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North-South cuts
(Editorial, Fortnight Magazine)
As everyone in the island of Ireland faces the coming cuts, it is tempting for those of us in the North to be thankful that we are not having to deal with our own bank bailout and that we continue to enjoy a substantial subvention from those who are better off in England and the rest of the United Kingdom. But the figures analysed in this issue suggest that the relative scale of the deficit and the cost of the bank rescue plans are not all that different. And in both parts we have contributed to the overall problem by indulging in a reckless property and development boom and bust.
The way in which the bailouts have been funded and accounted for in London and Dublin differ substantially. The underlying causes – a large structural deficit in the relation between income from taxation and public expenditure and the need to protect the banking system from collapse – are similar. So is the corresponding need for increased taxation and/or reductions in state benefits and services, though there are legitimate concerns over the speed of the measures and the balance between new taxes and spending cuts.
Here in Northern Ireland the pain will be inflicted by a simple reduction in the subvention from the Treasury in London, leaving the Executive to decide how it is to be managed and allocated within the fairly narrow limits of its devolved powers. In the Republic the level of pain is imposed by the authorities in the Eurozone and the sovereign debt market. But the government has somewhat greater freedom to decide on the balance between service cuts and increased taxes. In neither case will special pleading about the aftermath of the conflict or the love and luck of the Irish cut much ice in London or Brussels.
December 21, 2010
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This article appeared in the October/November 2010 edition of Fortnight.
