From the TUC

Public spending: Good bad examples from Ireland

20 Jan 2010, by in Economics

One of the key election battlegrounds will undoubtedly be public spending, and how best government balances the need to reduce the deficit with ensuring ongoing investment in our public services as Britain begins to emerge from the downturn.

Ireland provides a clear example of what can happen when government gets that balance wrong – and the New Statesman is not alone in suggesting that what is happening across the Irish Sea provides a possible, ‘foretaste of life under the Tories’.

Successive public sector pay-cuts totaling 12% ; massive reductions in essential benefits such as children’s allowance and unemployment benefit; and cuts in capital spending and public services including, health and education, totaling €1.8bn (and  a commitment to shrink state spending by €15bn over the next four years) have plunged the Irish economy into crisis. The Irish Government’s decision to slash public spending rather than invest in fiscal stimulus has meant the economy is on course to shrink by 15% and unemployment has risen to 12.5%. Calls by the Irish Congress of Trade Unions for the government to chart a more progressive course have fallen on deaf ears.

Another consequence of the Irish Government’s decision to take an axe to public spending is the collapse of the social partnership arrangements which until recently underpinned economic growth, and have existed in one form or the other since the agreement of the Programme for National Recovery in 1987 (PNR).

Ironically the PNR originally emerged out a consensus amongst Irish politicians, employers and trade unions that there had to be a better, fairer way to revive the Irish economy than the approach taken by Thatcher’s Conservatives in Britain. Union leaders were, ‘acutely aware of their own vulnerability at this time, given the battering which the unions in Britain had been taking since the election of the Thatcher government in 1979…Employer leaders…strongly shared the view that the ‘Thatcher approach’ was not the way to go about resolving the Irish crisis’ [1].

Now, in place of social partnership, Ireland is now gearing up for a period of further industrial unrest as unions embark on a campaign to defend public services and the livelihoods of their members.

Let’s hope that politicians in the UK draw the right lessons from what is currently happening in Ireland; and – just as Irish unions, employers and politicians did in 1987 – step back from ‘slash and burn’ economics, and instead seek to build a recovery based on consensus rather than conflict.

NOTES:[1] Quote from ‘Saving the Future’ – for more useful background on the PNR and the contribution of social partnership to the success, and limitations, of the Celtic Tiger, it’s also worth reading Ireland’s Economic Success: Reasons and Lessons by Paul Sweeney, and economic advisor to Irish Congress.

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