The prospective partners in government are at odds on a range of key economic issues
THE LIKELIHOOD of Fine Gael and the Labour Party beginning coalition talks in just over two weeks’ time is as close to a sure thing as exists in politics.
On the basis of the positions set out over the campaign so far there is much that separates the parties. Although the differences have sometimes been exaggerated for electoral gain, there are a great many issues on which substantive disagreement exists.
Social welfare accounts for the largest share of public spending and the two parties have lots of acrimonious history on how much should be spent on it. They disagree as much now as they did when in government together in the 1980s. The larger party intends to cut the welfare budget and some benefits. Labour sees no scope for further cuts. Fine Gael wants benefits to be withdrawn from those who refuse offers of jobs or training. The smaller party rejects such conditionality.
On other issues of relevance to jobs there are also differences. While both parties agree that changes are needed in how training is provided and funded, Labour believes that the evidence to support Fine Gael’s voucher scheme is too mixed.
And if there are differences on money following the purchaser in training, how the two parties’ hugely detailed health strategies can be reconciled will require the wisdom of Solomon and the patience of Job.
The parties have taken different positions on downsizing the public sector, with Fine Gael advocating a much larger voluntary redundancy scheme to shrink numbers by 30,000. Labour wants a lower figure, of 18,000, saying that its likely partner could not keep its promise to maintain frontline services with such a reduction.
On State ownership, Fine Gael advocates selling off a range of assets not only because it believes entities such as ESB need not be government run, but also because it wants to use the proceeds to fund investment in new assets. Those assets, it believes, will provide a better return and require public investment because they won’t be provided by the private sector. Rural broadband is the stand-out example.
Although Labour is just as keen on infrastructure investment, it is, in keeping with its more statist instincts, not proposing to offload publicly owned possessions. And, in one case at least, the Labour Party wants to create a brand new State agency. Its Strategic Investment Bank would invest in high-growth Irish companies. Fine Gael peddled the same proposal until recently. Now it rubbishes the idea.
These are just some of the longer-term issues on which the parties disagree. There are others which will land like hot bricks in the parties’ laps from the get-go.
Yesterday, Labour set in the stone of its manifesto a commitment to seek three major changes to the terms of the EU-IMF bailout. Along with Fine Gael, which has also been preparing to wage war on two renegotiation fronts, Labour wants to seek a smaller budget adjustment package (of €7 billion) than that set out in the terms.
Given that Fine Gael is committed to the €9 billion adjustment, it is hard to see it fighting for a Labour commitment it doesn’t think can be won.
Both parties have said they will seek a better deal on sharing the burden of banking losses and on the interest rates charged on the EU tranches. The latter issue (and just possibly the former) is to be decided within the framework of a redesign of the architecture of the euro, to be agreed among the bloc’s 17 member countries by March 24th. Neither Fine Gael nor Labour is fully abreast of the debate in Europe, so distracted are they by the demands of the campaign. They don’t yet have positions to disagree on.
Regardless of the size of the adjustment, its composition is probably the single biggest issue separating the parties. Labour wants the burden to be shared equally between spending cuts and new taxes; Fine Gael likes to portray itself as an axe-wielding friend of the taxpayer ready to hack into the bloated public sector. If the parties do coalesce, Fine Gael’s expected dominance in seat numbers means the split should be more to its preference. A 2:1 ratio in favour of cuts would be closer to its 73:27 position. As it happens, this is the ratio on which the Department of Finance has based all its sums.
Despite the urgency of putting a new government in place, not least to deal with bailout issues, there may well be too many issues to resolve in the nine days between the time all votes are counted and the reconvening of the Dáil on March 9th.