Saturday 14 December 2019

Odds on an early divorce shorten

The dream is a Coalition win in 2016, but when the heat is on there will be more rows over cuts and taxes, writes Dan O'Brien

TEAM GOVERNMENT: Structures created by the Coalition have proven effective, with the Economic Management Council of (from left) Brendan Howlin, Enda Kenny Eamonn Gilmore and Michael Noonan particularly important. Photo: Gerry Mooney
TEAM GOVERNMENT: Structures created by the Coalition have proven effective, with the Economic Management Council of (from left) Brendan Howlin, Enda Kenny Eamonn Gilmore and Michael Noonan particularly important. Photo: Gerry Mooney
Dan O'Brien

Dan O'Brien

LAST week marked the halfway point between the last Budget and the next one. In six months' time Michael Noonan and Brendan Howlin, if they are still in their respective jobs, will unveil Budget 2015.

Will it include the €2bn austerity package that has long been part of the Coalition's baseline adjustment strategy; will the economy be generating enough tax revenues to allow yet another painful Budget to be avoided altogether; and has the Government already raised expectations excessively with talk of easing the tax burden despite the still huge debt and deficit challenges?

The only thing that can be said with near certainty is that if a package of spending cuts and new taxes is implemented, the ratio between the former and the latter will be 2:1. Other than that, Budget 2015 remains a blank page.

But before looking at the very complex interplay of the two coalition partners' differing political calculations and the role of Brussels in budget formulation, as well as the likely state of the economy and the public finances come October, consider both parties' dream scenario for Easter Sunday 2016. It goes something like this.

Enda Kenny and Eamon Gilmore lead the events marking the centenary of the Rising, which takes place in the middle of the general election campaign. Having left it to the very last possible moment to go to the country, the poll will take place just 12 days later, on Friday, April 8.

With three years of economic recovery behind them, unemployment having fallen into single digits in 2015 and the effects of tax cuts and spending increases in the 2016 Budget generating a feelgood factor, both parties' poll ratings are well above mid-term lows and on the rise.

Having successfully guided the country from the low point of economic collapse and bailout ignominy, the cohesive coalition partners have a strong case as they urge voters to back their already-agreed joint programme for a second term.

And then there are the ample negative campaigning opportunities. They hammer home the message that giving power back to Fianna Fail after just five years would be to invite yet another boom-bust cycle and emphasise at every turn the very different dangers of Sinn Fein in government. Those previously considering voting for a change of government are having second thoughts as decision time looms. Momentum is going the incumbents' way.

But there is a very long way to go before this dream scenario might materialise for the governing parties. And it is further away this week than it was just seven days ago.

Early last week the disagreement between the coalition partners over how water charges would be rolled out ran out of control. Poor communications on both sides, insensitivity on the Fine Gael side to Labour's issues and Labour's oversensitivity to perceived slights came together to cause what very nearly became a fatal accident – never since the Coalition was formed more than three years ago did break-up and an early election come so close.

It is extraordinary that the situation was allowed to deteriorate to the point that it did. Both parties have every interest in remaining in office until the last possible election date and neither would have benefited in any way from an early poll.

The water charges debacle is all the more extraordinary given the many factors that have contributed to making the Coalition cohesive to date.

The Taoiseach-Tanaiste relationship has been good, and, as one wise old owl observed last week, may even be the best between Fine Gael and Labour leaders in government since Liam Cosgrave and Brendan Corish in the 1970s.

Personal relationships among the other main ministerial players are generally solid and there are fewer rivalries than is usually the case in coalitions, perhaps because so many of the Cabinet are too long in the tooth to have leadership ambitions.

Institutional arrangements matter too. The structures the coalition partners have created to manage government affairs – with the Economic Management Council particularly important – have proved effective.

Nor is there excess jockeying for position among and between the Kenny and Gilmore teams, in part because there aren't big and bristling alpha male egos of, say, a Fergus Finlay (adviser to Dick Spring when he led the Labour Party).

Despite all this, accidents can happen all too easily in coalition government. They happen more easily when trust is fraying.

With the Labour side still deeply resentful at what it perceives as Fine Gael's attempt to take more than its fair share of the glory for exiting the bailout in December, the serious spat over the past week has further eroded trust. Rebuilding that trust with next month's elections looming, and a likely nightmare outcome for Labour, will make it all the more difficult.

That in turn will make the framing of the next Budget very difficult, as if there weren't already enough challenges.

'To govern is to choose' goes the old saying. When the Troika ruled the roost, the Coalition had fewer choices to make, and hence less scope for disagreement. If the economy does continue to recover, the Government could have choices come next October, thereby widening the scope for conflict (the economic and budgetary dimensions are explored in greater detail in an accompanying column in this newspaper's business section).

While both parties are fully committed to sticking to the budget deficit targets they are obliged to meet under EU rules, they differ on what to do if (still a very big if) there is any fiscal headroom generated by a stronger economy.

Labour wants to ease up on budgetary adjustment at the first opportunity, while Fine Gael fears if they ease up too soon they might miss the deficit targets, erode the confidence painstakingly built up with investors and end up fighting a battle with Brussels that will have only one outcome – humiliating defeat.

That latter point may not have been fully internalised among the political class. Under the new dispensation, member states' budgets can be vetoed in Brussels in the weeks after they are unveiled in mid-October if the sums don't look like adding up. For a government that last December made so much of regaining sovereignty to be told to rewrite its Budget next November would be a devastating blow.

This all leads to a somewhat curious conclusion. If economic and public finances conditions are good enough to give the Government options, the rancour caused as they fight it out on which option to choose could tear them apart. On the evidence of last week, the odds of the Coalition collapsing before the parties have a hope of fulfilling their 2016 dreams have shortened.

Sunday Independent

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