INSIDE POLITICS:Fianna Fáil must forget about winning the next election and do what is required, regardless of the consequences, writes Stephen Collins
IN THE coming weeks Brian Cowen’s Government will face a test of character that will define its reputation once and for all. It has to choose between doing the right thing by the country, regardless of the political consequences, or taking soft options which will imperil the nation’s prospects for a generation to come.
The length of time it has taken for the Government to come up with a response to the crisis in the public finances has created the impression that it is indecisive and weak. If it cannot dispel that image quickly it will never have the authority to govern.
It will take political courage and skill of a high order just to begin the process of bringing public spending under control, but it cannot be postponed any longer. For once, Fianna Fáil will have to forget about winning the next election and just do what is required, regardless of the electoral consequences.
The reason Ireland’s plight is now so dire is that the government led by Bertie Ahern consistently took the short-term popular option to win electoral approval. It was a remarkably successful political tactic, resulting in three election victories in a row, but the people of Ireland are now picking up the tab for such profligacy with their money.
The basic problem was that in a time of plenty the Fianna Fáil-Progressive Democrat government cut taxes to the bone and at the same time allowed public spending to rise far faster than inflation, year after year.
In recent years the exercise was funded by a construction bubble that was inevitably going to burst.
The difficulty Cowen and his colleagues face is that they were involved in the bad policy decisions that resulted in our current plight and so will have great difficulty persuading the public to trust them on how to get out of it, as the controversy over the October budget showed.
One of the biggest mistakes made by Ahern’s government was a phoney benchmarking process that resulted in substantial pay rises for public servants, many of whom were already relatively well paid, as well as having job security and remarkable pensions. The 2002 benchmarking awards are now costing the exchequer €2 billion a year, precisely the same figure that the Government wants to cut out of planned public spending this year. Tackling the public pay and pension bill has to be an essential part of the Government’s plan, whether it is done through pay cuts or an income levy to reflect the benefit of superior pensions, as has been mooted in recent days. Whatever action is taken is bound to be deeply unpopular with public servants who are capable of making life very difficult for the Government.
It is also something that could bring the whole edifice of social partnership crashing down, but the coalition simply has to risk it.
If the partnership process is worth its salt it should be able to accommodate the need for a significant contribution from public servants to helping the country out of the current mess. While union leaders can’t be expected to like the decisions, they will have to decide whether to live with them or fight them.
In their submission to Government, the Irish Congress of Trade Unions made a number of positive suggestions, including the need for a property tax. Ironically, it did not go nearly far enough on the issue, suggesting a tax only on large “trophy” homes.
What is required is a broadly-based property tax. That would not only to raise revenue in the short term, but widen the tax base so we don’t repeat the mistakes of the 1980s and impose crippling taxes on labour to get the exchequer finances into line.
That said, income tax will inevitably have to rise in the next few years, on both the higher and lower rates.
Earlier this month Fine Gael also made a number of proposals on how to deal with the crisis, but the party shirked the real issue by suggesting that cuts should only apply to public service salaries of over €100,000.
While it is difficult to expect the main Opposition party to take on vested interest groups, when it is not even clear that the Government has the stomach for it, the Fine Gael proposal was disappointing. The party has done very well over the past year by taking the lead on what is to be done.
Leo Varadkar proposed the cull of quangos long before the Government identified the problem, while Enda Kenny had the courage to say that the national pay round agreed last September should not be paid to the public service. By identifying the nature of the problem well before the Government, Fine Gael earned the credibility to present itself as a viable alternative.
The party is in danger of undermining that achievement by pretending there are soft options just when the Government is about to screw up the courage to act.
The Labour Party has not offered any real solutions to the crisis in the exchequer finances. Again that is understandable, given the party’s links with the public sector unions, but it does beg the question about whether an alternative government would be capable of dealing with the scale of the problems facing the country.
Fianna Fáil and the Greens have nothing to lose by taking bold decisions in the national interest. They will probably lose the next election no matter what they do, but if they do the right thing they may actually benefit in the long term.
A period of political instability in response to the ongoing economic instability is likely in the years ahead. The ultimate political winners will be those who can demonstrate a willingness to act in the national interest.