Thursday 20 June 2019

Kenny is trying to have his cake and eat it while tackling public-sector pay

Taoiseach Enda Kenny, faces the media in Dublin after a jobs announcement. Photo: Steve Humphreys
Taoiseach Enda Kenny, faces the media in Dublin after a jobs announcement. Photo: Steve Humphreys
Colette Browne

Colette Browne

Enda Kenny's mixed messages about the country's economic fortunes are throwing petrol on the dumpster fire that is the Government's industrial relations strategy.

Depending on his audience, Mr Kenny's predictions about the country's national finances are vastly different.

When it comes to public-sector unions he cries the poor mouth, but given an opportunity to score some cheap political points against Fianna Fáil and suddenly the State is flush with cash.

In the immediate wake of the Garda pay deal hammered out at the Labour Court, a dour Mr Kenny was adamant the agreement was not a game-changer and could not be extended across the public service.

"Obviously the Minister for Public Expenditure does not have an endless pot of money.

"Lansdowne Road is the agreement that we have and that's the agreement that's being implemented," he insisted.

However, last week, when challenged by Fianna Fáil leader Micheál Martin to accept that promises to abolish the USC were "not in the land of reality" given the myriad problems the country now faces, Mr Kenny remained defiant.

"He [Mr Martin] would be very associated with the USC, wouldn't he?

"He was a member of a Government that, after the most ruinous, calamitous management of any economy, brought in the USC as an emergency tax measure.

"The Fine Gael party has a very clear intention of abolishing that USC over a five-year period, and we stand by that," he said.

So, which is it? Do we live in a country that is currently in the eye of an economic storm, generated by Brexit and Donald Trump's election, or are we free to throw caution to the wind and abandon a sustainable annual €4bn in taxation?

A bullish Mr Kenny would not even concede that his obsession with scrapping the USC was predicated on the country managing to withstand international volatility over the coming years.

Five years after Fianna Fáil was last, officially, in government, Mr Kenny still feels his best response to political attack is to remind the country it was the other lads who drove the country into the abyss.

That stock response was stale long ago and it's about time the Taoiseach learned to defend his own Government's record without resurrecting the ghosts of governments past.

Say what you like about Fianna Fáil, and this column has, but at least the party seems to be showing some signs of cerebral activity when faced with incontrovertible facts.

Unlike Mr Kenny, Mr Martin has recognised that he can't simultaneously be penny pinching with the unions and populist with the populace, vowing to slash taxes in the middle of a supposed economic crisis.

Lest anyone be under any illusions, indications that the country is about to take an almighty battering are growing more and more ominous.

Tax returns, retail sales and manufacturing output are already all on a downward trajectory, resulting in a stark warning from the Finance Department that tax returns would have to pick up before the end of the year if the State's existing spending commitments are to be met.

Meanwhile, a joint paper by the Finance Department and the ESRI, published earlier this month, warned a hard Brexit could cost the country up to €10bn in lost output.

Given the British appear to have lost their minds, and seem willing to leave the European single market, that is a nightmare scenario that is looking increasingly likely.

Further complicating matters, both British Prime Minister Theresa May and US president-elect Donald Trump have made slashing their countries' respective corporate tax rates a central plank of their economic platforms - reducing the appeal of Ireland to foreign multinationals. If foreign direct investment begins to dry up, there won't just be implications for jobs, but also for public services given the Government is using windfall gains from corporation taxes to fund current spending.

Enda Kenny may be fond of reminding the Soldiers of Destiny that they marched the country over a cliff, but he doesn't seem to have learned any lessons from that disaster despite being charged with piecing the wreckage of the economy back together.

Last week saw the Government receive yet another rap on the knuckles, this time from the EU Commission, for relying on "volatile" corporate tax receipts to fund spending.

For all their assurances that they are the party of fiscal probity, Fine Gael is beginning to look more and more like Fianna Fáil at the height of their profligacy.

Instead of relying on revenue generated by an overheated property market to fund their largesse, the Government is instead insistent USC can be scrapped and transitory corporation taxes used to pay for public services.

When it comes to negotiating with public-sector unions, the Government can't have it both ways.

It can't regurgitate dire warnings, about the economic risks the country now faces, while at the same time issuing upbeat assurances that reliable tax revenues can be entirely eliminated.

The approach of Mr Kenny, to date, has been utterly incoherent, undermining the efforts of Public Expenditure Minister Paschal Donohoe to emphasise the clear and present danger both Brexit and Trump pose to the country's finances.

The truth is that the State, using the current budgetary arithmetic, simply can't afford to restore the salaries of 300,000 public-sector workers in one fell swoop.

Instead, money needs to be funnelled into public services to try to tackle national emergencies like the housing crisis and hospital waiting lists.

However, it will be difficult to convince unions of the bona fides of this argument while at the same time insisting the current international maelstrom has no implications for plans to abolish billions in taxes.

Irish Independent

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