As an exercise in budget kite-flying, it seems one of the more far-fetched – the idea reported over the weekend that the Government will cut the old-age pension as part of its efforts to balance its books and keep the troika happy.
The disclosure, undoubtedly from Fine Gael sources in Government, was just the latest attempt to focus attention on the social-welfare bill and the reported requirement for Minister for Social Protection Joan Burton to fund savings of €440 million this year – and possibly to distract attention from some equally pressing matters at Health run by their own deputy leader, James Reilly.
Kite-flying has become one of the more reprehensible features of the the annual Irish budget jamboree – generally designed specifically to target the most vulnerable sections of society in the hope that other, less austere measures on budget day will be greeted with relief. If this is the transparency of process the Government promised us in its handling of budgets under its watch, it has little to commend it. Already, this summer, targets have included child benefit and pensioners’ free travel.
Cutting €10 a week from pensioners would lead to savings of between €250 million and €300 million, it was reported. And, if slowing economic growth does require the Government to save close to €3.1 billion in October, the troika would undoubtedly be more than happy to see a cut in State pension payments that are high in comparison to some of our neighbours. But there are several reasons to think that cutting State pensions at this point is unlikely.
First up, politics. It’s one thing knocking over an unloved Seanad in lieu of badly needed Dáil reform: it’s quite another for any Government to take on the “grey vote” as the last administration discovered. Michael Noonan, Brendan Howlin and Burton have already overseen a significant cut last December in the household package for pensioners. They might be wary of coming back for a second bite this soon.
The Government has also invested some political capital in its ability to deliver less austerity this time around. One can argue about how much they expect they are likely to have to play around with, but the figure most often mentioned is in the region of €500 million.
Labour's electoral worries
It's not just Eamon Gilmore and the Labour contingent that has been rubbishing the claims of the Central Bank, the troika and the advice of the ESRI that any adjustment this year needs to be at, or close to, the €3.1 billion figure. Fine Gael also has its plans for any financial leeway that can be engineered.
But failure to hold the line against actually cutting pension payments would add acutely to Labour’s electoral worries and the growing conviction that, once again, the junior coalition partner will bear the heaviest burden of voter anger come the polls. Even over the weekend, senior Labour figures cited such a step as a “Coalition breaker”.
Of course, the problem for the pensioners – as with those in the private sector, where many are vulnerable to losing some or all of their accrued pension benefits – is that those making the decisions on these matters will never be affected by them.
As pensioners struggle to deal with cutbacks and a higher cost of living, the ministers making the decisions accrue pensions that are not only generous by any standard – even with recent changes – but are actually accelerated so that they attain greater benefits with less service.
And these pensions are guaranteed by the State. This is one of the major gripes of private-sector workers – and pensioners – when it comes to Government inaction on dealing with the broader pension problem. How can politicians – and a regulator staffed by civil servants on similar, State-guaranteed, final salary schemes that do not need to meet any funding standard – be expected to have the necessary incentive to frame fair and fundamental reform of the sector which balances all its competing interests?
The answer, as shown by years of inaction, including on the priority order of wind-up and the Waterford Crystal fallout, is that they don’t.
That might be the biggest worry for those half-a-million-plus people currently in receipt of the old-age pension as the budget approaches.
