Monday 27 January 2020

Noonan proves to be a skilled goose plucker

Michael Noonan stood up in the Dail yesterday to present the second half of a Budget billed in advance as the harshest ever.

The Finance Minister's immediate task was to announce €1.6bn in tax increases, to follow the €2.2bn in spending cuts unveiled by the Public Expenditure Minister Brendan Howlin on Monday.

The background was grim. Since last March, the Fine Gael-Labour coalition had struggled to make a start on rectifying a devastated economy.

Ministers -- including Mr Noonan himself, Mr Howlin and Taoiseach Enda Kenny -- had named jobs again and again as their priority. But the dole queues remained as long as ever, or longer than ever.

In addition, the shadow of a frightening international situation loomed over every action undertaken by an Irish government, or any government.

The European debt crisis threatens the survival of the currency. The continent, and indeed the wider world, looks forward to the summit meeting of European Union leaders on Friday with hope, but with even greater apprehension.

And the Irish Finance Minister is not a free agent. He is bound by the terms of the EU-IMF-ECB bailout. He has to balance the danger to the economy of over-taxation with the need to raise revenue. He also has to find means of limiting the suffering of the citizens, especially the poorest citizens.

In the circumstances, Mr Noonan's speech yesterday was a masterpiece. In easier times, it might have been called a triumph.

A French minister in the distant past said that the art of taxation consisted of plucking the goose so as to obtain the maximum quantity of feathers with the minimum quantity of hissing. Yesterday the Irish minister plucked so adroitly that many geese could scarcely have known they were being plucked.

Much of this success was owing to his style and manner. He gave the impression of total control of his material, total confidence in his message. He combined authority with humour.

He could not offer an alternative to austerity. But he offered a welcome alternative to the whingefest which has lately crammed the airwaves, especially those of RTE.

This operation features contributors who mix a startling ignorance of economics, sometimes of simple arithmetic, with a loud and dogmatic method of argument.

They have their counterparts in Dail Eireann, but interruptions had no effect on Mr Noonan yesterday. He paused, and moved on.

In so far as these people propose any coherent departure from the main lines of current policy, it amounts to "taxing the rich", the rich being defined as persons with incomes above €100,000 a year.

They got no concessions yesterday. To the great relief of a nervous minority, the minister announced that there would be no increases in income tax rates, no widening of bands and no cut in credits.

By contrast, he went ahead with the well-flagged increase in VAT. This is undoubtedly a dangerous move, with consumer confidence already on the floor and savings at what he called a "phenomenal" 14pc.

Among his other moves, two deserve particular praise, both for their ingenuity and their potential.

One is the scheme to facilitate transfers of commercial property, including farmland. Irish farmers, who have known the worst of times and what appeared the best of times, are enjoying a boom right now, and economic theory might deplore a "pro-cyclical" measure which in all likelihood will tend to increase the value of agricultural land.

But the move might better be read as an acknowledgment of the stage of development which Irish agriculture has reached.

Only a few years ago, the industry appeared to be in serious decline.

Now, encouraged by the huge increase in commodity prices and the likelihood that the trend will continue indefinitely, Irish farmers and Irish agribusiness have seized their opportunities and built a thriving modern industry. In all probability, "the best of times" is yet to come.

The other laudable measure is the mortgage interest relief for first-time home buyers. Again, economic theory might disapprove, believing that the market should find its own level. But at present there is, in effect, no market. A Government attempt to stimulate the industry is justified.

All the Government's efforts could be frustrated by a European failure, but Europe's leaders know they must choose between dazzling success and the contempt of history.

As for Ireland, Michael Noonan has shown that we can do something for ourselves.

Irish Independent

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