McNulty

    “They will, 15%-20% I think, though that includes their voluntary 10% pay cut from earlier in the year£

    Is that good or bad, comparatively speaking, as we are comparing the UK and Ireland?

    For example, I am the Taoiseach and I have a piece of string, I’m going to cut by 15 per cent. Gordon Brown has a piece of string, he isn’t going to cut it. Who has the biggest piece of string?

  • Mack

    Brian Cowen still has it, I think..

  • DR

    Mack, I think brian has just applied the brakes.

  • Ulster McNulty

    “Brian Cowen still has it”

    lol

  • Beware an Englishman who cheers on Irish politicians, if they happen to be right wing journos on the make, at least raise a question or two. Is there any real reason to doubt the UK cannot carry its current debt, at least for the time span Darling suggests?

    Whereas Ireland’s is more problematical, so to compare the tactics of the two governments over debt directly, as like for like, is simply a means for right wingers to gain brownie points from their tory friends in the hope of preferential treatment if they gain power.

    It is pathetic how both Cameron himself and his creatures who operate in the dark are aping blue Labour in the run in to the 1997 election. The very same type of A-political opportunist lurk in the hope of crumbs from the top tables, were the tories to gain power.

    By the way, I wonder if Mick F would like to tell us what Guidos financial interests are in Ireland that give him such authority to talk about such important matters. Over here he is regarded by most as a gutter internet blogger and smear merchant, totally wrongly I’m sure.

  • “Brian Cowen still has it”

    Pity it is not a rope we could then hang him with it.

  • The Irish Government TRY to deal with reality. The British Government PREFER delusional. QED

  • RepublicanStones
  • The Irish Government TRY to deal with reality. The British Government PREFER delusional. QED

    David,

    Like many who have claimed this, you do not offer anything to back it up, I am far from a supporter of Blue Labour, but I see no evidence they are denying the scale of the UK State’s debt problem, they are simply saying if they were to go down the Irish road with the country still in recession, it would simply extend the economic crises. Believing it is better to use the next period to boast the economy and to take the edge off of some those who will feel the recessions impact most; and then to move to deal with the debt burden. (The main reason the Irish government acted as they did was because they do not have the luxury of an alternative, or so the Green Party claims)

    Whilst Blue Labours proposals are not radical enough for me and fail to deal with the gross economic inequality which played a role in the Bankers behaviour, the alternative you put forward would be even worse.

    It seems to me people like yourself and the Tory fiddler David Cameron, (see latest figures from MPs expenses) see this crises as an opportunity to role back the welfare State and have not a care for the human collateral damage your regurgitated failed 1930s economic proposals will cause. Indeed I would go further and in Cameron’s case add, as long as his type are not caught in the backblast he does not give a fig.