The budget lived up to its terrible premonitions. Income levies, diesel tax rises and changes in mortgage relief have all made people worse off. Is this bringing us back to where we should have been anyway? Back at the turn of the century in 2000 and 2001, we were at the income level of the main European countries but they had higher tax rates.
Our pay rates though jumped over 20 per cent compared to France, Germany and Holland. Tax rates were lower as the property market here boomed for another six years. There were similar booms in UK and USA. They have all come to a halt also but none endured the harshness of the hard-landing felt in this country.
The hits on income are in the order of 10 per cent on average for most households, which is a heavy blow. On the plus side, the cost of living will fall 4 per cent and, if you shop around and spend a little less, then people will survive. We are therefore going back at least 5 years in living standards. A likely outcome is that we will settle at the general euro level of 2001/2 comparable with the countries that comprised the EU at that time. We reckon that the effect on consumer sentiment will be huge with people becoming very cautious.
The effects of this budget could be carnage across the economy. With the closure of Waterford Crystal, and short-time in the majority of factories, the situation is probably more precarious here than in most parts of Ireland. As we are a manufacturing city, we feel it more than most places. Other sectors are now going to feel it hard. We met one tourism operator from the West and they said that their takings over Easter were down 60 per cent. The full brunt of what has happened will be felt more in a month’s time.
The public anger is not fully felt but the summer local elections are not far off and we could be in for a very different result with independents and alternatives doing well. We met one astute person who wondered why politicians like the Taoiseach and his cabinet were not more humble. They should accept that they should not have stoked the economy more after 2002. A lack of humility combined with aggressive arrogance seems to be the hallmark. They also failed to co-operate with the Opposition. This would have been a smart move as the other parties would have had to take the burden of responsibility for remedial action like tax hikes or pay adjustments.
The bottom line is that the country paid itself too much. It cannot afford the current level of pay and public services. The sooner we realise that we must take some medicine and move on with life the better. Another round of complaining and blaming will not solve the figures.
The EU had probably a major role to play in the formation of the budget arithmetic, but not the detail. Ireland is in the Euro zone and we must live with the discipline of low inflation. This was not done in the last 5 years and we are now suffering the consequences. This is a very painful period for the population and for the morale of the country.
It needs good leadership to help us get through it along with some humility. We lack that at senior levels of Government. Once the local and Euro elections are over, it would then be a time for a national government. Confidence might be restored and more jobs saved in the short term.