Budget blues

View from the Pew is a regular column I write for Newslink, the magazine for the Diocese of Limerick and Killaloe - this article appeared in the December/January 2009/10 issue.

Minister of Finance Brian Lenihan

Can you visualize €1,000,000,000?
Ireland is in an economic mess – commentators, politicians and interest groups all keep telling us so. The Government promises us a harsh budget, and says that if we take the nasty medicine now we will all be better for it. Figures of billions of Euro in budget cuts and/or higher taxes are bandied about – on top of billions to recapitalise the banks, and yet more billions for NAMA. It is all quite bemusing, isn’t it?

€1 billion = €1,000,000,000

One billion 1 Euro coins placed end to end stretch 23,250 km

That’s more than 100 times the distance from Limerick to Dublin

€4 billion would fill one carriageway of the Limerick to Dublin motorway with 1 Euro coins

The hole we are in
As a citizen of this Republic, I feel I should try to understand our situation. So I have just been reading the November 2009 Pre-budget Outlook published by the Department of Finance – you can download it free from http://www.finance.gov.ie/viewdoc.asp?DocID=6087. It summarises the context in which Minister of Finance Brian Lenihan will frame his budget for 2010. To my surprise it is quite easy to read, and at just 30 pages a good way to get an overview of our economic woes, even if it is rather depressing. For me, the key facts are these:

• National output (GDP) has fallen by around 7.5% this year and is expected to fall by another 1.5% in 2010. Unemployment has soared; pay rates have fallen (in the public if not the private sector); prices are falling; consumption is falling; savings are up; investment is minimal.


• The government deficit – the difference between what is raised in taxes and what is spent – has ballooned to around €20 billion in 2009, largely because tax revenues have collapsed and social welfare payments to the unemployed have surged.

We are faced with a classic deflationary spiral, like the great depression in the 1930s. Keynes’ remedy then was increased public borrowing and spending, to put people back to work and stimulate demand, leading to renewed confidence and a return to investment and growth. This is what other countries are doing now with stimulus packages, and it is what our government has been doing too, by increasing the government deficit.

But the Government says this can’t go on, because even if financial markets would keep lending to us, paying them back would cost too much. Last April they declared they would reduce borrowing by €4 billion in 2010 and another €4 billion in 2011, in order to get borrowing down to 3% of GDP by 2013. Most economists and politicians seem to agree that this scale of adjustment is necessary, though the trades unions argue that the adjustment should be over a longer period. I for one am persuaded a €4 billion adjustment in 2010 is appropriate.

How to reduce borrowing by €4 billion?
But the big question is how to do it. I believe our Christian faith demands social justice – a ‘preferential option for the poor’, in the phrase used by liberation theologians. Can there be any doubt that Jesus calls us in solidarity to protect the poor and the vulnerable?

I am therefore dismayed by the media chorus, on the one hand urging cuts in social welfare for the poor and vulnerable because consumer prices are falling, while on the other asserting that the well off cannot afford to pay more in taxes. Both arguments are nonsense, I think.

First, basic living costs for those on social welfare have not dropped as they have for other groups. Most of the fall in the price index is due to lower mortgage interest rates, but few on social welfare have mortgages, so cuts in line with the index would cause real hardship for those already struggling. St Vincent de Paul points out that the planned removal of the Christmas bonus already represents a 2% cut, at a time of year when poor families need to spend more on basics such as heat, light, food and clothing. A new carbon tax is expected in the budget. This will promote the transition to a low carbon society which we must make to avoid climate change catastrophe, and I am in favour of it. But the poor spend more of their income proportionately on high carbon fuels. Without compensating measures a carbon tax will increase fuel poverty. Social justice requires benefits to be raised, not cut.

Second, those who are well off are well able to pay more in taxes to help out their less fortunate fellow citizens struggling to live on social welfare. Most of those who profited from the bubble economy remain very rich. Sean Quinn, for example, has been able to pass €200 million to his four children this year, despite his losses in the collapse of Anglo Irish Bank. Salaries for Irish professionals, such as doctors, lawyers, business managers and government ministers, remain very high by international norms. Such people will suffer no hardship if asked to pay more. Those who suggest they would skip the country to avoid tax are arguing that we should give in to blackmail, as well as impugning their patriotism.

But more than this, income tax rates for those of us lucky enough to still have good incomes are very low by international standards, as Garrett Fitzgerald has been arguing. Most Irish taxpayers pay tax on income at rates between a quarter and a half of the rates in other western European countries and the USA. Even at higher income levels our rates are still a quarter lower than these other countries. These low rates of tax on incomes are a result of grossly irresponsible government decisions during the boom to fund cuts in income tax from stamp duties and capital gains tax arising from the housing bubble. If we want to enjoy decent health and education services and an acceptable social welfare safety net, we must all be prepared to pay more in tax. And ways must be found to relieve the interest burden on ordinary families who were persuaded to take out mortgages to pay absurd stamp duty on over-priced homes.

Back in April Brian Lenihan appeared to accept this, saying he would raise €2.5 billion in increased taxes in 2010, with a more manageable €1.5 billion in expenditure cuts. More recently he has been saying the whole €4 billion must come in cuts. Is he really preparing to throw social justice to the winds in budget 2010?

And what about overseas aid?
Social justice must not end at home. It should also apply to the poorest of the poor in the developing world. My own key test of Budget 2010, as it was last year, is what happens to development aid.

Ireland has a proud record for overseas development aid. Like all rich countries we promised to increase development aid to 0.7% of GNP to achieve the UN’s Millennium Goals, which include eradicating extreme poverty and hunger. By 2008 we were the sixth highest per capita donor, giving 0.58% of GNP, on track to meet our commitment to achieve 0.7% by 2012. I awarded Brian Lenihan a cheer in October 2008 for protecting the overseas development budget for 2009.

