Lenihan's long road back to recovery

Source : Sunday Business Post

Lenihan's long road back to recovery

07 December 2008
By Cliff Taylor
Billions here and billions there. It is difficult to get a handle on the state of the exchequer's finances, such has been the rapid pace of their deterioration.

Last year, the state's books were pretty much balanced - in other words, we spent roughly the same amount as we raised in revenue.

By next year, borrowing could be 8 to 9 per cent of GDP, and the government will be under pressure to cut back spending further. By any standards, this has been a very rapid turnaround.

How has it all changed so quickly?

The public finances reflect the economy. The rapid downturn in economic growth has hit revenues hard. In particular, the collapse in activity in the housing market has turned a key source of exchequer revenue growth into a black hole.

Unfortunately, when you are dealing with government finances - spending and taxes - you are dealing with huge numbers. For every 1 per cent that tax revenues fall short of target, the exchequer loses more than €400 million.

Such has been the collapse in revenue this year that taxes look set to fall €8 billion short of target. This means that the state will have to borrow about €12 billion, or some 6.4 per cent of GDP, according to forecasts from stockbrokers Davy. It believes that this is set to rise to €16.6 billion, or 8.9 per cent of GDP next year, well above the 6.5 per cent target for 2009 set by finance minister Brian Lenihan in October.

How come the 2009 forecast looks so much worse now than it did just last month? Some 20 per cent of all the tax revenue collected in a year comes in during November. It is the big month for self-employed payments and for corporation and Capital Gains Tax.The budget sums for next year were calculated without these figures being available.

Unfortunately, November ended up even worse than feared.

Total tax revenue for the month was some €3 billion below target. This knocked a hole in the budget arithmetic in two ways. First, because the tax take this year will be lower than expected, the base figure from which 2009 revenues will be calculated has fallen as well. Second, the trend in the figures will have worried the Department of Finance. What they will find difficult to calculate is when tax revenues will hit the bottom. However, as things now stand, their prediction on Budget Day that revenues next year would be roughly the same as the out-turn for this year, looks over-optimistic.

This is why economic forecasters have been increasing their deficit projects for 2009 so sharply.

Is there any problem in borrowing so much?

The problem is that the pace of deterioration in the government's finances will make it difficult to come up with a plan to get borrowing back down below the EU limit over any reasonable time period, barring very serious efforts to control spending or raise new revenues.

In its budget sums, the government put forward a strategy to get borrowing back down below the 3 per cent EU ceiling by 2011. These calculations have now been thrown seriously off course.

Early next year, it will have to present a new strategy to Brussels - a kind of fiscal consolidation plan. This is now inevitably going to have to involve some hard decisions. It may be that the government will decide to wait until after Christmas to start making these decisions but, one way or another, it will come under pressure to come up with a plan.

Borrowing a significant amount for a short period is possible, but if borrowing continues at 8 per cent above GDP for any prolonged period, then the national debt - which is currently relatively low compared with our EU partners - would rise quickly and the interest payments would become a significant burden, as they did in the 1980s.

The government will also have to be mindful of the cost of raising finance. Money is scarce enough for all borrowers at the moment, because of the nervousness surrounding the credit squeeze.

Already, smaller countries like Ireland have had to pay a premium over big countries such as Germany in terms of interest, and it is difficult at the moment to raise long-term funds.

While the exchequer has enough cash to get it through next year, the cost and availability of borrowing is a serious constraint that will have to be borne in mind.

How does the new 'An Bord Snip' come into this? Last week, Lenihan announced that he was setting up a special committee to advise him on how to save money (called 'the special group on public service numbers and expenditure programmes', if you must know!) There will be a core group of two - UCD economist Colm McCarthy, who will chair the group; and senior Department of Finance official Donal McNally.

They will be assisted by Maurice O'Connell, the former governor of the Central Bank, Willie Slattery, managing director of State Street International, Mary Walsh, a former partner in accountancy firm PWC, and Pat McLaughlin, a business consultant and former senior executive in the HSE.

Early next year, they will receive spending details and proposed savings from all departments. They will go through these and question the secretaries-general of each department. Following this, they will report to the government by next June on where they believe savings can be made. As part of this, they will assess numbers in different areas of the public service. The government has said that part of its reform plan will be to have greater flexibility to move people from areas of surplus to areas of need.

The committee will be encouraged to come forward with any potential quick savings ahead of its final report. It will be free to report to the government at any stage. It remains to be seen how the process will work. A key issue will be the willingness of the government to allow it to examine and recommend savings in all areas - including lowering staff numbers - and whether its remit extends to capital projects, as well as day-to-day current spending.

