IT’S ONLY LATE June and already the fratricidal warfare that is the Irish budgeting process has begun. It will be December before we have the budget for 2013, but the arguing, briefing and back biting will only intensify over the silly season that is the summer break.
All this week we’ve been hearing back and forth about the Croke Park Agreement, income taxes and stealth measures to come. We can be sure as night follows day that social welfare, education, health and a million and one special little projects will come under the glare of attention in the coming weeks and months.
Our government is constrained by ridiculous election promises that led everyone with half a vote to be promised protection from austerity. Labour won’t cut spending and Fine Gael won’t raise taxes, yet we’ll still bridge the €20 billion a year gap no problem. We know what size of an envelope we have to fit our budget into, but the horse trading continues right up to budget day and, in the case of the SNAFU’s like cuts to disabled children that make it through, onto Joe Duffy.
Six months of political argument may seem like an interminably long time to listen to our ruling classes showing themselves up as halfwits, but I would argue that it is actually more ridiculous to plan a €50 billion budget, in all its thousands of complex individual parts, in six months or less (counting for last minute wrangling).
The budgeting process is a long and complex one, building up from individual organisations and programs to departmental budgets and woven into macroeconomic mathematics. The government eats up half the oxygen in the economy to add to the importance of the process. It is not, in short summary, something that should be handled like a day at the Smithfield horse fair.
One can only feel sorry then for the professional managers trying to build forecasts, organisational development and ultimately define goals for the money they spend; only to have some politician who has hardly had a real job in their life beyond minding their constituency get onto the Six One news and upend the apple cart in public after the private wrangling didn’t lead to a result they were satisfied with.
Projects and initiatives that have real value when run over several years can end up being cut out because numbers had to be made up to preserve whatever other program happens to be flavour of the month. There is no holistic approach in the sharp elbows school of management.
The uncertainty over the annual Budget doesn’t help anyone
It must be difficult too to live in a world of political fictions while trying to define very mathematical models that make up a budget. The HSE is predicting (almost predictably) a €500 million overspend this year. Part of this is because the same high quality individuals who couldn’t run the organisation well last year and the year before are still running it today, and dropping the ball on projects like a €150m drug price reduction scheme. But a bigger part of their overspend will come because, just like last year and the year before, the service plans presented to hospitals are a convenient fiction to fit a political narrative. When too many sick people show up looking for medical care, the fiction – and the budget – is blown.
Public service management aren’t the only people suffering uncertainty around budget time. The government keeps assuring us that there will be no tax increases levied on people in the next budget. The IMF in its reviews keeps on suggesting quite strongly that we will need more taxes on income. One doesn’t need to wonder for long who will win the argument in the end. The back and forth from the government for months on end has people wound up about what they have in their pockets that we can spend. Similarly there is no clarity on what new taxes we can expect on our homes, our water, or anything else.
This feeds from consumers into businesses that are suffering today as retail sales continue to fall, and that will suffer tomorrow as entrepreneurs cannot reliably predict what the business environment will be in 6, 12 or 24 months.
How things could be different
What we need is a detailed multi-year budget that our government commits to at the beginning of its term. Not a high level document explaining what we expect the total tax and spend to be, but a line by line explanation of how much will be spent on this quango and that school, and how much we will be taxed for what.
This is a pretty complex undertaking. Not only do you have to budget for multiple years, taking account for demographic and economic conditions, but you would have to present several scenarios for different growth conditions within the country.
This would be complex and require a new and enlarged budgeting infrastructure within our government. I would view this as an improvement from the existing, slightly ad-hoc approach we have. It would force the government to think through its plans at a high level, asking not what programs we will save today but where we want to be in five years time. If we say “Top five in IT education in the world,” it’s easier to work backwards and harder to chop our IT universities in half to make up the numbers one year.
The biggest boon would be the clarity it would provide. We would know what will be coming out of our pockets to within a few euros depending on growth in the economy; and the government and public service could focus on delivery rather than constant turf wars.
The government knows how many billion euros it will have to take in and spend in 2015. Why not make the decision today on what it will spend, bar the reason that it would be difficult?
Aaron McKenna is a businessman and a columnist for TheJournal.ie. You can find out more about him at aaronmckenna.com or follow him on Twitter @aaronmckenna.
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