The game, until Budget 2012 was to dream that there was a safer place, a better refuge from austerity. It’s now clear there is not. Vested interest groups shouted ideology across the divide at each other, in many cases devoid of any logic or an understanding that money is not an agricultural by-product of planting trees . Still we tried taxing the bejasus out of the economy but just look now at the result - collapsing tax receipts.

Nobody wants to hear this today when it’s popular to rage about cuts, but it’s the truth. The longer you try to raise taxes instead of cutting, the worse the economy becomes. Still the political instinct for self preservation never fails to try the economically impossible. In 1975 Ireland hit a deficit of -7.6% and spent the next 12 years getting it hopelessly wrong. Taxes as a percentage of GDP rose from 38% to 44% but spending was maintained, barely moving from 49% of GDP in 1975 to 48% in 1987. The politicians played politics while the economy died, growing at a paltry 1% pa. Ireland got increasingly poorer, our young left in droves. We weren’t the only country then led by chuckleheads. Austria spent 14 years getting back into balance and Spain 15 years by taxing instead of cutting.

By 1987 with debt to GDP at 123% Irish politicians simply had to cut, cut and cut. We couldn’t borrow another cent. Three years later after truly savage cuts, except on education, Irish GDP was roaring at 5%pa and the Celtic Tiger had started. We know how it ended. Public spending, much of it pay and pensions, gorged itself on once off property tax revenues. The power of public sector unions meant that yesterday’s cuts could not come from the inflated pay and numbers that characterised the tiger period. It is easy math. Social protection accounts for 38%, pay and pensions another 36%. Immunise one and you savage the other but predicting this inevitable juncture at the outset of the crisis was as about as popular as Jesuit support for Gallileo in Rome four hundred years ago.

Still despite the rhetoric, this Government’s first budget went after the lowest hanging fruit. Cutting capitation fees to schools is a community tax, meaning more cake sales, more mercy payments. Money to pay the heating is cut before pay. Reducing jobseekers benefit but not capping Bertie, Brian and Mary’s pension is cruelty. But it can’t last. The new coalition have simply bought twelve months at most. There is no way The Croke Park farce can stand against the cuts of Christmas future;  €1.7bn 2013, €1.9bn 2014 and €1.5bn 2015. Yesterday is the smallest of the four at €1.45bn. 

The announcement to move to multi-annual spending programmes and away from an annual budget circus that only encourages media leaks, backbencher histrionics, back room dealing and power plays by vested interests, is most welcome. But by next Monday it should be clear that all Minister Howlin is doing is fitting into the new model being prepared as part of the price of continuing Eurozone membership, a precursor to Treaty change. 

You can forget all the guff about being back in markets and restoring economic sovereignty as Taoiseach Enda Kenny would have us believe is an achievable goal. Minister Howlin’s new template is being readied for the new Ministry for Finance in Brussels. The Dail and its annual budget will become to Brussels what Louth County Council is to us; of interest only to locals, an exercise in the illusion of self governance, ruthlessly controlled from the centre of power.

- Eddie Hobbs