However, the key focus of the committee will not be on quick cuts, but on a methodical process leading to significant savings in many areas, with a focus on getting these included in spending plans for 2010.

So what will happen between now and when An Bord Snip reports next June? Because the public finances are deteriorating so quickly, the government is under pressure to come up with some quick savings. Fine Gael and Green Party Senator Dan Boyle have both called for the 3.5 per cent public pay increase - due to come into effect next September - to be postponed.

While the government has not publicly stated that it believes the money cannot be paid, senior ministers are now believed to accept that this is the case, particularly as it would cost the exchequer €1 billion in 2010. Indeed, it is possible that senior officials could be asked to accept a pay cut, such is the scale of the problems facing the public finances.

Also, the government is likely to give serious consideration to extending the voluntary redundancy programme in the HSE across some of the rest of the public service.

The alternative to cuts in pay and/or numbers is to seek further cuts in non-pay spending, which is also politically controversial, as shown by the controversy over the medical cards for the over-70s and the increase in school class sizes.

Or the government can seek to cut capital investment spending on projects such as roads and railways. It has promised to maintain this at a high level, though, in reality, some projects are already being delayed.

Lenihan has said taxes will not be increased in the short term. However, further increases are certain in the 2010 budget.

Speaking last Friday, Brian Cowen said that he would be working on a programme for economic renewal with the social partners in the weeks ahead. It is certain that a correction in the public finances will be at the heart of this strategy.

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Teachers must learn to make sacrifices

Source : Sunday Tribune

Teachers must learn to make sacrifices

What planet are the teachers of Ireland living on? Judging by yesterday's protest in Dublin, it's a different one to the rest of us.

Education cuts are hardly a welcome development, but between the economy, the banks, unemployment and the looming prospect of a lengthy depression, what is welcome these days? So before any more time and energy is wasted on protests, the teachers should start to get real.

Nobody wants to see pupil-teacher ratios rise, particularly in classes of younger children. Parents of children who have passed through the primary school system have seen the benefit of smaller class sizes within their own families. The quality of education that is now offered, particularly to primary school children in smaller, better-equipped classes, complete with classroom assistants and special needs help, is vastly superior to the school experience of older brothers and sisters who went through the same system eight or 10 years ago.

But as disappointing as these cuts are, we are not going back to the really bad days, and if teachers were a bit more flexible and a bit less hysterical, there would be no need for children to suffer at all, especially as many of the schools in particularly disadvantaged areas have been ringfenced from cuts.

Last week, as teachers rallied the troops and prepared pithy puns for their placards for yesterday's march, we learned that tax returns for November were far worse than predicted and that the financial shortfall for the year could top €8 billion. We also had a frightening set of unemployment statistics that left economists gloomier than ever about next year, with a rate as high as 10% now looking likely (though very few teachers are likely to be among them). Eurozone interest rates were cut but British interest rates were cut even further, prompting what could turn into a currency crisis. As queues to Newry lengthen, there are fears that a lot of the €3bn pumped back into our pockets by the last two interest rate cuts could be spent north of the border.

Against that background, it seems absurd that teachers are protesting against the withdrawal of substitution for uncertified sick leave; this costs the taxpayer over €16 million a year, with cover for certified leave and other absences now over €280 million. That so much money was ever pumped into a sick pay system devoid of consequences for people ; albeit a minority ; who think they are "entitled" to a certain number of sick days every year, was always wrong. Today, it seems obscene.

A lot of parents who have lost jobs, who are on two- or three-day weeks or who are perilously close to unemployment are losing patience with teachers because they seem oblivious to the relatively small sacrifices they are being asked to make compared to the scale of the crisis facing people in exposed sectors.

Nobody, not even in the most profitable firms in this country, has an "allowance" of 30 days' sick leave without certification, as primary and secondary teachers do. Nobody is allowed to take three consecutive days off before being asked to provide a doctor's cert, as primary teachers are ; and four days in the case of secondary teachers ; especially when they work for a maximum of 167 days a year. They don't work anti-social shifts, they don't work weekends or nights and they already enjoy generous holidays.

Like Batt O'Keeffe, everyone knows teachers are often brilliant, dedicated and hardworking. That is reflected in the pay, pensions, supervision allowances, increments and sick benefits they enjoy. Most work about 22 hours a week actually teaching. It cannot be that hard for them to devise a system within individual schools to cover for sick colleagues ; just as people cover for sick workmates in most firms ; without the need for extra pay or expensive substitution.

The Department of Education budget for next year is one of the few that has actually increased. It now stands at €9.6 billion; 80% of this is allocated to staff pay, and rightly so, because education is all about human contact and personal inspiration.

