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Huge questions posed as Sinn Fein moves towards taking power

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Dan O'Brien Twitter

The sort of fragmenting of the vote that has happened in most European countries in recent decades - and particularly those with proportional representation electoral systems - has belatedly happened in Ireland. This heralds enormous change. Many questions arise.

Among the biggest questions is: how would Sinn Fein wield power if - as seems likely - it has the numbers to participate in government after the next general election?

Given that the party could be in power by this time next year, it is increasingly relevant to consider in detail what it would seek to do in government, how it would do and what effects its participation in government would have.

These questions are all the more relevant because foreign observers are beginning to pay attention to the "political risk" factors that could, among other things, undermine the country's prosperity.

Last week, the Irish subsidiary of the US investment firm, Cantor Fitzgerald, issued a research note to its mostly foreign clients. It said this: "A Sinn Fein/independent government would not only be inherently unstable, but it would propose policies not conducive to growth and investment."

When considering how Sinn Fein might wield power in the Republic, the best place to start is Northern Ireland, where it forms part of the devolved executive. Among the causes of the latest round of crisis which threatens the collapse of the devolution deal is Sinn Fein's position on reforming the welfare state.

The British coalition government has decided to try to solve the problem of welfare traps by capping the annual amount any family can receive in benefits at £26,000 (€33,000). Sinn Fein has refused to agree even though it could well result in the collapse of the devolved institutions.

If it were in government in the Republic, would Sinn Fein be as uncompromising a coalition partner when the stakes were so high? Would it engage in that level of brinkmanship? And would its policy menu be dictated by electoral considerations north of the border, just as its unwillingness to compromise at Stormont is dictated - at least in part - by political considerations in the south?

That Sinn Fein continues to show inflexibility on welfare is all the more surprising given the chronic weakness of the North's economy and its huge dependency on the solidarity of the British, as is to be seen by way of comparison.

Public spending in the North is equivalent to around 80pc of its estimated GDP, far above the 50pc level in Sweden and Denmark, the countries with some of the highest public spending in Europe. The difference with those Scandinavian countries is that only about half of public spending in the North comes from taxes raised there. The rest comes from taxpayers across the water in Britain.

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Despite this, Sinn Fein is committed to the holding of a referendum to end partition without making clear how the loss of British taxpayers would be dealt with - massive cutbacks in Northern Ireland or very large tax increases in the Republic. Sinn Fein needs to be clear with voters on both sides of the border exactly who would pay.

As has been seen in Scotland and Spain this year, polls about changing borders are destabilising. But even if Sinn Fein put a referendum on the long finger, its coming to power in the Republic would destabilise Northern Ireland.

The sovereign governments in Dublin and London act as bookends to the cast of actors north of the border. While the two governments do not always agree, the much improved relations in recent years mean that they act as poles of stability in the politics of Northern Ireland. If Gerry Adams were Tanaiste and an impasse of the kind that currently exists had to be dealt with, would he travel north, as Joan Burton did last week, to participate in efforts to resolve matters? Would unionists, the SDLP and the Alliance Party accept having Martin McGuinness sit with them on one side of table while Gerry Adams sits with the two governments on the other side? Would the other parties continue to see both sovereign governments as poles of stability if Adams represented one of them? Could its role in government result in the collapse of the devolved institutions as unionists calculate that direct rule from Westminster offers them greater security? To what extent would Sinn Fein in government in the Republic use that position to forward its stated primary objective of Irish unification? And how would bi-lateral relations between Dublin and London change if Sinn Fein were coalition partner is Dublin?

But relations on these islands are not all that would be affected by Sinn Fein taking power in Dublin. Huge questions would also arise about relations with Europe.

As a result of the euro crisis, governments in the single currency zone have agreed much tighter control on their freedom of action in economic policy. In essence, the rules constrain governments and political parties promising unaffordable tax cuts or spending increases.

Sinn Fein is vehemently opposed to the new rules. Specifically, it described the Fiscal Treaty, which is now written into the constitution after more than 60pc of voters backed it in a referendum, as "bad for Ireland and bad for Europe. Rather than stabilising the euro it will make matters worse. It [the treaty] seeks to impose drastic and destructive austerity policies in perpetuity and means the Irish government will have to implement budgets that involve savage cuts for its full term of office and beyond."

More generally, as a nationalist party which has opposed moving closer to Europe at every referendum over the years, it is instinctively against a role for "supranational" institutions, such as the European Commission in national affairs.

If Sinn Fein were in government and Brussels were to find that its budgetary policies were likely to be damaging to Ireland, and by extension the rest of Eurozone, would the party react in the aggressive and dismissive way it usually reacts to criticism? Would it reject the rules a previous government has signed up to, some of which, as mentioned, are in the Constitution? Would it seek to court popularity by playing the we're-standing-up-to-Brussels card? Could Ireland come to be viewed as a country with which others can't do business, much as Greece is today? And what sort of effect would this have on relations with other Eurozone countries?

Whatever one may think about the new dispensation in Europe, Ireland ultimately has a choice either to work within the new rules or exit the euro. Given Sinn Fein's extreme hostility to those rules, its instinctive hostility to deeper involvement in Europe and its preparedness to play even the weakest hands aggressively (look at how it demanded yet more subsidies from London in talks last week) it is not at all clear that Sinn Fein in government would be willing or able to live with the constraints of euro membership.

And finally there is the issue of how it would live within those rules, if it were to accept them in the first place. In its last budget submission, Sinn Fein promised considerable additional spending, funded largely by the introduction of a new 48pc income tax band on those earning over €100,000 and a large increase in PRSI on the same group, to be paid for by their employers.

Choices about taxation are for voters to decide and there is nothing wrong, and certainly nothing undemocratic, in these proposals. But for a country that already taxes its high earners at northern European levels, and is highly dependent on attracting high earners to work in the multinational sector, the proposals seem neither fair nor sensible. They are unfair because thanks to the most progressive tax system in the OECD, the higher paid already contribute more to overall revenues than anywhere else. And they would make Ireland one of, it not the highest tax country in the world for high earners, something that would drive away high value added employment.

It is not clear whether Sinn Fein's focus on the small number of people who earn over €100,000 is motivated by hard political calculation or whether the party believes - as populist parties often do - "the rich" can be tapped without limit and without consequence, but that would quickly become apparent after it took office and its support base sought more gains from having its party in power.

Much else would soon become apparent too, most particularly the degree to which it has evolved away from its extreme and anti-democratic origins to become a normal democratic party. There may not be long to wait.

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