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Analysis: Budget uproar sends government reeling

February 16, 2011

By Staff Reporter

By Andrew Bushe

DUBLIN — Having done one embarrassing U-turn and brought in what was in effect a mini-budget in an effort to quell the uproar about disadvantaging women in the home, the Irish government is facing the prospect of a similar humiliation this week.

A budget and two mini-budgets — all within weeks. It is unprecedented series of political climbdowns and the post-budget patches will still leave the reeling coalition with major problems.

Short of dumping the budget and starting again — and that is obviously not politically feasible if the coalition is to remain in power — the government is being forced to muddle through with a series of concessions that will store up more problems for the future.

Once of the budget genie is out of the bottle only an election can put it back.

The whole mess is an unprecedented blow to the confidence and credibility of the Fianna Fail/Progressive Democrats alliance and has stoked speculation about an election.

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The continuing fallout means the government faces another week of trying to get pay talks negotiations under way again — with trade unions seeking improvements for the low paid and the poor — and a renewed assault from the opposition.

"Certainly I’ve had better weeks," was the rueful comment of Finance Minister Charlie McCreevy, who is man who will suffer worst from the debacle. Whatever leadership ambitions he had — and there is a tradition of finance ministers becoming taoiseach — have been severely damaged.

In the past, selective leaks of budget measures had softened up the public and helped sell what was on offer. This year everyone knew it would be a giveaway from over-flowing Exchequer coffers but there were no advance hints about how the bonanza would be shared out.

The opposition was dreading it. How can you score points against Santa Claus when he arrives early with a bulging sack?

And bulging it was. McCreevy chopped taxes to the tune of £942 million and gave away the highest ever benefit handout of £400 million. But he had little time to bask in the glory from his third budget.

Within hours it began to unravel. Fine Gael’s Michael Noonan was the most effective hatchetman and he quickly zoned in on the main Achilles’ heel — the so-called "individualized" tax allowances.

This gave bigger tax breaks to two-income homes over one-income households, where one spouse — mainly women — remained working in the home.

By the weekend the floodgates had opened. Mna na hEireann was in revolt backed by the church, and a new element had entered the row — the rich-poor disparity of McCreevy’s handout.

A week after his budget, with warnings from the Independent T.D.s who support the government that it was either change the budget or oil your bike for an election and with his own backbenchers falling over themselves to make public their objections, McCreevy buckled.

A statement said he had "reflected." A new £3,000 allowance for some women in the home was announced to ensure the "right balance" is maintained between those going to work and carers in the home.

Those caring for children, old people and the handicapped will get the handout and the cost will be £125 million.

A new row started about the ignoring of those women who cared only for husbands. But it appears to have been enough to buy off the Independents and satisfy the backbenchers involved in the remarkable few days of a Fianna Fail version glasnost — in stark contrast to their normal mute-mouthed discipline.

SIPTU pullout

Meanwhile, the secondary row about the budget mainly favoring the rich had gathered momentum. It exploded when SIPTU, the biggest union in the country, pulled out of the crucial talks for a new partnership deal that would deliver moderate wage demands.

The pay talks remain suspended. The government is reported to be preparing a further £100-million-plus handout and there have been rumblings in trade union ranks about a £1 billion wish list.

The country’s major think tank, the Economic and Social Research Institute, and international organizations commenting on the economy, had all warned the government about the need for a soft-landing from the huge surge of growth in recent years. They cautioned against handing out too much money and overheating the economy.

The counterargument was that Ireland’s finances were unique and a crucial linchpin that has driven the growth are the partnership wage deals. The government had to loosen the purse strings to secure a new deal.

Expectations have been stoked since the government lost the stare-down contest and began their expensive blinks. With each sticking plaster being applied costing over £100 million it is becoming an increasing expansionary and damaging budget.

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