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.