| 8.3°C Dublin

Marc Coleman: Voters' message is to prioritise reform over new taxes

So the second referendum will be held on May 31. The second referendum? Yes, the second referendum. In case you missed it, the first one -- a slow-motion vote on the household charge -- just ended yesterday.

By a margin of two to one, voters rejected the idea of paying any more tax to a system of local government whose failures were laid bare by the Mahon tribunal.

Even those who paid only did so out of fear: they'd rather see an end to massive local government spending waste than pay higher taxes. Nor do they buy the line about funding "services" when the bulk of local government finance goes on pay and pensions, much of which is excessive.

The prospects for the second referendum look a bit better. The agreement secured by Michael Noonan to delay -- by one year -- the first cash payment due on our promissory note obligations helps the Government's case.

But there is still a debate to be had. To that end, the National Forum will hold the first public debate on the referendum at 6.30pm this Thursday in Dublin's Davenport Hotel. With guest speakers Declan Ganley, Michael McDowell, Eamon O Cuiv and Brian Hayes, it'll be a lively affair. All are welcome -- just email your name and address to info@nationalforum.ie.

If the Government has sense it will keep other issues off the agenda until May 31. This means accepting what voters are saying about the household charge. Just like the customer, the voter is always right -- and the voter's message is that local government reform should precede any new taxes.

That well-funded local authorities with thousands of administrative staff were unable to even mount a successful campaign to inform us as to how to pay the tax is a damning indictment of the idea of giving them even more money. The €160m to be raised by the charge is a mere fraction of what could instead be raised by merging the huge number of authorities, ending duplication, rationalising middle management staff and reviewing salaries and associated increments above €50,000.

The smug belief that "Ireland is the only country without a property tax" betrays a typical D4, smoked salmon socialist ignorance of hard realities like stamp duty and negative equity. And, politically speaking, preaching the cause of higher local taxes in the wake of the Mahon tribunal has to be one of the dumbest ideas ever conceived.

What was demanded last week was not new taxes, but a drastic overhaul of local government and planning laws. Particularly, as Colm McCarthy pointed out, of the 1963 Planning Act. And the question to be put is not the one put by the Taoiseach on Wednesday of whether we as a nation "measure up" to paying more tax. It is whether government "measures up" to meaningful reforms.

But it is not too late for the Government to put the household charge behind it. Having restored our reputation abroad and secured billions of euro in investment by China, the Taoiseach and Tanaiste have a healthy reservoir of political capital. More good news is that not just Bank of Ireland and Permanent TSB but also Ulster Bank, AIB, EBS and KBC will now offer "negative equity" mortgages, with some of them helping those people trading up to retain tracker mortgages. At last, someone has grasped that if a third-of-a-million households in negative equity are to vote for a referendum securing our future, they need to be given a stake in it.

And if serious reform begins now, that future remains bright, with not only recovery but new heights of prosperity possible by 2020.

The State has had many great successes: the IDA; our schools; and our diplomats. But it also failed us in banking regulation, social partnership, gross overspending (a 55 per cent rise between 2004 and 2009 alone), and the lumbering -- against all free market principles -- of taxpayers with the private debts of bankers. Against that massive spending rise, by the way, the Government plans to reduce spending from peak to 2013 by just 7 per cent. By failing to grasp the spending nettle, and raising taxes instead, the State is threatening recovery, jobs and growth with excessive taxation. In their reluctance to pay the charge, voters are showing more sense than the State.

When Lucinda Creighton and Brian Hayes told us that a failure to pay the household charge would lead to higher income taxes, they were putting false choices before us. As the annualised declines in VAT, CAT and CGT returns in February show, Budget tax rate rises are backfiring. Nor will income tax rates substitute for the household charge: they will actually lower tax revenues, spending, investment and jobs. That two intelligent Ministers of State don't grasp this is truly frightening.

The household charge has nothing to do with the Fiscal Stability referendum. But it has lent weight to the perception that the Government is lining up against voters with opponents of reform -- not to mention international bankers. Between now and the end of May, that perception must be reversed.

Marc Coleman presents 'Coleman at Large' each Tuesday and Wednesday from 10pm on Newstalk. Twitter @marcpcoleman

Sunday Independent