If we don’t slash and burn now someone else will do it for us later

The OPW is renting – at high cost – dozens of unoccupied buildings, partly arising out of the aborted decentralisation scheme. It’s a disgrace. Heads should roll. I would issue an edict to terminate such leases forthwith.

The minister for finance should negotiate a 25% reduction of all property rents

THE debate on public finance stabilisation needs to get real. The post-budget book of estimates for 2009 sets out current expenditure of €56.6bn (up 6% on 2008) andcapital spending of €7.3bn. This €64bn contrasts with tax revenue expectation of €36bn. You don’t need a degree in economics to cop the €28bn shortfall. This year we’ll borrow the balance.

Irish GNP is only €150bn. Our creditors won’t allow this to continue. The future interest costs will gobble up our tax as the debt rises. We can’t tax our way out of recession. Higher spending taxes will drive more shopping north of the border.

Fás predicts 584,000 jobless by the end of the year. More taxes on work will worsen this nightmare. The only solution is to cut spending – radically and drastically – now.

How can €10bn of cost reductions be attained? Let’s start with capital spending. If we defer new contracts for a two-year period, except broadband, we would save €3bn. Cheerio to the €5bn Metro North. Extra infrastructure can be postponed. The construction industry has a lot to answer for. Their over-production of property and miscalculation of the market has caused this depression. There is an overhang of 90,000 residential units for sale. We cannot sustain construction for the sake of building jobs.

For current spending I favour the concept of ‘zero budgeting.’ This means expenditure programmes have to justify their continued existence. The overall requirement is a 12% cut across the board. This should be a baseline starting point for all departments.

Public sector pay is €19bn. In all forms of employment, the level of absenteeism relates directly to the terms of sick pay schemes. Get rid of self-certification and extensive paid sick leave. In addition, a ban on salary increments is imperative. This year an extra €250m is earmarked for this.

A severance/early retirement scheme of 20,000 public servants could reduce the pay bill by €2bn annually.

Within the 370,000 public payroll there is inefficiency and overstaffing. How can we justify 4,560 officials in the Department of Agriculture when the number of full-time farmers has gone from 150,000 to 30,000?

We should abandon many of the 800 agencies that duplicate and triplicate functions. Quangos have doubled since 1990. It’s an ‘organisational zoo’ according to the OECD.

Take job creation: the Department of Enterprise employs 1,000 people. Yet is has 14 agencies (Fás, Forfás, IDA, Enterprise Ireland, Science Foundation Ireland, etc) to do its work. Additionally, we have 35 city and county enterprise boards. This nonsense is the polar opposite of the entrepreneurship it is supposed to foster. The education budget exceeds €9bn. How could we save €1bn? The abolition of the transition year would not alter academic attainment at post-primary level. Non core subjects could be reduced by the number of foreign languages and other peripheral courses.

We spend €1.8bn on third level – assets are poorly utilised and research is unaccountable. Productivity at college is abysmal – some tutors draw big salaries for four hours of lectures per week.

Health spending costs the taxpayer more than €15bn a year. 16,000 of the 112,000 staff are administrators. The HSE was set up to rationalise and streamline the previous nine health board bureaucracies. They added 1,900 more paper-pushers. We need to downsize by 8,000 (switching to generic drugs from expensive branded products would, in addition, save €200m).

Our top brass are overpaid. Our judiciary, at a cost of €25m, are the second best paid in the world. Senior posts such as the DPP, Central Bank governor, comptroller and auditor general, regulators and Fás bosses are paid between €50,000 and €130,000 more than the EU average. International benchmarking in reverse is overdue. Even worse, check out the total number of assistant departmental secretaries, assistant garda commissioners, assistant city and county managers now and a decade ago. Whole new layers of expensive bureaucracy have been approved.

Systematically reduce these by 30%.

How can we justify €800m of defence spending for a neutral country?

The cross-border military requirement has abated with political settlement in the North. The basic army functions of cash transfers, prison work and garda support could surely be done with a fraction of the present personnel. We have an excess ratio of air pilots to planes. It’s incredible that our chief of staff is paid more than the head of the British army.

The resources from the Lotto and exchequer have provided a political slush fund of grant aid to sporting, social and cultural organisations. Gaelic players were almost becoming civil servants through player grants. We cannot afford these optional schemes – €400m can be saved through sharp adjustments.

The state is inept at maximising the potential of its massive purchasing power. The centralised negotiation of phone and electricity costs could obtain significant savings. The main commercial providers of energy and communications services should be asked competitively to tender bargain basement prices for all government users.

The most significant correction across the Irish economy has been the 50% reduction in property asset values. The Office of Public Works (OPW) is renting – at high cost – dozens of unoccupied buildings, partly arising out of the aborted decentralisation scheme. It’s a disgrace. Heads should roll. I would issue an edict to terminate such leases forthwith. The minister for finance should negotiate a 25% reduction of all property rents.

This tenant has a genuine “inability to pay”. €200m could be saved in property costs by commercial confrontation and renegotiation.

BUT the biggest single area of spending is social welfare. With rocketing unemployment, the total could exceed €22bn in 2009. The abolition of universal benefit across the board has to be considered. From child benefit to free travel it is hard to sustain the principle of automatic entitlement. The taxpayer can only afford to support the needy. Means testing all entitlements could save up to €2.5bn.

The state support of housing benefit is out of control. Mortgage and rental subsidy schemes need to be revisited in the context of the collapse of the housing market. Immigrant accommodation is costing us €52m a year. Why should the state overpay for negative equity loans and unadjusted rents? It is only to prop up bad banks and failed property investors.

We need to replenish the National Pension Reserve Fund due to the bank bailout. The next generation should not be shortchanged. Over the next three years the Government, through the NTMA, should seek to generate €10bn into the pension fund.

I propose a planned incremental sale of shares in the ESB (€6bn), Bord Gais (€600m), Dublin Port (€4bn), Dublin airport (€2bn), Coillte (€300m) and Bord na Móna (€300m). The taxpayer is their shareholder – we need the cash.

There are no just or painless expenditure cuts. Special pleading is now an industry in its own right. We cannot live in a world of denial and pretend radical reform is avoidable. The alternative is to wait for the IMF or ECB to do the dirty work in 2011. Politicians are undermining our sovereign credibility by failing to confront reality.

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