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Budget 2013  A future of Austerity

As the broad of outline of next month’s budget was revealed to a committee of German MP’s over a year ago the €3.5bn package of spending cuts and tax increases will come as little surprise. In recent months more details of how that package will be made up have been made public. The most explicit statement came in a letter from the finance minister to the Troika (EU/ECB/IMF) revealing that it will be split approximately 2:1 be-tween public spending cuts of €2.25bn and tax increases of €1.25bn. There have also been instructions coming from the various members of the Troika to the Irish Government on how it should proceed. The latest of these was the country report from the IMF that demanded the Irish Government set out a detailed four-year austerity programme. 

Taken all together we can see an austerity offensive across a broad range of society that will continue into to the foreseeable future. 


Health has borne a sizable proportion of the cuts that have already been implemented and is due for more. Indeed, in order to comply with the bailout terms the Government earlier this year announced €260 million in emergency cuts to the health care budget, resulting in the elimination of 200 care home packages for the elderly and many home help positions. 

This provoked great anger but it is only a fraction of the cuts that are coming. It has been reported that another €1 billion (roughly 8 per cent of the overall budget) in cuts to health alone will be required next year to meet Troika conditions. 

It is expected that the main mechanism for achieving these cuts will be through the introduction of a more rigorous means test that will reduce the number of people who will qualify for medical cards. The Government is also likely to introduce measures to reduce prescription budget. Another area identified for savings is wages within the health service - with money spent on agency workers and overtime pay coming under examination. 

Welfare benefits 

The impact of cuts will also fall heavily on social security. There have already been cuts in this area but now the focus is on unpicking universal payments such as child benefit and the state pension. Again the mechanism for this will be the extension of means testing, which under the guise of directing resources to those most in need, will actually deter people from making claims and leave them in a more vulnerable position. 

The Government is considering proposals to remove the link between pensions and earnings, instead linking them to inflation, which would in effect result in a massive cut. The rate of at which employees pay contributions into the pension fund may also be increased. Taken together these two changes would result in workers paying more for less. 

One of the reasons given for such changes is that the fund out of which pensions and welfare benefits are paid is running an unsustainable deficit. However, this ignores the fact that such shortfalls are to a large degree the result of the funds being plundered to pay the costs of bailing out the financial class (both Irish and international) that is responsible for crashing the economy in the first place. 


Incomes are likely to come under further pressure through direct wage cuts. The value of wages has declined markedly in recent years with figures showing that labour costs in Ireland have fallen by 6 per cent since the onset of the crisis. Despite the claims of trade union leaders some of the most severe wage cuts have come in the public sector. 

Under the Croke Park deal the public sector wage bill has fallen dramatically. In its first two years Croke Park has generated recurring annual savings worth €1.5 billion. 

This was achieved through the abolition of a range of allowances, through mass redundancies and most shamefully through the introduction of a two tier workforce. Conditions for new entrants into the public sector are significantly worse than for those already employed. For example, a teacher starting out in 2012 could expect to earn fully €11,000 less than would have been the case just two years earlier. This amounts to a 30 per cent pay cut. 

New entrants also have poorer pension provision with calculations based on an average of their earnings throughout their working life rather than a final salary. They will also have to wait longer for their pension as the retirement age is to rise to 68 from 65 over the next 15 years. 

Moreover, the squeeze on wages is set to continue with ministers demanding further savings of €1 billion in the pay and pensions bill by the end of 2015. 


In addition to cuts the budget is likely to see significant tax increases with the biggest single new tax being a property tax. This will initially cost householders an average of €300 per year, though it is expected to rise to €1000 in future. Excise duties are also set to increase along with taxes on motoring. 


Alongside fiscal measures there will also be an acceleration of the programme of privatising pubic assets and services. The managers of education, health, justice and local authority departments have been ordered to make plans to deliver services more “efficiently” with private sector involvement. 

Class inequality 

The measures contained within the budget will impose further hardship on a population that has suffered a massive decline in living standards since 2008. But there is also a clear class dimension when it comes to those who are being most adversely affected. According to the Irish Times, figures for the period 2008-2009 show that the poorest 10 per cent saw their share of overall income slashed by a staggering 26 per cent. For the next poorest 10 per cent of the population, the drop was 14 per cent. By contrast, in the same period, the richest 10 per cent of the population saw their incomes grow on average by 8 per cent. 

Despite recession and austerity the Irish rich continue to be featherbedded. This was seen recently with the revelations over the pay and pension levels at the top of Ireland's bailed-out banks which showed there are 76 individuals being paid in excess of €300,000 across the bailed-out banks, and 1,700 being paid in ex-cess of €100,000. 

Despite the state being the major shareholder in these institutions (the outright owner in the case of IBRC) we are told that the Government is powerless to act. This contrasts with its ruthless determination when it comes to imposing austerity and implementing the dictates of the Troika. It is a good representation of the situation in Ireland as a whole where workers are being made to pay the cost of the crisis while those caused it continue to prosper. 

How much longer should this be tolerated?


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