Saturday, 22 November 2008

A View from the Pew - Judging the Budget

View from the Pew is a series of articles I am writing for Newslink, the Diocesan magazine for the Diocese of Limerick and Killaloe. This one appeared in the November 2008 issue.

The morning before
I am writing the morning before Brian Lenihan’s first budget as Minister of Finance. We all know it will be harsh, because government spokesmen have been continually telling us so for weeks. No doubt they are managing our expectations to limit the political fallout. Dire it may be, but if it is kinder than they have made us fear, we will all heave a collective sigh of relief.

Our public finances have been badly mismanaged, I think. Government funding has relied far too much on the speculative property bubble, which has now burst. The sharp reduction in stamp duty and other property related receipts, the slowing economy, and increasing unemployment have led the Department of Finance to forecast a deficit in 2009 of €13.3 billion, 7 per cent of GDP, unless drastic action is taken. Plans must be changed to reduce the deficit. We must expect the budget to raise taxes, cut services and defer plans for desirable new infrastructure and services. And I do not think these changes will be temporary. The fact is we can never return to the unsustainable property boom which artificially buoyed exchequer receipts. Revenues must be found from elsewhere or necessary services will be cut. The global financial crash can only make the Government’s difficulties worse, but I do not believe their denials that the deficit is home grown.

But now is not the time to assign blame and punish the guilty – there will be time enough for that in years to come. Now is the time for those responsible to take the hard decisions on behalf of us all. Let us pray that they are also the right decisions. I do not envy Brian Lenihan today.

On his way into Government Buildings Brian Lenihan said, ‘The Budget will stabilise the economy and inject confidence into the financial system, while also looking after vulnerable people.’ I like the bit about looking after the vulnerable. Jesus tells us, ‘Just as you did it to one of the least of these my brothers and sisters, you did it to me.’ It is our collective, Christian duty in these difficult times to look after the vulnerable, so I pray that Brian Lenihan will live up to his confident words. Please God, he will look after the vulnerable in our own society, the poor, the disadvantaged, the unemployed. But please God he will not forget the very poorest of the poor in the developing world.

Overseas development aid – an Irish success
For me, perhaps the biggest test of his budget will be how he deals with overseas development aid. It is to the credit of successive Governments and to the Irish people that we have so expanded development aid in recent years. Like all rich countries we have promised to increase development aid to 0.7% of GNP to achieve the UN’s Millennium Goals agreed in 2001, which include eradicating extreme poverty and hunger. Ireland has made a public commitment to achieve this by 2012. And unlike many other countries we have been delivering on our promise. Since 2001 Irish development aid has grown from €250 million to €870 million. We are now the sixth highest per capita donor, giving 0.54% of GNP in 2007. We are on track to achieving the target of 0.7%.

This table published by the OECD, showing how countries compare in aid to the poor world in 2007, makes interesting reading. The five leading countries that already exceed the target are all from northern Europe. Apart from Luxembourg, they are historically Lutheran – could their faith tradition have influenced their generosity? The USA is the largest absolute giver of overseas aid, but at 0.16% of GNP, its per capita performance can only be described as niggardly.

Of course these statistics do not tell the whole story. They are for official development aid, from state sources, and exclude private giving, for which it is difficult to find comparable statistics. Perhaps because of generous tax relief, experts believe that private US citizens give as much again as their government – but that would still leave them way down the league. How does our Irish private giving compare? I don’t know the figures, but I suspect and hope we too are privately generous. Nor do the statistics allow for how effectively the aid is used. Some decry aid as useless – I am thinking of a mean-spirited columnist I choose not to name – but aid does help poor people. And Ireland has developed an international reputation for using its aid well.

So what will the budget bring? Will Brian Lenihan live up to his promise to look after the vulnerable? Will he at least maintain the current percentage level of overseas development aid? We will soon know.

The morning after
It is now the morning after the budget. Like everyone else I’m sure, I am struggling to get to grips with its implications. It is indeed harsh. The pain will be felt by all of us through a combination of tax and duty increases and service cuts. Government supporters would like us to accept this as a patriotic duty, but there is a lot of anger around, as I detected chatting to people while doing the messages.

What about the promise to look after the vulnerable? I looked at the website of CORI – the Council of Religious of Ireland - to see their analysis. They say, ‘Our overall conclusion is that Budget 2009 failed to protect the vulnerable in the manner or on the scale required.’ They welcomed the increases for social welfare recipients – the only group to gain in the budget - while criticising the failure to fully cover the rising costs of food and fuel for poor people. They also criticised asking the working poor to pay the 1% income levy and the failure to increase child benefit. These are perhaps reasonable criticisms. But I think we should acknowledge that quite a lot was done in the budget to protect the vulnerable in our own society, even if we would have liked more. Perhaps the budget deserves half a cheer for this.

What about my own key test, protecting Ireland’s overseas development budget? This has been cut by €7million to €891 million for next year, but because GNP is expected to fall, this actually represents an increase to 0.56% of projected GNP. We remain on track to meet the 0.7% target. We continue to live up to our promises to the poorest of the poor, despite the economic difficulties. It really is remarkably good news, worth a full cheer at least!

If you agree with me, why don’t you write to a government TD to tell them so? When they do something right, they should be congratulated, to encourage them to do more of it in future!

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