Well, there we have it. The government are proposing to reduce public expenditure by 5 billion this year. Far be it from us to interfere in their eight week holiday, so we are going to have to wait until December before they start implementing any of the required cuts. Between now and then, this means that we will have to borrow an additional €8,125,000,000! Can somebody please tell me why we have to wait until December to have a budget? Could it have anything to do with their determination to ensure a yes vote in the Lisbon Treaty? Oh, I nearly forgot, we are doomed as a country unless we vote yes. I wonder just how much more doomed we could be than we are at present and will be for the next 10 years?
The reality is that Fianna Fail bought their historic third term in office using your taxes. They pandered to the GAA and farmers to secure the rural constituencies, brought in the SSIA’s to get the middle-class vote, introduced benchmarking to get the civil servants onside, embarked on the largest capital expenditure programme in the history of the state to placate their friends in the construction industry, they set up literally hundreds of quangos and then elected their friends to the boards etc. It was (some of) us the people who decided that everything was going just fine and refused to listen to anybody who struck their head above the parapet and suggested that the economy was indeed dangerously overheated. The majority of the people who bothered to vote where in favour of a Fianna Fail or Fianna Fail led coalition government. Well, the party is truly over and maybe now the citizens of this country will realise that it is their responsibility and theirs alone to ensure that the people that we entrust the running of the state to, are capable of the job, and do so in the interest of the country and not the ‘party’.
The harsh reality is that extremely difficult financial measures must be implemented immediately in order to minimise any further damage to our already weakened economy. Waiting until December is simply not an option. This is an example of political expediency at its very worst. The fact is that the ‘elephant in the room’ is not social welfare, not health, not education but the public service wage bill. The reality of the situation is that the average public service wage (20 billion per annum divided by 303,000 employees) is presently €66,000. According to the Central statistics office this is approximately 49% higher than the average industrial wage. If the average salary was reduced by 25% it would still be €50,000 ! The situation is quite simply untenable. The public service is employed by us the citizens of Ireland and the harsh reality is that we cannot afford to pay them this level of salary any longer. Either the government has the bottle to reduce public sector pay by at least 25% across-the-board or within a year the IMF will do it for us. I wonder what that will do for our reputation abroad? Did you know that public service pay and pensions were specifically excluded from the terms of reference of the “An Bord Snip Nua” report? I don’t think it would take a genius to work out why.
Alternatively, we could revisit the other elephant in the room, namely the oil and gas reserves off the west coast of Ireland.
“All natural resources, including the air and all forms of potential energy, within the jurisdiction of the Parliament and Government established by this Constitution and all royalties and franchises within that jurisdiction belong to the State subject to all estates and interests therein for the time being lawfully vested in any person or body.” (The Irish Constitution).
Reputable estimates put the value of oil and gas reserves off the west coast of Ireland at approximately €400 billion. Now that we have begun to realise that our country is in fact insolvent and bankrupt, it is time to consider renegotiating the deal that was done with Royal Dutch Shell and others in relation to the exploitation of these resources. Many countries around the world have renegotiated deals that they have done with multinational oil and gas companies, particularly in times of severe domestic economic difficulty. Although there will be cries from many people that you simply cannot go back on a contract that was signed, this is simply not the case. The government of Ireland could if it so desired, pass legislation that would enable this process to begin. As regards the impact it would have on our reputation abroad I have to ask which is more important, the economic survival and well-being of the people of this country, or its reputation. Personally, I could not care less about our reputation because as far as I am concerned it has been irreparably damaged by a totally and utterly incompetent administration.
