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Budget 2014  - A budget of smoke and mirrors, advancing an agenda of barbarism

The extent to which the ideology of austerity has been engrained in Irish society is reflected in the expression of relief that has greeted the latest budget. Despite another negative adjustment of €2.5 billion the general consensus is that it could have been worse. There is also a belief, encouraged by the government and the media, that austerity is easing and that the Irish economy is on the road to recovery. This is exemplified in the declaration by Taoiseach Enda Kenny that Ireland’s exit from the bailout programme by the end of the year would mark the end of the period of crisis and a restoration of “economic sovereignty”. 

However, when we examine the claims for an easing of austerity and an ending of the bailout, we find that they have very little basis in fact. Firstly, while the budget adjustment was less than the €3.1 billion originally scheduled, it was still severe and comparable to previous adjustments. It has to be remembered that this was the seventh austerity budget over a period of six years and comes on top of more than €30 billion in austerity implemented since the outbreak of the economic crisis in 2008. The cumulative effect of austerity means that it becomes hasher as it proceeds even if the adjustments are less. It is also the case that the Government had already agreed with the Troika an adjustment of €5.1 billion over the 2014/15 period. If it is adhere to this it will have to compensate for the €600 million reduction in the 2014 adjustment by adding to the €2 billion scheduled for the following year. Within this framework there is no easing of austerity at all. 

Budget 2014 

Budget 2014 contains €2.5 billion worth of austerity measures, made up of €1.6 billion of spending cuts and €900 million tax hikes, which will drain a further 1.5pc of GDP. However, it is only when we get beyond these broad figures, and look at the actual measures outlined in the budget, that we get a real sense of the degree to which austerity is biting into the fabric of Irish society. What we see is an intensification of the attack on public services and social security (what could be described as the social wage). This is particularly severe in the area of benefits and health. 


There is a reduction in Jobseekers Allowance for the under-25s. JSA payments for 22-24-year-olds will fall from €144 to €100. Those aged 25 will see their payments cut by €44 to €148. The full rate of JSA will now only be available for those over 26, who will receive €188. These measures deliberately target unemployed youth and are designed to coerce them into low wage employment and workfare schemes or force them to emigrate. Young people who want to continue in education are also being hit with a €250 increase in college registration fees which will bring the annual charge to €2,750. 

The dramatic erosion of the value of maternity benefit continues with the payment being standardised to €230 per week. While this will help some mothers, for the vast majority it will result in a reduction of €32 per week or €832 a year. Last year maternity benefit was taxed by €108 per week. Overall, the benefit has been reduced by €3,500 per year in the period the Fine Gael-Labour Government has been in office. 

A significant attack on older people is the scrapping of State Pension Transition. This benefit, which was valued at €230 a week, could be claimed by workers who had left their job at the compulsory retirement age of 65 and had paid enough social security contributions to qualify. From the beginning of next year this will be longer to available to retirees. They will instead have to apply Job Seekers Benefit, which at €188, is €42 a week less than they would have been previously entitled. The Invalidity Pension is also being reduced to this lower rate. Retired workers with a private pension will also be hit with an increased 0.75% levy on their funds. The elderly are also hit with cuts to their household benefits package. These include the scrapping of the €9.50 telephone allowance.

Other benefit cuts include: The removal of the €850 bereavement grant paid to poorest people to bury their dead. The extension of the number of days (from three to six) workers will have to be off sick before they can claim Illness Benefit. The ending of the mortgage interest supplement scheme that will hit the tens of thousands of people burdened by mortgage debt. 


There is to be a €1 increase in prescription charges to €2.50. However, most of the cuts in the health budget centre on medical cards. The health minister has said that he intends save €124 million in this area by reviewing the eligibility criteria for medical card provision. This will result thousands of medical cards, which entitle people to free treatment, being removed. It likely that the majority of pensioners will see their medical cards removed and replaced with a card that only grants them free appointments with a GP. Any treatment beyond this initial stage will be charged. 


