Labour unlikely to land in position to realise property tax pledge

There is only one flaw with the Labour Party local elections manifesto plan to cut property tax by 15 per cent in councils where it is the dominant party.

That flaw is this. It’s a forlorn hope for even the most ardent Labourite that it will be the dominant party on any city or county council after the May elections. And that includes Dublin city, where it won two-fifths of the vote in 2009.

The party did exceptionally well back then, reaching a high water mark in terms of over 100 full council seats for the first time. However, the strong result also reflected a geographical imbalance for the party. It has become to Irish politics what arthouse cinemas are to movie lovers - a phenomenon largely to be found in large urban centres. The 2011 elections was an outlier for the party and it won seats in constituencies which did not fit the typical Labour Party profile.

In the 2009 election, Labour's best results were in Dublin, where it became the largest party on three of its councils (and the second largest in Dún Laoghaire-Rathdown). It also became the largest party in Galway City, winning five of the fifteen seats.

On the evidence of a long series of opinion polls, there is little to suggest that Labour can repeat the feat this time around. Indeed, the regional breakdown in Irish Times polls suggests Labour’s support levels are now lagging behind that of all the other major parties, as well as independents. Against that, support levels seems to have recovered somewhat in recent months.

The irony is that Labour could very well retain (well realistically, almost retain) the number of seats it has on all four councils where it is currently the largest party. The only reason for that is that the numbers of councillors on each has been increased substantially as a result of the local government reform and abolition of town councils announced by Minister for the Environment Phil Hogan last year.

For example, Labour has 19 of 52 seats on Dublin City Council. Under Hogan's changes, the number of councillors in Dublin city will increase after the May elections. The very large local electoral areas (i.e. plenty of seats) will also help the party retain seats in the face of lower percentages.

Its manifesto pledge is interesting and provocative. In once sense and one sense only, it could be compared to the amazingly good manifesto of the Green Party for the 2009 general elections. The Greens are arguably strongest at a local level. Its plan for a radical reconfiguration of transport in Dublin was imaginative and wide-ranging. However, the party was humiliated in the local elections, losing all but three of its 16 council seats (and losing all its seats in Dublin). An unforgiving electorate punished it for its participation in coalition with Fianna Fáil. And so its manifesto fell on barren ground. And in terms of Labour Party implementation of its own manifesto pledge, the same outcome is likely.

That said, the announcement at this early stage is electorally crafty and will put it up to the other parties, particularly Fine Gael, to respond to it. The legislation for the local property tax will allow councils to vary the rate applied to households by 15 per cent plus or minus. The idea behind this variation is to give local authorities some autonomy in terms of decisions on raising taxes locally. A reduction of 15 per cent in the property tax would mean a homeowner with a house worth €400,000 would enjoy a reduction of €57, or a person with a home worth €600,000 would see a saving of almost €100 per annum.

Fine Gael was the biggest party in 24 of the 34 councils in 2009 and is likely to be the dominant party in a majority of the 31 councils under the reconfigured set-up. So it will face the most pressure during the campaign to respond to the Labour move.

The biggest question will be how big an issue will be property tax? It’s certain that it will be an issue but there is a sense that the debate on its merits has largely finished, that it a fait accompli, albeit one with a lingering bad taste in the mouth. How will it compare with the prospect of water charges later this year and the ongoing controversy over the substantial set-up costs of Irish Water, with accusations of gold-plating and padding?

Unlike Labour, Fine Gael has not committed a strong view. On RTÉ this morning, the Minister of State Brian Hayes said he agreed with the general thrust of the Labour plan. But when pressed, it emerged he agreed with the flexibility it gave local councils and made it clear that they could charge extra if they saw fit.

He basically also argued that if local authorities were to reduce the property tax, they would have to find the funding to finance it from other sources.

“To reduce it by 15 per cent or to increase it you need to work out on the other side of the equation, the expenditure side, how you would do that,” he said.

What of the opposition parties? Well Fianna Fáil has described it as a stunt, with its European election candidate Mary FitzPatrick berating the party for having introduced the tax at such a high level in the first place. At the same time, she has argued there is a need for a reduction in the Dublin area in particular, where property prices are much higher than those outside the capital.

Sinn Féin and smaller parties have all opposed the property tax and have argued for its abolition. They will feel reluctant to state a position on whether or not they support a reduction in a tax, the existence of which they oppose.

The reality is that with the reduction in the local Government fund for local authorities, it is unlikely that any council will be in a position to lower property taxes in the short term without undermining its overall budget, or without implementing significant cuts elsewhere.