The cuts agenda will not create jobs
Enda Kenny's assertion that "Budget cuts are designed to safeguard jobs" is demonstrable nonsense. By Michael Taft.
We’re into the great expectations-management game again. It happens once a year, just prior to the budget. “Proposals” are leaked or rumoured. The media – colluding in this annual exercise – chase around for stories. TDs, commentators, and people potentially affected are lined up for comment. No one is any wiser but it fills column inches and media minutes. And then the budget happens and finally we know. This ritual is getting tedious.
Take the rumoured Child Benefit cut. No doubt, another cut would impact harshly on families. No doubt, it will have little effect on the deficit (we’ve already cut over half-a-billion euros from Child Benefit and supplements). But given the Tanaiste's insistence during the election campaign that Child Benefit would not be touched, the issue has become politically sexy. Will Labour renege? Will they stand up to Fine Gael? Will they protect universal payments?
The Child Benefit cuts leaks could be a matter of expectation management. The rumour is put out with no intention of cutting them – and when they aren’t cut, Labour can say “we kept our election pledge” and hope that people will applaud them. Or they could be leaked to ensure that such a storm is created that the pro-cuts lobby in Government will have to back off. Fine Gael could be leaking it to put pressure on the Minister for Social Protection. Or maybe it’s just a rumour with no foundation at all. We won’t know.
Focusing on the detail makes for great copy. It also diverts us from taking a broader, more fundamental perspective on what’s happening in the budget. For instance, this headline should provoke more debate, more analysis, and more outrage since we know more about the budget measures that will impact on this:
“Budget cuts designed to safeguard jobs: Kenny”
The story goes on:
“Taoiseach Enda Kenny has insisted that any cuts in the looming Budget will be imposed to safeguard jobs...But he warned that difficult cuts will be imposed to avoid having to hike taxes and ensure the Government can fulfil its main objective of protecting jobs.”
This is an incredible statement. All the more so since the Government has announced (not leaked, not rumoured) budget measures that will destroy jobs. Let’s go through some of them.
- Capital spending: The Government has announced €750 million in capital spending cuts. According to the Department of Finance, this will entail, on average, the direct loss of 7,500 jobs – with more jobs lost downstream (lost demand, lost procurement from other private sector companies, etc). The Government has also announced a further €550 million capital spending cuts in 2013. That’s another 5,500 jobs gone. This will impact on the group that has suffered the most in this recession – construction and craft workers. So much for “protecting jobs”.
- Cutting public sector employment: The Government has announced that it will cut employment in the public sector by 22,500 by 2015. This will lead to a straight one-for-one rise in unemployment in the short-term and higher emigration in the medium-term. The loss of demand from this reduced employment will impact on domestic businesses and their employees. How cutting employment protects jobs is beyond me.
- Cutting public ervices: While there are no firm numbers on this, the Government wants to cut €1.45 billion from current expenditure. With €700 million being cut from Social Protection, the overwhelming remainder will come from public services. Don’t forget: nearly 1/3 of expenditure on public services goes on procurement contracts to the private sector. If these contracts are cut, this will have a negative impact on those companies. It is hard to see how private sector employment will not be hit.
- Cutting Social Protection: Whatever the details – Child Benefit, rent/mortgage supplement, support grants such as carers’ respite or the free schemes – cutting people’s income will result in a fall in demand which will impact negatively on domestic businesses. With consumer spending and employment expected to fall next year, how much more will this depress economic activity and job numbers?
When you step back, you see that the Government is pursuing an agenda which will have a major depressive effect on employment – so much so that the Government recently projected that unemployment will still be close to 12% by 2015. And what agenda is this? It’s not an income tax-raising agenda. It’s a cuts agenda – one that is supposed to protect jobs.
The Taoiseach is talking demonstrable nonsense. But you won’t get a debate about that. We’ll chase around the details without ever looking at the larger landscape.
The dark, bleak, job-cutting landscape that the Government is busy painting.
Image top: Ben Clinch.