The cuts in public services and social security are particularly severe in Ireland as the country’s social wage was always at a relatively low level. But austerity is not just about cuts in public spending. It is also about reducing wages and working conditions across the whole of the economy. The objective is to reduce the costs of labour in order to maximize the rate of profit. This is the basis of the recovery strategy for capitalism (both here and across the world) and the element of the austerity programme on which the Irish state has been most successful. Marco Buti, head of the European Commission's economics department, has praised Ireland for making "major strides improving competitiveness". Indeed, it this element that the Troika have most insistent on while showing some flexibility on spending cuts. 


The trade union leadership have been instrumental advancing both the public spending cuts and the competitiveness agenda. They are wholly signed up to the bailout framework and have delivered major cuts and wage reduction in the state sector through the Croke Park and Haddington Road agreements. 

In their budget submission ICTU made it clear that they supported the bailout targets. Their suggestion was for a slightly lower adjustment of €2 billion with more coming from tax than cuts. But despite talk of wealth taxes they supported the most obvious tax on wealth—corporation tax – remaining at 12.5 per cent. Of course the trade union leadership aren’t alone in this - they are just one part of national consensus that includes every major party in the state. 

The future 

The question is: will the strategy of the Irish Government (and the Troika) succeed on the terms it is set for itself – will the Irish economy recover and will the Irish state exit the bailout? 

Despite claims for a recovery and forecasts for strong growth the Irish economy remains weak. While growth returned this year, after falling back into recession at the end of 2012, the growth rate of 0.4 per cent was far below that predicted. Year-on-year, GDP was down 1.2 per cent. Gross national product, which strips out the impact of multi-nationals, fell 0.1 per cent over the year. Economic growth is not at a rate that would reduce the debt burden upon the state or ease the pressure to meet deficit reduction targets. 

Despite a succession of cost cutting budgets the state is still missing its targets. Overall, public debt stands at 123 per cent. It is estimated that out of every €100 collected in taxation, €14 will go just to servicing national debt, not just next year, but for decades. Private household debt stands 200 per cent of national income while mortgages in arrears by 180 days are at a record 17 per cent. This debt burden along with the austerity measures depresses economic growth, which in turn increases the pressure for further austerity. Under such conditions austerity will continue into the future. Indeed, the finance minister Michael Noonan has already indicated that budget cuts will continue up to at least 2020. 

A critical point is that the financial crisis, despite the bailout, has still not been resolved. Irish banks remain in a poor state – they continue to post losses and hold massive liabilities. It is estimated that more than a quarter of the portfolios of the country's banks are non-performing. In these circumstances is likely that the Irish banks will require another bailout. This is why the Government is pressing for Irish banks to be given access to the European Stability Mechanism (ESM). 

While Ireland may formally exit the bailout by the end of the year external support for the Irish state and financial institutions will continue in some form. Whether that is the ECB underpinning Irish bonds or further support from the Troika for Ireland’s banks. As for economic sovereignty - well that was given up years ago. Going into the future the Irish economy will be subject to more control than ever. The IMF is to continue supervising government policy until 2021 while budgets will have to be submitted to the EU for approval. 

The prospects for the working class are extremely bleak. Six years of ceaseless attacks and defeats have left the capitalists masters of all they survey. They are able to advance the most transparent lies, pile misery on misery at previously undreamed of levels and openly impose barbarism on the weak and the sick without any significant opposition. In part this is the result of partnership between the unions and Labour party on the one hand and the major capitalist parties on the other. In part it arises from decades of victory for capitalism and imperialism that convince many that there is no alternative to submission to imperialism. In part it is the weakness of the socialists whose projects have collapsed, who hear no evil and see no evil while the union bureaucracy openly betray the workers, and who themselves feel unable to advance a socialist alternative to the austerity. 

What we can rely on is the on-going class struggle. Among the mass of the oppressed who will face into the new austerity there will be sectors who will desperately attempt to stand and fight in their own defence. At the time of writing that role is filled by Dublin bus workers and members of the ASTI teaching union. Other groups will emerge. At any time they could connect with the long history of struggle, of solidarity, and of hatred of imperialism that is still alive within the Irish working class. 

The capitalist promises of turning the corner, of exiting imperialist control, are so much hogwash. The austerity and oppression are here to stay. It is the duty of socialists to prepare for the inevitable fight back and to advance a programme of solidarity and a socialist alternative to capitalist barbarism.


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