Don’t Get Fooled Again

January 29, 2016

Today we’ve launched our Economic Manifesto, urging the people of Ireland not to get fooled again.

A growing number of people in Ireland and international organisations are warning against exactly the sort of auction politics we’re seeing from the establishment parties. Fine Gael and Labour are proposing to massively erode the tax base – abolishing the USC, for example, would wipe €4-5bn o the revenue base each year. They are justifying this recklessness on the grounds of a growing economy and unexpected tax returns.

This is exactly what Fianna Fáil did before the crash in 2008 – they ignored all the warnings, and pointed to the good news. Then as now, our economy was growing faster than other countries, unexpected tax revenues were appearing, home ownership was becoming impossible and commercial rents were soaring. Then as now, government investment was too low. Then as now, pre-election promises were aimed at buying votes at any cost. The result of all of this was a lost decade, and a great deal of hardship for millions of people.

What Fine Gael / Labour are proposing is, however, even more irresponsible than what Fianna Fáil did. Why? Because there are no safety nets left. When the crash hit in 2008, many households, business and voluntary groups were able to cut back. The State was able to borrow vast sums of money. Today, people, businesses, and voluntary groups have nothing left to give. Public services are over-stretched and the state can’t borrow additional funds. So if another global economic shock hits Ireland, as it did in 2008, we will be far more vulnerable to it than we were then.

The chances of such a shock are rising rapidly. Stock markets are seeing big drops in recent weeks, and emerging market economies, including China, are slowing down.

The Social Democrats don’t want Ireland to experience another lost decade. We believe the economic breathing space available should not be used to buy the election, but instead

to safeguard the future. We are proposing the tax base be maintained, with some minor adjustments. Instead of stripping out billions, we should be doing things like creating a modern healthcare system, putting in place the infrastructure needed to support business for years to come, sorting out the housing market, rebuilding communities and supporting parents in areas like affordable childcare. €4 to 5bn a year would let us do a lot of very good things in the short term, and let us start planning for big long term challenges like pensions, flooding and climate change.

The way to put money back is people’s pockets is by reducing the costs of living. We are proposing a range of measure to do this, including in the areas of childcare, healthcare, insurance, education and energy.

Many people in Ireland want a credible alternative to the political cartel. They want a political vision that marries strong social vision with responsible economics and better government. That is exactly what the Social Democrats are offering.

We are aware of the false promises made by so many parties before elections. We do not believe that false promises should be ‘something you do during an election campaign’. We are therefore stating very clearly that this manifesto lays out our priorities and our plans for the short, medium and long-term. They are the policies we will champion in the next Dáil. Are they ambitious? Yes, they are, because we believe Ireland and its political system must be ambitious if we are not to repeat the mistakes of the past.

The fiscal approach taken by the Social Democrats will ensure that higher than usual levels of State funds will be available as opposed to the other parties alternative approach of eroding the tax base. For example, abolishing the USC would reduce the revenue base by €4-€5 billion per year. This is a significant sum of money that we believe would be best used for strategic investment in repairing and building top quality public services.

It is important to note that many of the policies we propose would save very significant sums of money in the medium term. For example, investment in children has a return of about seven to one. This means that money invested today would radically reduce future costs. Similarly, moving to a modern, community-based healthcare system would require up-front investment. However, that investment would quickly start to reduce a range of existing healthcare costs.

Ultimately this is about long-term, strategic measures that will both immediately and in the future reduce the overall cost of living for those in every section of society.

Manage Ireland’s National Finances Responsibly

Ireland is still firmly locked into a repeated sequence of pre-election budget giveaways and promises that erode the tax base and set the country up for a fall. The worst example of this was Fianna Fáil during the bubble, leading to economic instability, recession and high levels of public debt. This allegation of irresponsible scal policy by FG/Labour is now being reported on by the EU.

Fine Gael / Labour are now repeating exactly what Fianna Fáil did – they’re using one-o revenues, largely from unexpected corporation tax returns, to fund large scale tax cuts. The results can already be seen in things like increased child poverty and people on trolleys in A&E Departments.

The size of the crash could be bigger under Fine Gael / Labour, as the various safety mechanisms that kicked in at the time of the last recession are gone. Public debt is too high for any serious future borrowing, households have nothing left to give, businesses have nothing left to give, public services are already severely cut-back.

The Social Democrats propose an end to this boom-and-bust cycle, through responsible fiscal management. To this end, there are many policies the Social Democrats would prioritise, including:

  • Maintaining the tax base at its current level;
  • Running a structurally balanced budget;
  • Increasing investment in social and productive infrastructure (e.g., schools, broadband,transport, flood defences, primary care centres, community centres);
  • Putting money back into people’s pockets by reducing the cost of living (see that topicseparately);
  • Refuting validity of outstanding Anglo / INBS promissory note debt of €25 billion and seekmultilateral agreement on burden sharing at earliest opportunity;
  • Beginning the fiscal planning necessary for the long-term provision of services, includingpensions and healthcare.

Call For A Eurozone Debt Conference

Our National Debt has increased from €93 billion to €183 billion during the lifetime of the current Government. This has caused and will continue to cause deep hardship for our citizens. A significant portion of this extra debt arose from the banking collapse and the decisions of this and the previous government to bail-out the banks using our money and that of future generations. There remains a deep sense of injustice that these banking debts were foisted on the Irish people due to a combination of weak and incompetent Irish politicians and bullying from European Institutions.

Other countries in the eurozone are also suffering severe hardship arising from debt problems. We strongly believe a Eurozone debt conference should be convened to address this issue in a collegiate and rational manner. This would help reinvigorate the solidarity among nations that should be at the core of the European project.
At a minimum the €25bn Anglo/INBS debt should be classified by the Irish State as odious debt, and full write-o should be pursued vigorously by the new Government.

A European debt conference was held in London in 1952 to restructure Germany’s debts, including the writing o of significant amount. This restructuring was one of the drivers of Germany’s subsequent economic growth.