Lessons from Ireland

The Republic of Ireland has recently introduced an emergency budget to address the effects of the economic downturn.  It’s the latest in a set of measures in an economy which, to an even greater extent than Britain, has been dependent on speculation and booming property prices.  The contraction of the Irish economy has been savage – official estimates suggest it will be 8% in 2009.  The rhetoric is about stabilising the public finances in order to bring a huge deficit under control, to restore confidence in the Irish economy.

The Irish policy response is interesting because it reflects quite closely the sort of policy framework that David Cameron and George Osborne have been setting out for the UK, in opposition to Gordon Brown’s stimulus package.  So it’s a useful exercise to unpack it to assess what Conservative policy could mean for the UK.

There’s an interesting analysis at Though Cowards Flinch which demonstrates how, despite the rhetoric that those who earn the most should pay the most, some of the changes in the tax regime actually bear down hardest on those least able to pay, by reducing income tax thresholds.

But this follows on from the announcement earlier this year of the Pensions Levy, which is in effect a swingeing pay cut for public sector workers.  The justification is simple; public sector workers enjoy substantially better pension provision than those in the public sector, and should therefore pay more for it.  Understandably it has provoked fury and mass resistance in Ireland, and the recent budget package modified it so that that it did not apply to lower-paid workers.

It’s a measure that fits closely with the rhetoric coming from the British Tory Party and its supporters in the Press.  In particular, the Daily Mail has been banging the drum about featherbedded public servants and their gold-plated pension provision, and individual Tory spokesmen have been making guarded comments on the subject (ever mindful of the fact that there are 600,000 voters in the public sector who have to be convinced somehow that voting Conservative is in their interests).  Others, like London’s Mayor Boris Johnson, have been much more outspoken.

The truth, of course, is totally different.  Mailwatch dissects the poisonous rhetoric about public sector pay here better than I could and some of the specific lies about public sector pensions are nailed by the Secretary General of the PCS, Mark Serwotka, in a radio interview in December last year.  Mailwatch points to the fact that public sector workers – who are overwhelmingly among the lower-paid in our society – have enjoyed years of below-inflation pay increases, while the private sector has forged ahead.  It however forbears to comment on the spectacle of Cameron and Osborne – both of whom sit on piles of vast inherited wealth -denouncing as bloated the average public sector pension of £7000 p.a. – barely enought to equip a member of the Bullingdon Club with tails and waistcoat.

The official Conservative line is that nothing has been ruled in or out.  But if the Tories win the next election, watch for the assault on the public sector.

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