subject: Noonan's Plan Is The Best Way Out Of This Shambles [print this page] Michael Noonan is a man reborn, and his four-year plan is the most credible on offer from any political party. He should be Ireland's next Minister for Finance.
Noonan's rebirth has coincided with the sharp decline of the current finance minister Brian Lenihan, who, in the wake of the bailout debacle, the ongoing banking crisis and the fact that Fianna Fail will be booted out of office, is now yesterday's man.
Lenihan delivered his last ever Budget as finance minister. Well leaked and well flagged in advance, it contained few surprises. It also contained little imagination, vision or hope for a nation starved of inspiration over the past two years.
In the days preceding the Government's first instalment of its four-year plan, both Fine Gael and Labour published their own alternative visions for Ireland's recovery.
Having spent 10 days going through each of the three plans, examining tax policies, spending cuts, growth forecasts and recovery strategies, it is clear to me that only one of them -- that put forward by Michael Noonan -- has what it takes to end Ireland's worst financial crisis in history.
Full of clever thinking, smart initiatives and sound forecasts, Noonan's blueprint is the best remedy to Ireland's ills on offer from any of the main parties and, given that Fine Gael will be leading the next government, it should therefore be the plan upon which all public discourse from here on in is based.
Having examined Brian Lenihan's Budget and four-year plan in detail, it is clear it is nothing more than a crude slash-and-burn exercise which will inflict real pain on thousands of vulnerable people, will do little for job creation and growth and, worst of all, it is the softest of all the plans on public-sector reform.
Firstly, his growth forecasts are wildly optimistic. Only days after he said he expects growth in Ireland during 2011 of 1.75 per cent, the EU said it expects growth in Ireland to be half that at .9 per cent.
"His growth rates are too high. If you have a set of figures that are too optimistic, you will need further cuts later on," Noonan told me when I met him on Thursday.
Secondly, the reduction of the minimum wage by 1 is a botched attempt at improving competitiveness. While as a symbol it is a positive step for businesses, as Noonan pointed out on Budget night on RTE's Prime Time, the numbers affected by the minimum wage are so small that it will do little to help the overall picture.
Thirdly, Lenihan, despite considerable rhetoric, has failed once again to begin a wholesale reform or downsizing of the public sector. With a gap of 19bn in what we earn in taxes and what we spend, we just simply can't afford to keep a bloated inefficient public sector which is not fit for purpose.
He said he wants to cut 24,000 but his figures are based on the peak 2008 number of over 328,000. Some 12,500 or so have already gone, so he is talking about a reduction of about 12,000 between now and 2014. His commitment to reducing the public sector is even less than that committed to by the Labour Party, which is inextricably linked with the public sector.
Combine this with his failed banking policies, the ongoing enigma that is Nama (which has totally botched the property market) and the arrival of the IMF (which is the international standard of failure), the Government's four-year plan is about as credible as Lenihan is now.
In contrast to the delusion of Lenihan's plan, and the misguided nature of Labour's, the plan put forward by Fine Gael, which is a culmination of the work done over many years by Richard Bruton and now Michael Noonan, seeks to tackle much of the chronic inefficiencies in how the State works, is the best strategy for job creation and is the one that most protects the lower paid and those reliant on State care.
I sat down with Michael Noonan on Thursday morning to go through the merits and even the weaknesses of his plan and what is clear is that he is a man who is itching for the opportunity to get something done, and he is prepared to knock heads together to get it done.
The key aspects of his plan are as follows: The 15bn saving has to be done mainly by spending cuts and not tax increases; the most radical cut and reform of the public sector ever seen with a numbers cut of about 30,000 people; and the most impressive jobs and stimulus package proposed by any of the parties.
Even at age 67, Noonan's clear enthusiasm for the job is refreshing and given, as he said, he is no longer legacy shopping and wants to get something done, he is the right man in the right place at the right time to steer Ireland's recovery.
"We have to box clever, think outside the box and play to our strengths," he said.
"Cutting spending rather than increasing taxes is the only way to restore stability to the public finances. We have to get 15bn done by 2014, and if we are not below 3 per cent by then, that's why we've been given the extra year. Raising taxes will only depress us even further," he told me.
Part of that clever thinking is the using of the cash-rich State agencies to borrow money to provide for a stimulus package. He is also eyeing up a changing of the rules to allow Irish pension funds to invest more in Ireland, which could raise as much as 4bn. And there is also up to 6bn in the National Pension Reserve Fund, which he would use to put into job intensive projects.
On the jobs side, he opposed Lenihan's minimum wage cut, saying he would have gone instead for a three- year abolition of the 8.5 per cent rate of employers' PRSI on employees earning up to 356 a week.
One of his more interesting ideas is a cut in the lower rate of VAT from 13.5 per cent to 12 per cent. "The lower rate is the one that impacts most on labour-intensive industries like construction, hospitality, cleaning, maintenance and the newspaper industry. The idea is to get the retail economy going again," he said.
Of any of the three parties, FG has given the strongest commitment to tackling the chronic waste in the public sector: "We have said that we want to see a 10 per cent [reduction] which would mean about 30,000 people gone between now and 2014".
He also proposes a salary cap until 2014 of 200,000 for all public servants.
Noonan wants to declare an all-out war on social welfare fraud which, he said, will save over 1bn by 2014.
"Key to this is the misuse of PPS numbers and I have figured out how to stop this. The ID cards in the UK didn't work, but we will make recipients have their pictures taken (as they do passing through customs at airports) when they are collecting their money, so they can be matched with official records," he said.
When asked where he thinks the greatest areas are for expansion in job creation, he said he will prioritise tourism and the financial services industries.
"A new middle class has emerged in China who have begun to travel internationally. We must tap into this market. It could be a massive windfall for Ireland," he said.
He admitted that the amount of stimulus that Fine Gael had been talking about previously will now not happen. "In New Era, we spoke of a stimulus of about 20bn. It will be a third of that now, given what has happened in the banks."
While not perfect, Noonan's vision is the best by far of what is on offer. Real public-sector reform, a genuine and credible stimulus package which will help job creation, a real prioritisation of the domestic retail economy and a protecting of those at the bottom who are in need.
