Dialogue will afford space to talk but little room for manoeuvre

The Government has called the Opposition and figures from business, union and other stakeholder groups to two days of budget talks beginning tomorrow in Dublin Castle.

The “national economic dialogue” marks an attempt to facilitate public engagement with external groups without a return to social partnership of the pre-crash era. In that system, key fiscal questions were settled years in advance in a formal negotiation with government in which deals were concluded without reference to the Oireachtas.

The new talks are just that: talks, with nothing more than a commitment by the Government to “reflect”, in advance of the October budget, on whatever themes and ideas emerge. This is no negotiation. It is nothing of the sort.

Of course, the Coalition wants to concentrate on the outline budget plan for 2016, set out in the spring economic statement, which pointed to “fiscal space” of €1.2-€1.5 billion to be shared equally between spending increases and tax cuts. While the clear objective is to keep the focus solidly on the Government narrative, the Government’s opponents are bound to challenge that.

Within the confines already set, however, the room for manoeuvre is curtailed. On expenditure, indeed, the Fine Gael-Labour administration has already earmarked €300 million for increases next year in public pay and pensions. The remainder is €30-€450 million – and the Government has acknowledged some €300 million in additional funding will be needed each year after 2016 to provide for the ageing population.

The talks, chaired by Prof Alan Barrett of the Economic and Social Research Institute, will be opened by Taoiseach Enda Kenny and Tánaiste Joan Burton. The engagement will begin with a plenary session on the budgetary landscape, with contributions from ESRI academic David Duffy and Irish Fiscal Advisory Council chief John McHale, and a discussion under Barrett’s direction.

This will be followed by eight “breakout” sessions on specific themes, each of them chaired by Cabinet member. These include: Burton on competing economic and social priorities; Minister for Finance Michael Noonan on “equity and economic growth in tax policy”; and Minister for Public Expenditure Brendan Howlin on policy orientations in light of the demographic outlook.

Rapporteurs – among them former Revenue chairwoman Josephine Feehily, former Department of Transport chief Julie O’Neill, and academics Seámus Coffey and Stephen Kinsella – will submit a summary report from each breakout session in which there will be no attribution to individual contributions. Barrett will submit a final report to “inform” the Government but individual participants or parties won’t sign up to that report. His report and those of the rapporteurs will be submitted under their sole authority.

While background papers on each of the breakout session topics raise questions, the reality is that the central thrust of policy is set and the margin for movement within the confines set by the Government is very limited.

The taxation paper asks: what would be the best use of the circa €600-€700 million available next year? Still, firm promises already made to cut the universal social charge suggest the Government has the answer.

The paper then asks whether it is time to revisit “previously controversial” tax issues such as standardising VAT at one rate for all goods and services, individualisation of income tax, wealth and inheritance tax and refundable tax credits. With an election on the horizon, the time for tax controversy would not appear to be upon us.

The paper goes on to ask what can be done to direct the tax system away from incentives and “special pleading” towards improving the overall taxation framework. There is an irony here. The national economic dialogue seems likely to provide a forum for special pleading but the largesse is limited. That seems to be the basic message.