But what has happened since then? The overseas aid budget has been cut by 24% since February - three times higher than the fall in GNP. This year, for the first time, 1 billion people are going hungry. This shames us all – our government has shamed us! To their credit, 30 TDs and Senators from all parties wrote to the editor of the Irish Times on 14th November earnestly calling on the Government not to cut overseas aid any further. I pray that Brian Lenihan will listen to them, and even restore this year’s cuts.

View from the pew - The glass is more than half full!

View from the Pew is a regular column I write for Newslink, the magazine for the Diocese of Limerick and Killaloe - this article appeared in the October 2009 issue.

NAMA, Lisbon, the Budget – and Copenhagen

“NAMA, Lisbon, and the Budget – these are the three immense and immediate challenges facing Ireland”– so said An Taoiseach Brian Cowen to the business luminaries of the Irish diaspora assembled at Farmleigh for the Global Irish Economic Forum.

Brian Cowan addresses the Global Economic Irish Forum

These are important issues, as we all know. Political and media attention is constant and shrill - and focussed on these three almost to the exclusion of everything else. The decisions to be taken are important – they will shape our country for many years to come - so let us pray that they will be the right ones.

But in all the hubbub, could there be a danger that we lose sight of other things? Climate change is by far the biggest challenge we all face in the 21st Century (for the facts see Two Degrees, One Chance). Within a very few years, every single one of us - in every country - must change the way we live and work, in order to protect our fragile planet for our children and grandchildren and the rest of creation. World governments have promised to agree workable and comprehensive action at the UN Climate Change Summit in Copenhagen this December. It may be the last chance to do so before the planet passes a point of no return and suffers catastrophic run-away heating. So let us also pray for an effective and just agreement in Copenhagen.

This is what Nenagh Union will be doing on Saturday 3rd October in Teach an Leinn in the centre of Nenagh from 11am to 3pm, together with our brothers and sisters in Christ from local Roman Catholic, Methodist and (we hope) other independent congregations, in a joint day of prayer for climate change. Passers-by of all faiths and none will be invited to drop in for as long or short as they wish, to hear prayers and readings, share quiet time in reflection, and find out more about climate change.

So many crises, so many important and difficult decisions to be made! I would be spoilt for choice if I wanted to write about such grave matters – and looking back over the archive perhaps I do so too often. Are we in danger of losing sight of joyful things too? Forget all the dismal crisis talk – let’s be cheerful, it is a Christian virtue! Let’s think instead of how much we have to be thankful for – our faithful God has blessed us with so much.

Harvest Time
We have been blessed by September’s Indian Summer, haven’t we? It’s amazing how the spirits rise with a bit of dry, sunny weather - mine certainly do. Last Saturday I spent a glorious day in Cloughjordan at the Eco-Village open day and energy fair. I was much too hot in my tweed jacket and woolly jumper – I had to strip them off. In the balmy weather it was hard to remember that creation is in crisis!

2009 has been difficult for those who are farmers, the third bad summer in a row. Many will be disappointed with the return they have got from all their planning and hard work. But the settled September has allowed tillage farmers to salvage something from the difficult season. Yields may be down here in Ireland, but elsewhere in Europe they have been higher than expected, and the total world crop looks set to be a record. Prices will likely be low, but this will be a boon to those short of fodder because of the weather - Teagasc advises not to buy in expensive silage this winter, but to feed cereals.

Many more of us will be anxious about the economic recession and market collapse. Worries bubble up: Is my job safe? What about my savings and my pension? How can I stretch my income to pay the bills?

But let us see the glass as half full, not half empty! Just reflect for a moment on the breadth and variety of our harvest. We have the staples: we have wheat for bread and butter to spread on it, oats for porridge and milk to pour over it, barley for beer, hay, silage and meal for cattle. But there is so much more than staples for us to enjoy, isn’t there! There’s meat and eggs, cheese and yoghurt, fruit and nuts, vegetables and mushrooms, and gardens full of flowers! Many of us keep animals, and there are this year’s foals, and calves and lambs and chicks. But there’s also the fruit of our own bodies - our children and grandchildren born this year - thank God for them too!

Cause for celebration

Some of the produce from Joakim's Garden

My own harvest is as a gardener. In the picture you can see some of what my wife and I are enjoying at the moment: runner beans, beetroot, carrots, onions, potatoes, parsley, garlic, French beans, spinach beet, tomatoes, autumn raspberries, apples, pears, and wildlings from the hedgerow, blackberries and damsons or bullaces, as my mother used to call them. I forgot to include the frisé lettuce (plants a gift from a neighbour) and courgettes. And coming on there are romanesco broccoli, brussels sprouts, leeks and purple sprouting broccoli for the spring. We are freezing pounds of beans to enjoy over winter. Nothing tastes so good as what you have grown or picked yourself. And it is just as enjoyable to be able to give away the surplus. If this sounds like boasting, I can’t help it - God has been very good to us this year!

Above all perhaps we should thank God for our health and strength, and also for our intellects, our God-given cleverness. As every farmer knows, this bountiful harvest does not appear from heaven as if by magic: it takes hard graft and intelligent planning!

In this rich corner of the world today, we will not starve, as our forefathers so often did after a bad harvest. With the gift of cleverness we have invented ways to store food and to transport it, and economic and social systems to distribute it to where it is needed. If we consume a little less, it will probably be good for our health; and perhaps the whole planet will benefit. So let us be cheerful and follow the good advice of Deuteronomy: ‘You shall set the first of the fruit of the ground down before the Lord your God … Then you shall celebrate with all the bounty that the Lord your God has given to you.’

Let us all celebrate and enjoy our harvest!