Monday 21 May 2018

Jody Corcoran: FF's big misfortune was winning the 2007 election

The Banking Inquiry reminds us how Labour and Fine Gael failed to warn of impending doom, writes Jody Corcoran

Enda Kenny. Photo: Niall Carson/PA Wire
Enda Kenny. Photo: Niall Carson/PA Wire
Jody Corcoran

Jody Corcoran

The question they sometimes ask in Fianna Fail is 'what if?' It's pointless to speculate now, of course, but what if Fianna Fail had lost the general election in 2007, as almost happened, and Fine Gael and Labour had won?

Enda Kenny would have been in charge when the global financial crisis hit and the banks and economy collapsed and Joan Burton would have been there or thereabouts too, one assumes, along with Eamon Gilmore. Pat Rabbitte would have been Tanaiste.

So what would have happened? We can't say for absolute certain, but the Banking Inquiry report published last week gives us a fair idea.

The upshot is that if that had happened, the country would be in much the same place as it is now, the only difference being that Fianna Fail would be on the brink of winning an overall majority next month.

Such are the swings and roundabouts in politics. Is it any wonder they tend to wistfully reminisce in Fianna Fail?

At it turned out, in 2007 Fianna Fail won 46.67pc of the vote, or 77 seats. Fine Gael and Labour between them won 43.03pc of the vote, or 71 seats.

A close-run thing, then… but what if?

One of the more interesting asides in the Banking Inquiry report related to the "role and effectiveness" of the Opposition in the years before the 2007 election, the Opposition being Fine Gael and Labour.

The report states that the Opposition had a "valuable role" to play in a parliamentary democracy by scrutinising the work of the Government and holding it to account.

Enda Kenny was asked to explain why, during the 43 different Fine Gael private members' 'slots' in the Dail between 2005 and 2007, he or his party did not choose to address the system of regulating banks, lending related to property or excessive public spending.

He said private members' business was an opportunity for parties and TDs to "raise issues that might be of more local than national importance". A little bit of parish-pump stuff, if you like.

Brian Cowen summed up his view on the effectiveness of the Oireachtas in his opening statement: "...throughout my period as Minister for Finance the critique from the political Opposition was that we were not addressing economic issues quickly enough. There were constant demands for more spending. The capital adequacy, or otherwise, of banks, was not, to my knowledge, ever raised as a priority issue." You may recall Bertie Ahern's view that he "would have spent three times more if I'd listened to them."

While there were different approaches in detail and emphasis, the "underlying construct" for all the 2007 election manifestos was on tax cuts and spending increases - not unlike the underlying construct in advance of the General Election to be announced this week, then.

In 2007, the Fine Gael manifesto promised to cut taxes for all and increase current spending by 6pc a year; Fianna Fail's manifesto also promised 6pc spending growth on assumed nominal growth of 7pc annually and Labour's approach was also to promise tax cuts - Pat Rabbitte was first to promise tax cuts, actually - as well as additional spending, but that party provided no costings at all.

When questioned at the Banking Inquiry on why the Fine Gael manifesto put forward proposals to reduce taxes in 2007, narrowing the tax base, Enda Kenny said the commitments were: "... consistent on the basis of the growth forecasts that were available at the time, both from the ESRI and from the Department of Finance".

Joan Burton also referred to the ESRI and Department of Finance growth forecasts.

It is not difficult to understand then why the Banking Inquiry concluded: "All the main political parties, whether in opposition or in government, advocated pro-cyclical fiscal policies, including increasing expenditure and reducing taxation, in the years leading up to the crisis, as evidenced by their election manifestos in the 2002 general election and, especially, the 2007 general election."

So, what lessons, if any, have been learned? As the party that took the hardest hit - it had the misfortune of winning in 2007, after all - FF alone has promised to have its manifesto independently analysed and costed this time around, while Fine Gael and Labour talk "prudence" but in the same breath roll out election promise after promise.

The Fiscal Council, meanwhile, has said the amount of money available to pay for tax cuts and spending rises could be little more than €3bn, not the €8bn-€11bn that the main political parties state.

Yesterday, Fianna Fail's Michael McGrath estimated that Fine Gael would, in fact, need €13.3bn to meet its commitments and promises this time, plus an additional €3-€3.5bn for its proposed 'rainy day' fund. "This is simply impossible," said McGrath.

The Fiscal Council has said the Government should be careful about what it promises ahead of the election; that while winning was what an election was about, there was a fiscal cost that could hurt the economy in the long term.

So as the global economy potentially stands of the brink of another collapse, this time around you should not say that you were not warned.

Sunday Independent

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