ONE FOR (NEARLY) EVERYBODY IN THE AUDIENCE 1611 XCV

ONE FOR (NEARLY) EVERYBODY IN THE AUDIENCE

There was very little doubt that the 2017 Budget would pass. Nobody wanted another election. The shaky, unlikely coalition that is Enda Kenny’s government looks set to last at least until the middle of 2017 when a number of issues are scheduled to come to a head.  Kenny himself shows no sign of quitting.

This should not be taken necessarily as a sign that the “new politics” is working, just that neither of the two main parties saw anything to be gained in facing the electors again so soon. It’s been as you were politically since February. While Fianna Fail has been doing relatively well in the polls, consolidating its slight post –election lead over Fine Gael, an opinion poll before the Budget showed both main parties neck and neck with 26% each. These figures were marginally up on the election outcome but fell far short of enough support to govern.  Unless the two parties were to merge – still a favourite with the bookies.

Such a merger may eventually take place, but not before a lot of soul searching by both parties. Not only is it off the table as long as one party – Fianna Fail – thinks it can regain its dominant position in Irish politics, far-fetched but believable by the party faithful, but also because it would replace the current mild ideological party political set up with a more sharply defined Right –Left one. Not surprisingly Sinn Fein and its leftist fellow travellers have been clamouring for this as the obvious beneficiaries. But  between them Sinn Fein and the hard left constitute  less than 20% of the votes and seats;  they have clearly some distance to travel before being serious contenders for power. Any FF-FG merger would give Sinn Fein a major leg up, something neither party seems disposed to do.

There’s no doubt that the Recession and its aftermath severely damaged the neat pre-2008 arrangement of two broadly centrist parties, with a makeweight less-than-radical Labour party . Sinn Fein has been the chief beneficiary, siphoning support from Fianna Fail and Labour, which has also lost out to the Left.  There’s been a major rise in the number of Independents yet it would be premature to write off the major parties yet. Together with Labour they make up roughly 60% of the vote (and seats) and it’s been pointed out that many of the Independents have FF/FG DNA in their veins.

Passage of the Budget was helped enormously by the fact that it was basically uncontroversial and involved no hard choices. Revenue figures were buoyant, no tax increases were imposed beyond the ritual rise in cigarette tax, and no expenditure cuts were necessary. Indeed there was money – not a lot – to spread largesse around the system with a little for most pressure groups. Some progress was made on restoring some of the cruel cuts to welfare services, particularly in health, made during the austerity years and there were very modest cuts in taxation. There was precious little for the squeezed middle, something which may yet return to haunt, but, in the short term at least, economic hardship of itself looks unlikely to bring the Government down.

The Budget had two items of note, apart from the fact that the billion plus handouts were financed by borrowing (still!). A first step was made to introduce childcare subsidies to meet the demands of a particularly vocal lobby group – working parents – and a new income tax rebate scheme of up to €20,000 was announced for first time buyers of new houses. The childcare subsidy has been received with satisfaction by some (a “welcome first step”), demands for more by others and criticism from the much-less-vocal stay at home mothers lobby, demanding parity (watch this space when the subsidies are increased).

The tax rebate scheme has been received with derision and dismay by most economists and a large segment of the public as doing nothing to solve the housing supply logjam. This is an issue that seems likely to run. The government sought to appease the first time buyers lobby who are complaining over the amount of the cash deposit required to get on the housing ladder, thanks in part to the “stable door” lending restrictions imposed by the Central Bank to prevent a repetition of the disastrous property bubble that laid the country low in 2008. With new housing starts stalled or low in volume the sanguine hope is that having more people with money to spend will stimulate supply. Economists argue that it will merely push up the prices of new houses. Public reaction is to complain that the measure applies only to new houses, whereas often older houses are cheaper. There may be pressure to extend the scheme before the Finance Act is passed.

Thus far it has been the Government of Easy Options, with anything remotely controversial kicked into 2017. One Minister has been reported as stating that there was no point in attempting to introduce any measure that involved an additional charge or tax as it would not get through the Dail. But even prevarication has its limits. The water charge fiasco remains unresolved with an expert committee due to report next March. With Fianna Fail now committed to abolishing charges, either the diehards in Fine Gael agree or the Government will collapse. Bin charges, a lesser fiasco, will also heat up next year when the Government moratorium lapses in July.

Right now the sands are running out on another major headache for the Government – Public Sector Pay. This was cut during the Recession, as a quid pro quo for maintaining existing jobs, but with the fatal promise that the cuts would be restored when the economy recovered. Cue the recovery. A cave in to the (private sector) Luas tram drivers last summer was followed by another cave in, this time to the ( arguably more deserving) state sector bus drivers. Predictably the queue of state employees demanding restoration of cuts is mounting, with, as I write, the Government facing an unprecedented strike by the Gardai , with all that that implies, in November. The careful construct of public sector pay controls, essential to continued economic recovery and control of public spending , appears close to collapse. One friend has remarked that the country is becoming all but ungovernable. Another friend added more caustically that the country is ungoverned!

In 2017, also, the Brexit process will get under way. Already it has dawned on politicians here that the effects could be very serious for Ireland. The first jobs have been lost in the food sector as Irish producers struggle to cope with the slump in sterling. More will follow as Irish business tries to compete with suddenly cheaper British rivals. The North threatens to become again  a Mecca for southern shoppers,  and not just for  high excise items like alcohol, with the knock –on effect felt throughout the economy.

Even worse as a political headache, the Abortion issue is slinking back. The battle lines are being drawn (”Repeal the Eighth”), and, again, the “Citizens Assembly “will report on the issue in 2017.

2017: Chinese Year of the Rooster – when the chickens come home!

18/10/16

 

 

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