But just as the minister has successfully re-tendered for capital projects to get better value from the private sector in the school building programme, there can be no logical reason why teachers can't use all this energy they are expending on protests to find ways to create greater efficiencies in tough times ; as they say themselves, for the sake of the children.

December 7, 2008

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Call for 'staggering' education cuts to be reversed

Source : Sunday Business Post

Teachers, parents and their children were back on the streets again yesterday, protesting over budget cuts in the education sector.

The national demonstration, which saw tens of thousands of people march from Parnell Square to Government Buildings in Dublin, was the culmination of a series of protests held across the country since the cuts were announced. The issues they are protesting over range from increases in class sizes to the suspension of substitute cover, as well as the slashing of various grants in a variety of areas.

Last Thursday, education and science minister Batt O'Keeffe made a partial U-turn on one of the proposals, which banned substitution for teachers on uncertified sick leave or on official school business.

He said he would make €2.7 million available to second-level schools for the remainder of the school year. However, he said a full review of the substitution and supervision scheme would be carried out. But the concession did not stop yesterday's protest, which was organised by the Irish National Teachers' Organisation (INTO), the Teachers Union of Ireland (TUI), the Association of Secondary Teachers Ireland (ASTI) and the Irish Federation of University Teachers (IFUT). It also had the support of parents and school management authorities.

Marching under a 'Schools United' banner, the protesters walked from Parnell Square to Merrion Square, where a rally was held. Addressing the crowd, INTO general secretary John Carr said that teachers ''play their part but there can be no progress unless the budget cutbacks on education are reversed''.

''Our children must not be asked to pay the price for this generation's obsession with greed and the relentless pursuit of personal and corporate profit. It beggars belief that children would be targeted by government to bail out an ailing economy," he said.

Carr said it was ''staggering'' that newcomer children, Travellers and special needs children would be targeted for additional cutbacks.

''Shame on the minister who thought up those cutbacks. Shame on the cabinet that approved those cutbacks. Shame onthe government that would implement those cutbacks.

And shame on any individual who would accept those cutbacks," said Carr. He said the protest had shown that parents and teachers did not want ''small children herded into overcrowded classes'', they wanted a fair deal for newcomer children who need to learn English and that ''underfunded, dilapidated and overcrowded schools are unacceptable.

''Here, in front of the seat of government in this country, you have made a statement that, while economic well-being and security are important, we live in communities of people, including children. And it is in primary children that you want government to invest for a sustainable future," said Carr.

The rally was the culmination of a range of protests organised by the unions every weekend since the first was held in Dublin at the end of October.

There have also been smaller, local protests organised in regions by groups as diverse as parents' councils and the Socialist Party.

Another of these local events is taking place in Lucan tomorrow. Declan Kelleher, president of INTO, told the crowd successive governments had never funded or staffed primary schools fairly, and now they were breaking promises on class sizes. ''Government expects primary schools communities to accept increased class sizes to pay for economic mismanagement.

They can forget it. Primary education partners are up in arms and are saying, 'no, no, no' on behalf of children. We've put up with discrimination at the hands of government for years, and now we are standing up to them and their spin doctors," said Kelleher.

Meanwhile, O'Keeffe went before the Dail Select Committee on Education and Science last Tuesday, asking for a supplementary estimate of €15.5 million for this year. O'Keeffe made it clear at the meeting that the money was not being sought for ''substantial additional expenditure''.

The money, he said, was to tide over the department until it received European Social Fund (ESF) receipts that were due to be paid this year, but might not be paid until next year. He said that the value of the receipts was more than the €15.5 million he was asking for, and that expenditure would be managed within budget.

He said increases in costs in some sections of his department - mainly in the pay and pensions of teachers and special needs assistants - had led to ''significant pressures and excesses'', but said these had been offset by savings elsewhere. In overall terms, an additional requirement of €230.57 million across the budget is offset by compensating savings of €215.07 million.

''This has been an extraordinary year in terms of the scale of demandled cost pressures on the education vote [the education budget], allied to the very significant deterioration of the wider economic picture," O'Keeffe told the committee. ''As a consequence, I have been very conscious of the responsibility to minimise the impact of those unavoidable cost pressures on the overall exchequer in these difficult times."

Balancing the books

Education and science minister Batt O'Keeffe was before a Dail committee last week, where he outlined where extra costs had been incurred and where savings had been made in the department this year.

Increased spending

* Primary school buildings: some €75 million is needed for the primary school building programme.

* Transport services: an extra €10.5 million is needed to deal with increased demand for school transport, as well as costs associated with extra special needs requirements.

