Hamstrung Coalition needs to be more imaginative

INSIDE POLITICS:The Coalition’s strategy of tackling the gaping hole in the public finances through a myriad of small cuts rather than a handful of big ones is working at a crude book-keeping level but the political price it will pay for this approach could ultimately be very high.

At the outset the Fine Gael-Labour Government ruled out any increase in tax rates, any cuts in basic welfare rates and any cuts in public service pay. This triple lock has hamstrung budgetary policy and left Michael Noonan and Brendan Howlin with no option but to insist on an array of painful spending cuts and tax adjustments.

A handful of Labour Party TDs have expressed disquiet at some of the budget provisions and, while this is understandable, it is obscuring the fact that the party’s Ministers got a lot of what they wanted in the Cabinet negotiations and the budget is actually quite progressive in its impact.

If the dissent gets out of hand, though, it could be dangerous not only for Labour but for the stability of the Coalition. Some of the basic truths in politics don’t change over time and internal dissent quickly destroys a government’s credibility.

Back in the 1840s the British prime minister Lord Melbourne famously chided ministers about his government’s policy on the corn laws: “Now, is it to lower the price of bread or isn’t it? It does not much matter which we say but, mind, we must all say the same.”

Taoiseach Enda Kenny and Tánaiste Eamon Gilmore have certainly been saying the same about Budget 2013 and so has Minister for Social Protection Joan Burton. Some small adjustments may be possible but the danger is that unpicking one or two of the most unpopular measures could undermine the whole thing.

This is particularly the case with regard to the property tax. Persuading the public to co-operate will be difficult but, as the household charge saga showed, the big majority can be brought into the net with patience and discreet threats of ultimate retribution by the State.

The problem about the entire budgetary strategy, and it is one Labour TDs have to face up to, is that there is no alternative to annoying the public by a thousand cuts as long as the triple lock remains in place.

Another downside of those absolute commitments on tax, welfare and public pay is that they have preserved intact some of the key elements of the system that got the country into the mess.

At his post-budget press conference Michael Noonan made some interesting comments about why the Labour Party’s proposal for a 3 per cent increase in the universal social charge for those earning €100,000 had been rejected.

He said the Cabinet had taken the view that it would put Ireland at a competitive disadvantage, particularly in relation to our nearest neighbour, the UK, in attracting foreign direct investment.