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Ireland: Taxpayer will pick up tab for unwillingness to cut

04 October 2012   (0 Comments)
Posted by: SAIT Technical
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By Brendan Keenan (Irish Independent)

TAXPAYERS forked out €2bn more in the first nine months of this year -- and there is no end in sight to the calls on their purse and wallet.

The extra tax revenues were replacing borrowed money to keep public services going. But Exchequer figures yesterday show that around €6bn in borrowing was also needed, before any payments of debt interest -- a figure which will rise to more than €7bn by the end of the year.

Despite all the cutbacks, complaints and threats of trouble, it is proving impossible to make a significant dent in the cost of running the country. Current spending on day-to-day services was actually €125m higher than in the same period last year.

The intended fall was modest enough, given the size of the deficit, but two of the three big spenders -- Health and Social Protection -- actually spent more than they had been allocated in last December's Budget.

As the graphic shows, these two, along with Education, account for the bulk of government spending. Education is down a fraction, but Health and Social Protection are both well over budget -- up to €300m in the case of Health, and €400m in welfare.

The situation in Health has already caused serious political trouble and it has the potential to cause a lot more.

Impression

There was a distinct impression at yesterday's briefing by the Departments of Finance and Public Expenditure that the health service will not be forced to find anything like €300m over the next three months.

That will cause no political trouble at home, but it could cause a lot with the troika of the EU, ECB and IMF, from whom that €15bn in borrowing comes. The Government promised to keep health spending to an agreed target and spelt out how that would be achieved.

One area where cuts were identified was the high cost of "generic" medicines in Ireland. Those savings have not been achieved -- against a background of open threats from the giant pharmaceutical industry on which Ireland depends.

It remains to be seen how tough the troika will get if it sees a couple of hundred million being voted through the Dail to meet the health shortfall. Trouble at home is more likely to centre on the other clear impression -- that the €470m underspend on capital projects will be used to cover the overspending on the current side.

The extra spending in Social Protection is less of an issue, because the department must pay out whatever level of Jobseekers' Allowance and other welfare is required.

But it adds to next year's difficulties, when the bill must be cut further, despite employment and the Live Register being worse than had been hoped. No wonder that talk of reduced child benefit is in the air, even if from the unexpected, but well-connected, boss of Barnardo's children's charity.

Yesterday's other announcement suggests that the Government's main strategy is still to reduce the numbers providing services -- but with no attempt to find where the numbers might be excessive.

For those who provided the €34bn in tax revenues for the last nine months, the worry will be that, as in the past, that is where most of the extra €7bn will come from in the end.


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