Analysis: Pledge to axe USC could be a winner for Fine Gael

Party borrows strategy from David Cameron as it prepares its general election pitch

 Taoiseach Enda Kenny. Fine Gael has promised cuts to the USC as part of its election pitch. File photograph: Eric Luke/The Irish Times

Taoiseach Enda Kenny. Fine Gael has promised cuts to the USC as part of its election pitch. File photograph: Eric Luke/The Irish Times

 

The message thus far from Fine Gael has been stability and prudent management of the economy, yet no party can expect to be re-elected on the back of past achievements.

Winston Churchill was dumped from office after the second World War by an electorate looking for a different kind of society after the trauma of the war years, with Labour’s Clement Attlee given a landslide mandate for social change.

The Fine Gael and Labour Coalition likes to present itself as a Government that took office in a time of national crisis to guide the economy back to growth, and there is no denying the recovery and increasing employment.

However, the electorate needs something to vote for above and beyond stability and the now well-rehearsed reminder of the state of the economy, and who was responsible for it, when the Government took office.

It needs an offer to show that the bailout years of hardship were worth it.

For Fine Gael, it seems that offer is tax cuts and its “long-term economic plan”.

You could accuse the party of lacking imagination, since David Cameron’s Conservatives chose the exact same phrase as the basis for their re-election pitch.

Such accusations founder on Cameron’s success as a right-of-centre leader seeking re-election after years of unpopular austerity, although the British version was mild compared to the Irish experience.

If a model of success is readily available, why opt for something different?

Advice

Both know the messages of stability and tax cuts are proven winners.

Fine Gael’s greatest success in 2011 was promising not to increase income tax and hammering Labour as a high-tax party, two messages that brought it within sight of an overall majority, before Irish voters eventually recoiled from the prospect of single-party government.

Its opening salvo for election 2016 is a promise of a cut to the 5.5 per cent universal social charge (USC) rate in its first post-election budget, even if money will be tighter for budget 2017 than it was for Budget 2016.

The €1.5 billion package announced last month was buttressed by an additional €1.5 billion in supplementary spending.

The supplementary spending will not be repeated, since European rules will not allow it in future.

Noonan also told the Dáil he expects €500 million to be available for tax cuts and spending increases in 2017, although many say that is conservative.

With its general election USC promise, Fine Gael is making it clear that its priorities should be tilted towards cutting taxes, although levies could be raised elsewhere to pay for the reductions.

Canvasses

This contrasts with the Labour Party commitment to only abolish the charge for those earning €70,000 or less, even if the party is not ruling out total abolition.

Labour also wants the bulk of future resources to go towards increased public spending.

One Fine Gael source said some middle class liberal voters – who make up a sizeable number of Labour supporters – are baulking at the decision to restrict tax cuts to those below €70,000 and may seek solace in Fine Gael arms.

Such feedback will please those in Fine Gael who were against a common policy platform with Labour, an idea that was never really a credible runner in any event.

Haunted by fears of 1997, when Bertie Ahern outflanked the Rainbow Coalition’s complicated tax package with the “payback time” offer of straight rate cuts, it was felt that too close an electoral alliance with Labour could dilute Fine Gael’s tax-cutting message.

While it previously warned of the disastrous effect on the public finances of abolishing the USC, the Coalition parties both now say it can be wound down as economic growth continues.

They point to predicted growth rates of 6.2 per cent this year and 4.3 per cent next year, and tax take coming in substantially ahead of target.

The elimination of the deficit by 2018 will also mean greater scope for tax cuts and increased spending, but Fine Gael’s move on the main USC rate is designed to give the public something immediate to vote for, aside from stability and continuity.

A vote for payback time, albeit of a different stripe, this time out.

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