Business

Irish Budget: Counting the cost of economic recovery

  • 13 October 2015
  • From the section Business
Michael Austin
Image caption Ireland's recovery is "not feeding through to my customers", says chemist Michael Austin

It's Budget Day in the Republic of Ireland and the last before the government, which has driven a punishing austerity programme, goes to the polls early next year. Ministers point to an economic recovery but the spending cuts since 2008 have left wounds that are yet to heal for many in the country.

At the busy Hunter's Pharmacy in Dublin, the severe national economic medicine of austerity has proven a bitter pill to swallow for both customers and the owner, chemist Michael Austin.

Health cuts have been part of the prescription, but he also relies on retail sales of luxuries like perfumes and beauty products. With government and customers alike spending less, he's cautious about talk of recovery.

"The pharmacy sector has been hit very hard and retail sales are poor compared to years ago. We are in the early signs of recovery but as yet it's not feeding through to my customers.

"A lot of them have lost their jobs and with tax rises in the austerity budgets and various other factors, they're finding it very, very difficult."

Falling unemployment

However, Ireland's economy is growing with some predicting a 6% surge this year. Consumer sentiment has also risen and exports have been strong too - particularly to other EU countries, despite difficult conditions there.

Both have helped boost the domestic economy, with the government's tax take rising and unemployment falling below 10% - down from around 15% during the crash.

Image caption Declan O'Leary says the economy has turned a corner

Whether it is because consumers are feeling more optimistic or the unseasonably mild October weather, there's a large queue for home-made ice-cream at the Storm in a Teacup shop in the seaside town of Skerries, County Dublin.

Customers say the country's been through the economic equivalent of a hurricane since the banking crash and global downturn from 2008 and there are mixed views in the queue for the ices.

"I know good friends and family members who lost businesses and jobs. Thankfully they're working again and there seems to be a more optimistic feel about it all. Generally I'm more optimistic than I was a few years ago," says Gearoid McGauran.

However, Lorcan Smith who's retired, says that austerity has hit the poor and the elderly hard and is cautious about prospects

"It has improved from a few years back but I still don't think it's great. It's liable to change - you're totally dependent on other matters so I feel it could change at any time.

"It's still hard for a lot of people. A lot are still very much on the breadline, the poorer section in society. I think it's been a bit one-sided - austerity has hit the poorer harder."

Declan O'Leary says his business is doing much better: "It's slow but it is getting better. I would say the economy has turned a corner big-time. There's been a threshold crossed over the past year where things have gone from bad or getting worse to getting better.

"From my own small business point of view, things have moved into a full order book as opposed to scraping around, looking for work, low prices, that kind of thing."

Image caption Claire Best says she has to rely on her parents for childcare - she couldn't afford to pay for it on her salary

Janson Tighe who runs his own business says he's reliant on the economy improving for his customers: "It seems to be picking up but things are hard for people. I'm self-employed so I see it every day.

Some of my customers - they can't afford to pay their bills and they'll ask if we they can get the job done and they'll pay you next week. But on the whole we're seeing more new cars and more second-hand cars being sold and people seem to be a bit more up-beat about what's coming."

Childcare costs

After moving to England, nurse manager Claire Best returned to live in County Wicklow just as economic disaster struck in 2008. Austerity has affected her directly - her hospital emergency department was shut and she had to take a big pay cut on a lower grade in a different hospital before working her way back into management.

She says the impact of austerity remains: wards are overcrowded, sometimes with patients on trolleys rather than beds.

"There's been no provision for all these extra patients that are coming in from the other emergency departments which have been closing."

Image caption Health staff say patients face overcrowded hospitals because of budget cuts

The government is pledging more beds this winter but Claire's union is taking industrial action over the issue. She says patient numbers have doubled in her department - with more becoming ill due to economic problems.

"We see a lot of patients that are dealing with a lot of stressful issues at home. Whether it's having lost their houses to the banks or their family's fallen apart due to stress.

"Obviously alcohol can become an issue with a lot of the patients and they end up with more medical issues and in-patient stays within the hospital."

Claire says the lack of state childcare provision for her eight-year-old daughter Olivia means she must rely on her parents to help or face costs of over €1,000 (£747) a month which would force her to give up work.

Ireland has the highest birth-rate in the EU but also some of the most expensive childcare costs in the OECD, with families having to spend around a third of their income - three times the EU average. The government is facing widespread calls for action from employers and parents alike.

Rural-urban divide

Last year, Ireland's economy returned to the size it was in 2007, the year before the crash - but the bailout which kept the country afloat has caused the cost of servicing the national debt to quadruple to some €8bn a year.

Former IMF and Irish central bank economist, Professor Ray Kinsella, says that high emigration and a stripping out of public services have led to a two-speed recovery - with an urban-rural divide.

Image caption Ireland is facing a two-speed recovery, with a rural-urban divide, says Prof Ray Kinsella

A major housing and homelessness crisis is unfolding too, with a slump in building related to the economic crash forcing rents upwards.

"Ireland experienced a huge recession pretty well at every level. The economy is recovering from that, really since 2014, but it has cast a long shadow.

"There has been massive emigration - there have been serious problems in the provision of public services and in rural Ireland, people still say: 'What recovery?'"

Ireland is pointed to as a success story for those in favour of austerity in the EU. Its people will pass their verdict on the government in an election early in 2016 - with the Budget marking the effective start of the election campaign.

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