Wednesday 29 January 2020

Richard Curran: 'Expect a deluge of uncosted fixes in Election 2020 spinfest'

Starting gun: President Michael D Higgins and Taoiseach Leo Varadkar confirming next month’s election. Photo: Gareth Chaney / Collins Photos
Starting gun: President Michael D Higgins and Taoiseach Leo Varadkar confirming next month’s election. Photo: Gareth Chaney / Collins Photos
Richard Curran

Richard Curran

And they're off. But don't expect the economy to feature strongly in this, thankfully brief, election campaign. Now the economy has been fixed after the crash, we have the money to throw at our problems, right? Wrong.

The economy will be overshadowed in Election 2020 by more specific upfront problems, such as housing and the health service. We won't see promises of big tax cuts as both of the main parties, Fianna Fáil and Fine Gael, will want to avoid accusations of fiscal irresponsibility.

Instead, both parties will make a vast range of spending promises aimed at fixing everything that remains unfixed in this post-crash, post-recovery society.

The big-ticket items include the housing crisis, where not enough houses are being built, rents are at record levels, and not enough first-time buyers are able to save the requisite deposit to buy a house.

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In health, the record numbers on trolleys, overcrowded emergency departments and long waiting lists will all feature.

Fianna Fáil will believe it has an open goal against the Government on these issues. The best way to make hay in an election is to promise to fix everything without too much explanation of where the additional money will come from. For Fine Gael, it has the disadvantage that all of these issues remain unfixed, despite it being in power for nearly a decade. It can point to progress it has made, how it had a slow start because of the economic mess it inherited from Fianna Fáil and the Troika, and it can explain how it will fix these issues now the economy is going well.

But it cannot fully explain how the problems in health and housing were allowed to fester.

The simple truth is that neither health nor housing are likely to get fixed in a hurry.

On housing, Fianna Fáil's website - all we can go on until its manifesto comes out - has lots of proposals and ideas.

It wants to set up a National Housing Delivery Agency (a new quango); increase spending on building social housing (is shortage of money the problem?); increase housing supply to 50,000 per year (how?); make rents affordable by introducing a rent tax credit of €500 per renter (big cost which won't actually reduce rents); strengthen and enhance Rent Pressure Zones (which haven't worked under Fine Gael); introduce a local authority-led NCT-style accommodation certificate for rented property (not something that would encourage landlords to stay in the business); and bring in tax incentives to retain landlords in the system, such as LPT and rate reductions (costs money).

We kind of know what Fine Gael policy is because it is implementing it, but without much success. Its website focuses on longer-term policy initiatives the Government is involved in.

Top of the list is Project Ireland 2040 - a grandiose policy document covering the next 20 years. Then comes the Climate Action Plan, which is another long-term scheme with distant targets. Next is Future Jobs Ireland, which also happens to be very much about the future, rather than today or tomorrow.

Whether it is housing or health, money will be needed to fix the problem. The election row will be about specific measures and who will have the credibility to implement them, rather than the cost. Very little will be given over to what the country can afford in the years ahead.

As the starting gun is fired on Election 2020, there is an assumption about the economy, namely that we are at full employment, we ran an Exchequer surplus last year, and there is now money available to fix the problems in our society.

Housing and health will not be the only issues to surface. There will be a tonne of rhetoric around Dublin versus rural Ireland.

Things like childcare and motor insurance are also examples of unfixed problems that are likely to come up.

For the left-wing parties, there will be an opportunity to have a crack at business, especially given the level of wealth creation there has been in Ireland since the crash. But the whole issue of preserving economic growth will not feature strongly.

Take climate change, which will be paid a degree of lip service by the main parties. Implementing a credible climate change policy is going to cost billions. It will cost business, consumers, taxpayers, and other specific interest groups such as farmers, landlords and motorists. Nobody will deliver this piece of bad news. It will be presented as a win/win.

Fianna Fáil's policy on agriculture and farming wants a fair price for farmers.

It talks about amending consumer law, and establishing a National Food Ombudsman to protect producers in national law by ensuring fairness in the food supply chain. It is a nice idea but it is very difficult to see how this could work. What would it cost and how would it be acceptable to the European Commission? Food supply is a marketplace without price controls.

Similarly, Fianna Fáil says it wants greater transparency in the food supply chain and to "break the hold of a small number of players in the interest of food security". Again, it is pointing accurately to where the problems lie. But this doesn't sound like a workable solution - unless the law is changed on financial reporting and company disclosures of commercially sensitive information, which would have to apply to tech multinationals too. How can the State break the hold of a small number of players in processing or retailing without fundamentally changing the law in a way that would never wash with the EU?

The problems that exist for farmers are a feature of the internationalisation of agriculture and the food industry. If we want to have winners in that industry, there will inevitably be those who will lose out. Rolling back that process just doesn't seem possible or workable at this stage. The only way to ensure a better outcome for everybody is if the price of food, like beef, increases for the consumer. What political party is going to deliver that message?

So if the main election battlegrounds will be around silver-bullet solutions to real problems, where will the extra money required to fix them come from? That will be the thing to listen out for among the noise.

For left-wing parties, it will be about taxing the assets of the rich - a move that can be counter-productive for everyone.

If the economy continues to grow because of benign international circumstances, there may be enough new money rolling into the Exchequer to keep the show on the road and pay for some of the new promises.

However, the economic cycle feels like it is ready to start turning, if not in 2020 then next year. This could see a major fall-off in our corporate tax take, on which we have relied so much in the past five years. The Government has been living off a borrowed corporation tax haul.

A bad post-Brexit trade deal will hit jobs, especially outside the capital city, in areas like the food sector.

Nevertheless, some of that could be offset by renewed foreign direct investment (FDI), given we should have some advantages over the UK after Brexit.

More FDI is likely to benefit those parts of the country already showing signs of strain when it comes to transport, infrastructure, housing costs, and even access to local GPs as the population grows.

This will be a short election campaign. Yet there is such a long way to go from sticking a policy on a website, to that policy making the manifesto, to winning enough seats, to forming a coalition with a new compromise programme for government, to seeing what really happens to the economy and what we can really afford.

In a political era when a meaningless, vague phrase like "get Brexit done" can secure a massive majority for Boris Johnson in the UK, we can expect a deluge of promises to be made, as the means to pay for them takes the usual back seat.

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