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Noonan beware: only matter of time till squeezed middle shouts 'show me the money'


Public Expenditure Minister Paschal Donohoe (left) and Finance Minister Michael Noonan. Photo: Gareth Chaney Collins

Public Expenditure Minister Paschal Donohoe (left) and Finance Minister Michael Noonan. Photo: Gareth Chaney Collins

Public Expenditure Minister Paschal Donohoe (left) and Finance Minister Michael Noonan. Photo: Gareth Chaney Collins

Defining jargon to categorise the electorate into chirpy soundbites has become somewhat of a pastime for the bourgeoisie. The squeezed middle, the coping classes, the JAM (just about managing) generation... take your pick. They are all just euphemisms for that section of our society deemed to be most affected by rising charges and taxes. This section of society are in jobs that deliver low to middle incomes which have not been rising as fast as their expenses or, in some cases, not rising at all.

An unquestioned premise among our current batch of political masters has been that those taxpayers will remain subservient, content with no reward for their personal sacrifices while the Exchequer begins to bulge once again.

With the political system convulsed and paralysed with the machinations of Fine Gael, and who its next leader might be, real debate about our economy has slipped from the political discourse somewhat.

Fiscal space is lost in space and we are back talking about a magic pot of money somewhere that will simply pay for all our water charges. Yippee.

There will come a tipping point however, when the working middle class is no longer simply willing to remain silent. It's only a matter of time before the squeezed middle begin to channel their inner Jerry Maguire and start roaring "show me the money".

When that happens, political retribution will be delivered.

Finance Minister Michael Noonan, for one, knows the tipping point is approaching fast. Meanwhile, Public Expenditure Minister Paschal Donohoe valiantly attempts to hold back the tide of public spending and pay demands.

Several weeks ago, Mr Noonan signalled that it was time to look at lowering personal taxation. Speaking at the annual dinner of the Irish Tax Institute, Mr Noonan said: "There is a good case to reduce the personal taxation rate further."

He did so not out of the goodness of his heart or even in the interests of his own party's electoral appeal, but because reducing taxes is a must if there is to be any collective bargaining on mounting pay claims.

With increasing pay demands from individual sectors intensifying fast, hiving off sectoral pay claims individually is simply unsustainable. Moreover, it is reckless and in the longer term completely ineffective.

A consummate political pragmatist, Mr Noonan knows that as sure as night follows day, an overarching national wage agreement must be made.

We can faff around the edges of the debate about reform, restoration and efficiencies all we like.

The reality is, and everyone inside Government knows it, that the only way to make the required wage restraints viable with unions is through a trade off on lowering personal taxation.

Call it Social Partnership, call it a Commission on Public Sector Pay, or call it a National Wage Agreement, a rose by any other name will still smell as sweet to the hard-pressed middle classes.

Here is the idiots' guide to the science bit.

Recent live register figures have shown that the number of people at work has now passed the two million mark for the first time since the economic crash. The result of all those people returning to work means more money in the State coffers. Post-crash personal taxation revenue stands at around €20bn for 2015, up from €12bn in 2008.

Against a backdrop of CSO growth rates of 5.2pc, which have exceeded all expectations, the narrative of prudence and restraint is slipping further and further away from this administration.

Economic success is a welcome relief from all the doom and gloom, but such positive statistics do little to quell the rising anger that resonates with workers who are continually crucified without respite.

Ever since the "troika made us do it" fig leaf was removed, the Government has floundered in explaining the overarching necessities for longer-term economic sustainability.

To the ordinary punter, the books are beginning to look like they are bulging. In fact, they are only balancing. And the magic pot of money (general taxation) is diminishing. As our tax base is moving in ever-decreasing circles, it becomes narrower with every appeasing budget and every political promise.

As political fixation with reducing the USC continues, more than one third of earners now pay no income tax at all, and about 30pc pay neither income tax or USC. Paradoxically, just 140,000 taxpayers are paying more than 45pc of all income tax and USC, representing about 18pc of all tax revenue collected.

Any prospect of collecting water charges has been lost, and while the overall value of the proposed charge would not have been enormous in the overall context of the Exchequer finances, moving the funding of water investment off the State's balance sheet was significant.

Depending on a gradually narrowing tax base for costs like water and future infrastructure only further increases the risk of pressure on the public finances if economic growth slows again.

Equality and fairness remain the battle cry for the left, but who, politically, is looking after the middle?

With Fianna Fáil, Sinn Féin and the AAA all competing in the same space left of centre, the upwardly mobile middle class is largely un-catered for in terms of political offerings. So, other than Fine Gael, who is voicing their concerns?

Self-determination is a term we have largely come to associate with Northern Ireland and allowing people to make their own decisions, but it can also be applied to the area of personal finance.

The principle is one that has worked in the past and should be looked at again now to reward hard-pressed workers. In relation to taxation, the psychology of a more open-minded approach means that by cutting personal taxes, people are incentivised to work more and spend more, thus creating more indigenous jobs.

Deciding to put money directly into people's pockets so that they can make their own decisions is surely a more rounded way to approach a democratic solution and deliver payback.

The only way taxation reductions can be undertaken in a non-reckless fashion is to package them into a social partnership deal, curtailing public sector pay rises while pledging to increase workers take home pay.

Until that reality is confronted and addressed by the political establishment, we will continue to compromise the tentative economic recovery and all the hard work of the Irish people to date.

A wily old councillor from Kerry once told me: "People vote with their arse pockets, if they have no money, they won't spend, they won't thrive and they won't vote." It is the Ireland we live in, and new politics hasn't changed old ways. Think on.

Irish Independent