Monday 5 December 2016

Bruce Arnold: Rainbow coalition legacy now utterly demolished

Bruce Arnold

Published 08/12/2010 | 05:00

IN what was to be its last Budget, in 1997, the Rainbow Coalition argued that its performance -- with Ruairi Quinn as Finance Minister, and John Bruton as Taoiseach -- had been convincing across all departments.

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It was true and acceptable, an honourable delivery of public duty. It was not enough. The Irish people let them depart and ushered in the 13-year rule of Ahern and Cowen.

Looking at a fuller analysis of this Rainbow performance is like seeing the whole of the Ahern-Cowen era as a ghastly mistake. What the pre-Ahern State stood for has been demolished. The price we pay for this is poverty, unemployment, the end of physical development and growth, and placing the administration of the country in unsafe, foreign hands.

Fianna Fail's approach to what would be the Rainbow Coalition's last Budget, in January 1997, was an attack, not on policy, with which it largely agreed, but on implementation. The party failed to make any dents. Bertie Ahern, its new, untried leader, was pretty desperate. He became Taoiseach within the year, but by default. He had two great assets, however. He was in coalition with the Progressive Democrats, always a controlling hand, and he had Charlie McCreevy in Finance.

McCreevy will always be a controversial figure. To some, he made many significant contributions and gave to his period in office a clear stamp, one that did not exclude prodigality, gambling, flamboyance and excessive generosity. To others, he was responsible for a series of 'calamitous' policy errors between 2000 and 2003. Garret FitzGerald blamed Ireland's dire economic state in 2009 on this, a long and extended arc of responsibility.

McCreevy was a consistent advocate of cutting taxes and spending. In 1999 he announced the biggest give-away Budget in the history of the State. The dramatic cut in interest rates, preceding the joining of the euro, combined with a tightening labour market and tax reductions, led to significant increases in inflation.

During his term he made many changes to simplify the tax system. He presided over Ireland's entry to the Economic and Monetary Union and then the euro. He maintained a significant surplus during his seven years in Finance by forecasting tax takes that were lower than average. He simultaneously implemented a tax-cutting programme, major increases in health, education, pension spending and infrastructural development.

Unemployment fell. But real GDP growth also fell steadily, from a peak of more than 11pc in 1997 when McCreevy took office to just over 4pc in 2004. Yet in the Celtic Tiger era it represented by far the highest average of any western European country. Together with the cut in Capital Gains Tax from 40pc to 20pc, the economy was characterised by an explosion in housing and commercial property speculation. Ultimately, this collapsed the Irish banking system.

McCreevy was outspoken, controversially but also refreshingly so when describing Ireland's rejection of the Nice Treaty as "a sign of a healthy democracy". In 2008 he said much the same. Each country had to ratify Lisbon. If the only answer to the question was 'Yes' there was no point in putting the question.

McCreevy also pointed out that many who failed to vote in the 2007 General Election voted on Lisbon. "People did take the issue very seriously. That has to be respected," he said.

McCreevy's early budgets provided payback bonanzas and he was rightly blamed for his 'light touch' regulation of the financial system.

In the public mind the rich would benefit most. Yet he created the impression that the poor would also benefit. This set the tone for the future. He sought to control public spending, correct tax inequality and benefit the elderly. He went on to reduce the basic rate of income tax to 24pc and the higher rate to 46pc. Basic allowances increased by 8.6pc. McCreevy became the first Finance Minister in 50 years to bring in a budget surplus. He said that fairness demanded that the old and the lower paid be looked after.

McCreevy adroitly anticipated electoral needs. In 2000 he delivered a gambler's Budget. Its aim was to win an election likely in the first half of 2001. In the event it did not take place until 2002 but the nest eggs of victory had been well-laid.

The pre-election Budget sought to make people feel good. It had a central objective: to do this for the social partners, through a renewed and rewritten Programme for Prosperity and Fairness. But its remit was much wider. In many respects it reached out to the other political parties and, by meeting their demands, reduced the scope for criticism.

McCreevy was a good economist, in fact, the last good economic brain to occupy that particular ministry. Economic and financial rectitude was the motivation of McCreevy's political creed. He merited Finance in 1997. He performed with consistency up to and including the 2002 election for which he delivered popular answers and promises. His post-election Budgets were carefully constructed, well- balanced and responsible to the point of being boring.

Then, in July 2004, Bertie Ahern got rid of him. Charlie McCreevy went to Brussels without enthusiasm, not even knowing what job he would be doing. Brussels was remote from all that he held dear.

Fianna Fail's socialist era followed. Cowen's approach was "more caring, more socialist". Ahern claimed he was as good a socialist as the next man. Teflon man, who has never declared himself morally or spiritually in favour of any kind of political philosophy, took a principled position on behalf of the common man and was really the only socialist in Ireland. Economically it meant, 'Let everything rip!' It was this that saw the party storm back in 2007, led more by the aggressive performance of Brian Cowen than by Bertie Ahern.

Facing the Lisbon Treaty referendum, Ahern's money affairs made him a liability. He was eased out in March 2008. Brian Cowen took his place amid expectations that were unrealisable. It was promised he would take control. He never did. He made public service reform a personal benchmark. It never started. The party has never been reformist, but predecessors like Lemass were infinitely better than Cowen. As for winning the Lisbon Treaty referendum, Cowen made a complete mess of it.

On the economy he faced Richard Bruton who condemned him for allowing public spending to grow greatly in excess of economic growth. These increases were funded "on the back of property taxes everybody knew were unsustainable". A large part of that growth then collapsed under Cowen's feet and he fell through the hole.

Brian Lenihan, his replacement in Finance, was a victim of his own economic incompetence. Consider this platitude: "Current spending should not outdistance revenue. That path leads to unsustainable borrowing, less room for manoeuvre, lower growth rates and a heavy tax burden." Who did he think he was talking to? This sort of thing would have hardly passed muster in a school debating society on a bad day.

The Irish public had a right to be angry from 2008 on. That right has grown into fury and rage. The Government achieved the economic downturn with its eyes wide open and its mouth and its mind firmly shut.

Cowen's real problem as leader became that of defining a character for himself and the party fitting the new mood in the country. The Lisbon Treaty 'No' vote should have taught him that there was a much deeper respect for fairness and democracy than is present within his own party.

By November 2008 it was clear that neither Cowen nor Lenihan were up to their jobs and that Ireland was in a downward spiral.

Lenihan's delivery of his December 2009 Budget showed he had his father's ability to make a hopeless and desperate set of circumstances look defensible. The content was unimpressive. The only solutions the two Brians want are options in case a glimmer of change in the political landscape offers an election opportunity.

And so we come to today, where the Budget is not theirs nor is it ours. It is part of a script written by people outside this State who have taken control of our affairs without caring about them.

barnold@independent.ie

Irish Independent

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