Austerity Is Not Working

Posted: February 29, 2012 in Austerity, Budget 2012, Economy, Irish Politics

In the first of what is going to be a regular contribution to Mandate’s inhouse publication Union Post I argue that one year after taking office the evidence suggests that Fine Gael and Labour’s policy of austerity isn’t working.

Fine Gael and Labour have been in Government for one year. During the election campaign both parties promised change. The offered a vision of the future very different from the failed politics of Fianna Fail.

They promised to invest in job creation. Fine Gael had a plan to invest €7billion in the lifetime of the government.  Labour promised €2 billion to be invested in a strategic investment fund.

They promised to dispense with the failed banking policy of their predecessors and to stop blowing taxpayers money on bailing out toxic private banking debt. We were told that not ‘one red sent’ would be paid to senior bondholders until the banks got their houses in order.

They promised to renegotiate the EU/ECB/IMF austerity deal that it would be Labour’s not Frankfurt’s way.

Twelve months on and people are starting to ask, what has changed? Are things getting better under Fine Gael and Labour?

Unfortunately when you look at the evidence the answer is no.

Unemployment remains stagnant at 14.1%. A staggering 435,589 people were on the live register at the end of January. The CSO estimates that 6,000 people are emigrating every month mostly young people in search of work.

Rent arrears and mortgage distress are also on the increase. Central Bank figures for December show the number of families in serious mortgage distress is now over 100,000. From September to December 2011 92 families fell into serious mortgage distress every day.

Families are struggling to make ends meet, reducing spending on food, clothing and other essentials and spending more of their shrinking disposable income servicing their debts.

While Fine Gael and Labour didn’t cause the economic crisis, the policies they have been implementing since taking office are making things worse.

The billions promised for job creation before the election have not materialised. In the much hyped jobs initiative last April only an extra €29 million was invested into jobs.

The new banking policy has also failed to materialise. In the last 12 months Fine Gael and Labour have poured €21.3 billion into the banks including €3.1 billion into Anglo Irish Bank.

And rather than helping struggling low and middle income families make the most from their household budgets, the Government has introduced a long list of extra charges and stealth taxes pushing people further into financial hardship and poverty.

The core problem is that Fine Gael and Labour are making the same mistakes as Fianna Fail and the Green Party before them. They are blindly acquiescing to the failed policies of crippling austerity and bank bailouts.

They say that they have no choice, that they have to implement the EU/IMF/ECB programme or there will be no money to pay for public services and no money in our ATMs.

These arguments are simply untrue. There are always choices, always alternatives.

The Government must as a matter of urgency use the remaining €5.3 billion in the National Pension Reserve Fund to invest in jobs. Getting people off the dole and back to work is the best way to reduce the deficit.

They must stop giving taxpayers money to Anglo Irish Bank. Refusing to pay Anglo Irish Bank the €3.1 billion due on March 31st and every March till 2031 would reduce our national debt by 20% and out annual deficit by 2%.

They must also force the banks to assist struggling mortgage holders by insisting on negotiated debt write downs to assist those in mortgage distress remain in their family homes.

Crucially they must scrap the household charge and reverse the VAT hike. Extra tax revenue can be raised by the progressive reform of our tax system making those most able to pay give their fair share.

We urgently need a change of direction if we are to find the social and economic legacy of Fianna Fail.

Unfortunately, if the last 12 months are anything to go by, dashed hopes and broken promises is all we can expect from the Fine Gael Labour government.

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