Wednesday 26 October 2016

Re-electing FG could carry economic risks

Published 30/11/2015 | 02:30

Taoiseach Enda Kenny
Taoiseach Enda Kenny

Don't be distressed if you miss some key election campaign messages. You'll get plenty of chances to hear them again, and again, and again... and then again with that.

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Today, this newspaper brings you the first hint of Fine Gael's election plan on the economy. There are two key prongs: one is how it can steer Ireland towards a more sustainable prosperity; the other is outlining how this will benefit lower-income working families.

Enda Kenny's party is vulnerable on both fronts. In many ways. the economy can be compared to a long and deep coastal cove. The tide of economic good things lashes in swiftly, taking us somewhat unawares.

Then, just as quickly, the economic tide lashes out again leaving poverty and woe in its wake. We have seen both the flow and the ebb in the last decade and-a-half.

The dreaded Celtic Tiger roared loudly and lustily from the late 1990s until the middle of the last decade. There followed an economic nightmare from 2008 onwards. But the last 18 months have brought economic recovery that has delivered jobs at a much more rapid rate than anyone could have expected.

The immediate news is good and we'll take it sweetly. But the bigger lesson is the volatile and fickle nature of the economy and the urgent need to address the threats this brings.

The Fine Gael plan is to continue spreading jobs beyond the big multinationals in the more prosperous centres.

It will focus on stimulating the small and medium-sized businesses, which are the key source of jobs, with the aim of delivering an unprecedented figure of over two million people at work by 2020.

The plan has some credibility in that the Coalition has already seen unemployment diminish considerably, from 15.1pc in 2012 to the current rate of below 9pc. Some will see incentives to cut taxes and pay welfare to low-paid working families as an attempt to steal their Labour partner's clothes.

There surely is an element of that political 'clothes theft' at play. After all, an election is war by other means: it's every man and woman for themselves from this point onwards. Fine Gael will filch from Labour as much as from any other party.

But there is the ring of social good and common sense about any policy that favours work over welfare. So these pledges might play well for Fine Gael and add to its already considerable advantages in the coming months. We shall see.

Doubts persist, however, about just how certain we can be about Fine Gael being synonymous with political and economic stability after the next election. These doubts pre-date this plan and are likely to persist.

All of us are glad to see economic recovery. And most of us want a slice of its benefits in the form of better services and more money in the pocket via tax cuts. These are the most natural instincts in the world.

But these reflexes compete with an uneasy feeling that we may just be headed swiftly back to where we've come from. This is not killjoy stuff. The fear is founded on our recent experiences - and on drilling down a little more into the factors that have delivered us our recent economic recovery.

Just this past week, the Fiscal Advisory Council (FAC) warned about the Budget presented by the Government's moneybags duo, Michael Noonan and Brendan Howlin, on October 13 last. It is worth recalling that this independent council was established in 2011 with the express goal of providing independent forward economic planning advice to government, to avoid the nation hurtling itself over another economic cliff.

In simple terms, the FAC agreed with the Government assessment of the strength of economic recovery. But the FAC felt the fruits of the recovery would be better spent paying down debt, rather than spending money.

Now Messrs Noonan and Howlin and their colleagues are around long enough to know a government is not often elected based on promises to pay the national debt. The imperative is to win a general election.

Securing the boom must find its place in the queue behind that one. Of course, Fine Gael and Labour will tell you both imperatives can be served.

Yesterday, Health Minister Leo Varadkar was trenchantly arguing that this Government's increases in public spending are in no way comparable with the public spending recklessness displayed by Fianna Fáil leading into the general elections in 2002 and 2007.

This is undoubtedly true - but it is not a fix-all answer to the FAC's criticisms. The FAC says windfall company tax revenues to the Government, which allow increased spending, may not be sustained.

It points out that Ireland is heavily dependent on multinationals that could fold up their tents and move somewhere cheaper in the world. And other external factors swinging our way right now could change: interest rates could rise; oil prices could increase; the boom in the USA, the UK and Germany could falter. All of these things could happen quickly and leave us, as the small open economy on the periphery of Europe, back in queer street.

Mr Kenny argues his party is our only hope of stability. He also contends that, as the party likely to have the most votes after the election, it will fall to Fine Gael to lead a reliable government. On the economy, it's a choice between Fine Gael, our saviours; Fianna Fáil, the wreckers of the recent past; and Sinn Féin and leftists, who might be the wreckers of the future. It is a plausible line of argument that has the virtues of brevity and plausibility. But beware political arguments that are too neat.

Remember the FAC's words about this recent Budget. It says it has "worrying echoes of past fiscal policy errors made in Ireland during the boom". In other words, Fine Gael might bring its own economic threats.

Irish Independent

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