There are needless to say a number of issues that must be considered before such drastic action would be taken but I do believe it to be prudent to familiarise yourself with how we managed to do this most generous of deals in the first place. In 1967 Minister Des O’Malley (then Fianna Fail) gave the exploration rights to Ireland’s gas and oil in shallow waters, to a company called Marathon Oil, in perpetuity. When the Kinsale field was found (further out to sea and not in shallow waters) in 1971, the licenses to develop the field were again sub-let to Marathon Oil. When this gas was being taken ashore in 1975, the Dublin Government negotiated terms for oil and gas exploration with a 50% tax levy on profits, a 50% automatic shareholding and royalties of 6 to 7% on the sales revenue.
Against Department advice, the then Minister, Ray Burke (found to be ‘corrupt’ by the Flood Tribunal and later a convicted criminal) dropped the 50% right to shareholding and abolished the right to royalties payments. Is it coincidental that the then Minister had three meetings with representatives of Royal Dutch Shell at which no officials were present and the content of these meetings have never been made public ? To add insult to injury, in 1992 the Government, with Bertie Ahern as Minister for Finance (“the most cunning and devious of them all”), renegotiated the 50% tax levy downwards to 25% – the lowest rate in the world at the time. Furthermore, the new taxation regime allowed for a 100% write off for capital investment costs. In effect, any capital investment anywhere in the world that could with any degree of justification be ascribed to the cost of Irish exploration could be offset against tax revenues. Not only that – as if it wasn’t enough – this agreement was then backdated 25 years!
Against this background, I believe the people of Ireland are entitled to renegotiate the contract that were entered into on our behalf.
What of the 8,500 full-time members and 13,000 reservists in the Irish defence forces? At a cost of €1.1 billion per annum is it not time to start considering whether this is providing value for money? Who is going to invade us? Why would they bother? And even if they did, could they possibly afford to run a country that can’t manage to run itself? As it stands the €1.1 billion per annum that it costs to run the Irish defence forces constitutes just 0.7% of our gross domestic product, this however pales into insignificance compared what we will be required to spend if the Lisbon treaty is ratified. That’s right, if we vote yes to Lisbon we will be required to increase our spending on military capability. Don’t believe me? Read the treaty (Article 28 A-E).
To summarise, my recommendations are as follows
- Reduce all public sector wages and salaries above €40,000, by 25%.
- Implement the recommendations of “An Bord Snip Nua” relating to public service reform but not all those relating to social welfare, health or education.
- Renegotiate the terms of a contract entered into with Royal Dutch Shell and others in relation to our national resources.
- Reduce public sector employment by 10%
- Remove the right to a job for life from the public service and introduce personal accountability.
- Reduce expenditure on the defence forces by a minimum of 40%
- Nationalise the insolvent banks. and set up a state clearing bank.
The government must show leadership now more than ever before. If the public service unions decide that they going to go on strike and bring the country to its knees, so be it, because the IMF won’t be taking any prisoners should they have to come in here and bail us out. And just in case you don’t know what the implications of us not tackling this fiscal crisis immediately are, you need to be aware that the International monetary fund is the lender of last resort. The interest rates that we must repay on any monies provided by the IMF will be punitive. They will insist upon a massive restructuring of the public service and the privatisation of most state bodies to the highest bidder. We have a very stark choices to make and they are, either rectify the situation ourselves or remain in a state of denial until such time as we cannot raise any further finance abroad and must resort to the IMF. Another interesting little snippet is that according to the Maastricht Treaty which we are a party to, we are limited to not borrowing any more than 3% of our GDP, at present it stands at 8.5% and we can expect severe penalties from Brussels in relation to this (although they will undoubtedly wait until after the Lisbon vote). Furthermore, we are paying 1% more than Greece, 1.5% more than Italy and 2% more than Germany in interest on all the additional borrowings and we are borrowing, at a rate of €340 million per week, every week! Just to round off the perfect storm scenario, you may consider the implications on our already impoverished economy should, as is predicted by the department of Health, approximately 1,000,000 of the population contract swine flu between now and December. Food for thought indeed.
None of us has all the answers but all of us may have some, so I would be delighted if you would leave a comment as to what you think should happen next. Thanks to reading, Eamonn.
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