TENSIONS THAT have simmered for months between Fine Gael and the Labour Party are likely to develop into open conflict following publication of their pre-budget submissions. The revenue-raising and saving plans of the aspiring parties of government are so disparate that it is clear that both Eamon Gilmore and Enda Kenny are aiming to be the next taoiseach. There will be a fierce competition for votes. But how that competition is controlled will have a vital impact on the credibility of an alternative government in extraordinarily difficult times.
Fine Gael’s Enda Kenny has accepted the need for a €6 billion adjustment in the coming budget, as agreed with the EU and the IMF, with €15 billion being found in taxes and reduced spending over four years. The Labour Party leader, on the other hand, envisages an adjustment of €4.5 billion in 2011 and says he would renegotiate the terms of the €85 billion rescue package with the EU and the IMF. A central aspect of those negotiations would involve “burning” senior bondholders, something the EU has already rejected, but Fine Gael also favours.
The tone of pre-election relations between the parties was set by Labour finance spokeswoman Joan Burton when she pointed out that Fine Gael had supported the bank guarantee and now supported Fianna Fáil on financial adjustments. Labour would renegotiate the terms of the EU-IMF financial package and unwind the bank guarantee, she said. Labour also proposed a 48 per cent income tax rate for couples earning more than €200,000, on the basis that the highest earners should contribute most. Ignoring Fine Gael’s proposal for an effective tax rate of 30 per cent on all earnings above €250,000, she suggested that party has “a fairly soft approach to the very wealthy”.
As the possibility of Fianna Fáil surviving as a core political force diminishes with every passing opinion poll, the alternative parties of government are beginning to compete, rather than co-operate, in their hunt for votes and party advantage. That may prove costly if the electorate takes fright. Fine Gael and the Labour Party have presented very different election programmes to the public. There is, however, broad common ground.
Both parties offer job stimulus and job creation packages, but they will be funded and structured in different ways. Fine Gael promises no income tax increase for 2011 and projects savings of €3 billion on social welfare fraud over four years. In contrast, the Labour Party would balance spending reductions with tax increases and it expects to save only €100 million on social welfare fraud next year.
Fine Gael has trumpeted its intention to cut public sector numbers by 30,000 by 2014 and to make savings of at least €260 million next year. Labour, in contrast, doesn’t itemise public service job losses but expects to make even greater savings of €400 million in 2011.
The passage of the budget next Tuesday would suit both parties and make their proposals for 2011 virtually redundant.