* Salaries: an additional €40 million is required to deal with increases in the overall bill for teachers' pay, which stands at around €2 billion. The department also has to find an extra €10 million to meet the costs of additional special needs assistants.

* Payments to VECs, local authorities: the department needs an extra €48 million to provide for additional spending in the Vocational Education Committees (VEC) sector and €15 million to deal with payments to local authorities to pay for retired staff of VECs and Institutes of Technology (ITs).

* Grants for third-level institutions: an additional €8.8 million is needed to pay the Higher Education Authority (HEA) for grants to be disbursed to third-level institutions.

Savings made

* Teacher training: a saving of €6.22 million has been made in the area of in-career development and training.

* ICT in schools: €24 million was saved by the department's decision to delay the start of the new Information and Communications Technology (ICT) strategy.

* Redress: €25 million has been saved on the payment of awards under the Redress Scheme. The main reason for this has been due to a decline in the value of individual awards, as well as reduced legal costs.

* R&D: a saving of €27 million has been made in this area at higher-education institutions.

* Strategic Innovation Fund: the fund, set up to improve quality in higher education, made a saving of €23 million, as spending by institutions was slower than expected.

* Second and third-level capital programmes: €45 million was saved at second-level ; and another €29 million at third-level ; as the department prioritised primary-level capital spending.

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Acting in collective interest is an 'obligation of citizenship'

Source : D.E.S

Acting in the collective interest is an obligation of citizenship at this critical time for our nation, our society and our economy, according to the Minister for Education and Science, Batt O'Keeffe TD.

Speaking in advance of the planned INTO march in Dublin today [Saturday], Minister O'Keeffe said that, while he understands teachers' disappointment at the savings measures, it was simply not realistic that education be completely exempted from any spending restrictions in the current economic climate.

'We have to be realistic about what the country can afford.

'There is financial turmoil around the world.

'Many countries are now in recession including Ireland.

'We are having to make courageous political decisions to deal with the current economic situation.

'There is and must be a national commitment on the part of the Government to take the tough decisions that will restore our nation to economic prosperity as soon as possible.

'The cost-saving measures the Government outlined in the Budget are necessary to safeguard the future of our country and of our children,' said Minister O'Keeffe.

Minister O'Keeffe said the high quality of our teachers is recognised internationally.

'During my visits to many schools in the past few months, I have seen at first hand the excellent work teachers do day in day out with children in our schools.

'I am asking for the support of the entire education sector in helping us to work through this very difficult time for our country.

'I know that some of the measures, particularly those affecting schools, are unpopular, but the gravity of the financial situation we face makes them absolutely necessary.

'In relation to substitution, I have made available funding for limited substitution for second level schools following proposals made by the school management bodies.

'I am asking the partners in education to work together in solidarity to manage all the new arrangements locally to best meet the needs of school communities as we get through this very difficult period for our nation,' said Minister O'Keeffe.

ENDS

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Organisers predict big turnout for education protest

Source : Irish Times

SEÁN FLYNN, Education Editor

Sat, Dec 06, 2008

THOUSANDS OF people are expected to attend today's Dublin march against the Budget education cutbacks.

Teacher unions says they have been heartened by the level of support from parents for the march, which they predict will be the biggest-ever education protest.

Today's protest marks the culmination of a two-month campaign against the Budget cutbacks. Already, over 35,000 people have attended protest marches in Galway, Cork, Donegal and Tullamore.

Despite the scale of these protests, there is no sign that Minister for Education Batt O'Keeffe will reverse his decision to increase class sizes.

Earlier this week, the Minister agreed to row back on some cutbacks in teacher substitution at second level, a move which averted potential chaos in schools next month.

Last night, primary schools managers met to consider how a similar compromise deal on substitution might work at primary level. A spokesman for the Minister said he would await developments.

But the spokesman stressed the increase in class sizes was not open for discussion.

The INTO says the increase will see over 1,000 teaching posts lost in primary schools.

At second level, school managers say over 800 posts will be lost.

Mr O'Keeffe says the increase in class size returns schools to the class size levels of two years ago. He has accused teacher unions of exaggerating its impact.

Yesterday, INTO general secretary John Carr said the compromise deal on substitution changed little.

"The Government had done nothing to reverse the budget proposals to increase class sizes, remove English-language teachers and withdraw special education and disadvantaged funding at both primary and second level. Neither has Government moved to resolve the substitution issue in primary schools," he said.

"These are major issues of concern to parents, teachers and management and must be resolved."

He called on members of the public concerned about the future of education to march today.

© 2008 The Irish Times

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