Anxiety and anger over budget plans including welfare cuts continue on both sides of the water. Amid the attacks on George Osborne for “ Tory austerity” in his plans to cut public spending by a further £20 billion or 40% for unprotected areas, a rough comparison of public spending as a share of GDP suggests that UK and Irish spending by this measure will remain roughly comparable to the end of the decade. I float this out in the hope of attracting informed comment. Fintan O’Toole spells out the Irish position in the Irish Times.
According to the projections given to the IMF by the Department of Finance, spending (leaving aside interest payments) will fall as a proportion of GDP in the lifetime of the next government – from 34.7 per cent of GDP to 31.3 per cent in 2019. On the hybrid of GDP and GNP developed by the Fiscal Advisory Council, public spending drops from 40 per cent this year to 35 per cent in 2019.
Make of the ” hybrid” what you will. GNP includes overseas earnings some of which is presumably taxable but a good deal arising from FDI is not.
In the UK at 39.5%of GDP for 2015-16, public spending is set to reduce to 35.2% in 2019-20. In the UK the amount paid out for benefits and pensions, amounts to £183bn (26% of public spending). On top of that, £30bn is paid out in tax credits each year by HMRC.
In their political gaming for 2016, Sinn Fein and other critics should note this. Objections to welfare cuts are by no means limited to them.
The government is set to face its first Conservative backbench revolt over the Budget, after MPs voiced concerns about plans to reduce tax credits by up to £1,000 a year.
The Times reported the chancellor will face “real anger and frustration” around the changes, which mean 3m families will lose on average £1,000 a year, according to research from the Institute for Fiscal Studies (IFS).
The MPs are also concerned the changes will put families off going to work – despite pledges by the government during the last parliament to “make work pay”.
In an analysis of the July Budget, the IFS found cuts to tax credits will “only affect working families” and “protect the poorest”. The analysis suggested the changes will “weaken incentives for families to have someone in work”
On the Republic’s projections O’Toole argues convincingly.
Austerity measures that were understood – and just about tolerated – as temporary exigencies in an emergency period will become permanent. And that’s when the real trouble will start for the Irish political system. We need to start talking honestly about all of this now.
Whatever the effects on the political systems across the islands, a little more honesty would go a long way. In Northern Ireland particularly, intelligent debate is non-existent.