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Donohoe is right - we must consider tax cuts to mitigate effects of Brexit


Public Expenditure Minister Paschal Donohoe wants future income tax cuts as a way to keep current jobs in Ireland and attract new talent. Photo: Tom Burke

Public Expenditure Minister Paschal Donohoe wants future income tax cuts as a way to keep current jobs in Ireland and attract new talent. Photo: Tom Burke

Public Expenditure Minister Paschal Donohoe wants future income tax cuts as a way to keep current jobs in Ireland and attract new talent. Photo: Tom Burke

To paraphrase Winston Churchill, we may this week reach "the end of the beginning" on this Brexit marathon, which we have already lived with since the shock referendum result on June 23 last year.

If British Prime Minister Theresa May gets the right result in parliament today, then EU-UK divorce proceedings, the so-called Article 50 exit negotiations, could finally be triggered as early as tomorrow.

Thereafter, you are talking about two years to formalise some kind of big-picture British departure deal by spring 2019. Many important, detailed arrangements will probably take several more years to complete. Hence the parallel with Churchill's war-time speech in 1942 after a rare big British victory at El Alamein in Egypt against the Germans.

Since last summer, we have had many circular discussions about the return of a "hard Border" on this island as the only de facto land frontier between the UK and the EU.

We have heard much about Ireland's need to keep the Common Travel Area between these two islands and ensure the continuance of tariff-free trade.

All of those Irish aims look improbable right now, given Britain's determination to leave the EU single market and customs union. We have the most to lose of all the EU states as our biggest and oldest trading partner chooses to leave the trade bloc we joined with them 44 years ago.

The Irish Government and people like Foreign Affairs Minister Charlie Flanagan have been working hard on the case, trying to articulate Irish concerns across the other 27 EU member states. It has not been easy because we have only the most general impressions of what is to come - making Brexit at best a "moving target" for the Dublin apparatus.

But the absence of any manifestation of an "Irish plan" to face the challenges has added to Irish people's fears for their livelihoods in the near future. So, Public Expenditure Minister Paschal Donohoe's assertion that there must be a focus on cutting taxes is a welcome step in the right direction.

We must take Mr Donohoe's insistence he is not interested in contesting the Fine Gael leadership at face value. It is clear some supporters of Enda Kenny would like to see him stand for the leadership and that he would be a formidable contender if he were to do so.

But he has consistently, in both public and private, affirmed he is not a candidate. And it is past time to accept that statement in full.

But Mr Donohoe still has much to offer in Irish politics and he is very likely the successor to Finance Minister Michael Noonan. What he has to say about income tax makes sense.

In a world where a non-EU Britain is talking about cutting taxes, and so is the US under Donald Trump, we must follow suit. Mr Donohoe's argument, outlined in yesterday's 'Sunday Independent', will strike a chord with a lot of people. People on even modest incomes currently see their take-home pay halved.

"It is not sustainable to keep jobs we have, or to attract new talent, if you keep less than half of what you earn above a low income level," he wrote.

But it will be hard to deliver economically. There are big pressures to end public service pay freezes and reductions, and deliver some very large increases.

The Government will find it difficult to put that genie back in the bottle after capitulating to gardaí last November.

Our infrastructure is crying out for investment after eight years of neglect enforced by recession. The voters surprised many by opting for improved services over promised tax cuts in the February 2016 General Election. But in the ensuing 12 months there has been further reassurance on the state of the economy.

It will not be easy to cut taxes and deal with these demands. But there are political impediments which were also alluded to by Mr Donohoe.

He noted the Dáil has a strong component apparently espousing left-wing policies. We have seen how the Anti Austerity Alliance spooked Sinn Féin, which in turn spooked Fianna Fáil over water charges over the past two years.

Would something similar happen over the prospect of tax cuts? Fianna Fáil certainly read the runes correctly in the run-in to the last election, divining that voters were not ready for promises of tax cuts.

Would it be right to take the same view facing into another election? Would Micheál Martin and co be right to resist tax cuts as a way of coping with Brexit fallout?

The stance of Sinn Féin will be equally interesting. Ostensibly, it is now a supporter of Ireland's EU membership.

But Sinn Féin is still an unlikely Europhile.

It urged a "No" in every one of the nine EU referendums in the Republic from 1973 until 2012.

We are facing into a series of crucial debates here. We must choose carefully.

Irish Independent