February 18, 2016
A coalition of FF and FG would work for everyone - including the LeftPosted in Sunday Business Post · 133 comments ·
A few things occurred to me when watching the TV leaders’ debate the other night. The first was that Stephen Donnelly appeared to be head and shoulders above the other candidates in terms of his delivery, his clarity and his message.
His message was straightforward: if we want a Scandinavian-style welfare system, the next government should not be made up of parties that promise to cut taxes. This made him stand out initially because here was somebody who was stating the obvious and not focusing on scoring points.
Maybe it is the luxury of being a small party leader or, in his case, co-leader and how Scandinavian is that? (Who’s for smorgasbord, herring and Aquavit?) However, his basic proposition that “if you want X, you have to have Y” struck home as being eminently sensible. It may not be the rhetoric of electoral victories, but it is a breath of fresh air and a move away from the dreadful “auction” that is going on every day at the doorsteps.
The second thing to emerge is that the leaders of the main parties who have ruled this country for the past 90-odd years – Fine Gael and Fianna Fáil – will say anything to avoid the obvious, which is that a coalition of these parties would be the best thing to happen to the Irish political system for 90 years.
They are, for all intents and purposes, the same party. They have a broadly similar ideology with a broadly similar audience. The accent might be slightly different, but you know the message could easily be the same depending on circumstances.
They are the ‘Late Late’ and the ‘Ray D’Arcy Show’ of Irish politics.
They have the same format, the same studio, practically the same audience and stand for the same set of values. One is (or used to be) a slightly posher version of the other. Today, they both want to cut taxes and increase spending; tomorrow, who knows?
The Labour Party is in an invidious position. Indeed, successive Labour Parties have been in similar positions after the “contamination” of government. Power doesn’t suit them and it takes years for them to get over it. They always sound much better in opposition. They are the Jimmy Carters of Irish politics, in the sense that everyone listens to ex-President Jimmy Carter once he is out of office. In fact, Jimmy Carter is the best ex-President the US ever had; the only problem is that to get the Jimmy Carter ex-presidency, the US had to endure the Jimmy Carter presidency.
According to the polls, Sinn Féin is the coming unified force on the proper Left. It will just have to make up its mind as to whether, in proper Soviet fashion, Gerry Adams is life president or can be deposed peacefully. Those who know these things suggest that the Shinners can’t make much more progress with the bearded one at the helm. An alliance of the various Left parties seems remote given their almost theological or scriptural differences. The great prophet and tomes of the Left have been hair split to justify what are, essentially, a difference of vanities between the faithful.
However, a Fine Gael/Fianna Fáil coalition might solve that. After all, there’s nothing to focus the mind like a common, unified enemy.
One other thing to come out of the debates is that if the economy turns down, then all bets are off, all promises will be reneged on and the Europeans and their horrible fiscal rules will be blamed for inactivity.
With the exception of Donnelly and maybe Richard Boyd Barrett, there wasn’t much conviction on view. Lucinda Creighton’s flat tax is an interesting idea; however, such a massive “big bang” is probably beyond this country in peacetime.
Now I’d like to make a few comments on the nature of the Irish economy and what seems like the best thing to do at this juncture.
The first thing to appreciate is that Ireland is very open to changes in the world economy and the one thing that has changed in the past three months is that the global outlook has deteriorated dramatically. In 2015, the US was motoring along, the UK too and China was slowing down smoothly, while the rest of Europe had at least stopped contracting. All this has changed and it is not clear that the world will not enter another recession in late 2016, early 2017.
This means we have to be careful on the tax-cutting front. Don’t get me wrong: I believe that workers should be rewarded with lower taxes when the economy is growing, but it would be a mistake to cut taxes now, only to raise them again next year.
The second issue, and this comes from the first, is that being in the euro without our own exchange rate means that when things change we have little, if any, ability to adjust. If the last 10 years have taught us anything, it is that within the euro, the Irish economy is extremely volatile. We can go from having buckets of tax revenue to having none in a matter of months. Huge budget surpluses can disappear almost overnight. There is no reason to believe that this might not happen again.
As a result of this economic volatility, the third issue is that it is important not to make our tax base too narrow. In good times, there’s a tendency to cut taxes and become over-dependent on taxes from one or two main sources. We did this with property and consumption- related taxes in the boom. If something adverse happens, a narrow tax base becomes a very fragile and insufficient tax base.
The fourth issue on the economy is that the country is already recovering quite strongly, jobs are being created, revenues are reasonably buoyant and personal income is going up, so there really is no need to rev the engine by tax cuts.
I am no fiscal evangelist. I believe that tax cuts are the right of responsible government, but with so much uncertainty and with the economy performing, I am not sure whether it would be a sensible thing to do in 2016. Unless, of course, we want to slash State investment next year. If we are happy to revert to stop-start, well, off we go – but is that what we want?