Stephen Collins: Phoney war at Leinster House in advance of election

Gearing up to repeat the mistakes of the past

Very careful monitoring is needed  to ensure that a massive gap between tax and spending doesn’t suddenly open up,  once again requiring another bout of savage retrenchment measures. Above, Taoiseach, Enda Kenny Photograph:  Colin Keegan/Collins Dublin

Very careful monitoring is needed to ensure that a massive gap between tax and spending doesn’t suddenly open up, once again requiring another bout of savage retrenchment measures. Above, Taoiseach, Enda Kenny Photograph: Colin Keegan/Collins Dublin

 

A phoney political war has enveloped Leinster House in recent weeks as the parties manoeuvre for position in advance of the general election which probably won’t take place for almost four months.

One of the arguments for a November election was that the Coalition parties had basically implemented their programme and that hanging around for another few months would leave them at the mercy of unforeseen events.

So far events have not been particularly embarrassing for the Government, with the Opposition and much of the media spending more time chasing hares than focusing on substantial issues.

The row between the Ministers for Finance and the Environment over housing and rent control had the capacity to do some damage to the Coalition’s message of stability but the compromise hammered out in advance of next week’s Cabinet meeting should defuse it.

Whatever the merits or demerits of the housing package at least it is a real issue of concern to a lot of people. By contrast the long-running controversy over Enda Kenny’s comments in Madrid about the contingency plan to call out the Army to protect banks and ATMs if the euro collapsed in 2012 was hot air.

A lot of time and effort was expended by the Taoiseach’s opponents attempting to prove that he had made it all up until former tánaiste Eamon Gilmore confirmed the basic facts of the story.

In Inside the Room, his fascinating memoir of his time in government, Gilmore detailed how the Economic Management Council held an emergency meeting in summer 2012 to discuss what action to take if the euro collapsed, and the role of Army was discussed.

Kenny may have embroidered the story a little, or misremembered the detail of the discussions by saying Central Bank governor Patrick Honohan spoke about the Army’s role but Gilmore confirmed the matter was discussed and that the governor was there.

It was typical enough of Irish political debate that the focus of the controversy was not on the substance of the story, which was the near collapse of the euro and the implications of that, but on the detail of who said what and when.

The obsession with minor detail rather than substance has been a feature of political debate from the start of the financial and economic meltdown in 2008. An enormous amount of time and effort was expended debating the night of the bank guarantee, and who was or wasn’t in the room when the decision was made, as if any of that mattered.

The endless speculation about the night of the guarantee only served as a distraction from real questions about how things had come to such a pass that the guarantee was required and what lessons could be learned from the whole sorry chapter.

One of the positive aspects of the banking inquiry was that the evidence given in public by the main players finally brought a sense of realism to the discussion and hopefully put the conspiracy theories to rest.

Con fused

The fundamental reason for the so-called “austerity” measures of the past few years was not the banking collapse but the collapse in tax revenues which suddenly left the State with a €20 billion gap between revenue and spending.

In a letter to Minister for Finance Michael Noonan before the budget Honohan warned the Minister about the dangers of basing his spending plans for next year on tax revenues which may turn out to be windfall gains.

Much of the leeway for the modest tax reductions announced in the budget by Noonan has been created by a surge in revenue from corporation tax. There is an argument that this revenue is not simply a once-off surge but will be there in the future thanks to the international clampdown on tax avoidance measures by multinationals.

Massive gap

Another key element of the recent budget that demands serious debate is the Coalition’s plan to take more people out of the tax net and ultimately to eliminate the Universal Social Charge (USC).

One of the fundamental reasons the crash was so severe and the USC was required was that so many people on low and middle incomes were taken out of the tax net during the boom years and the system was effectively hollowed out, leaving it vulnerable to collapse.

A feature of the Irish income tax system is that people earning more than €70,000 pay almost the same level of income tax as people in Scandinavia where public services are so much better than here.

The inconvenient truth, however, is that the only way we can aspire to Scandinavian quality public services and meet the vocal demands from Opposition parties and interest groups for massive increases in spending is to raise income tax for everybody, including the low paid.

A general election campaign is probably not the best time to have an honest debate about the options facing the country, as the Irish electorate has in the past shown no inclination to reward politicians who tell the truth.

It is hard to avoid the conclusion that it is only a matter of time before we repeat the mistakes of the past yet again.

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