Category: TIME CAPSULE

NOT SINGLE SPIES

Just when the public, and the government, began waking up to the potential  extent of the difficulties posed by Brexit,  involving Ireland’s largest trading partner, along comes Donald Trump, with a hard- nosed programme part of which at least could impact on Ireland’s fragile prosperity by  threatening  inward investment  from Ireland’s largest source of FDI.

And as if that were not enough there are noises from a freshly emboldened EU Commission about a major push on removing tax sovereignty from member states and vesting it in a ”European sovereignty.”  With the heavy hitter against such a move in the departure lounge, holding the line on tax could prove fraught. The apparent certainties on which the current inter party governmental arrangement, cobbled painstakingly together six months ago, was based are no longer there. One of the adapted jingoes going the rounds here takes inspiration from the 70s hit “Stuck in the Middle with You” – “Trump to the Left of Us, Brexit to the Right….” All we need now is Tarantino.

It will be some time before the extent of any damage done to us by Brexit becomes clear, with the exit waters generally muddied considerably by a Court decision, currently under appeal, requiring consent by  Britain’s Parliament before the process of leaving can begin. As I write, a leaked consultant’s study has shown official disarray, lack of organisation and a paucity of qualified (or trained ) negotiators and staff to handle the complex process of unravelling forty plus years of EC membership with its thousands of directives, regulations and transposed  legislation. Factor in some evidently lukewarm British Ministers and the exiting process could involve hard pounding for some considerable time. Even after the Article 50 process is initiated, the two year timescale envisaged looks wildly optimistic (Who thought of that period anyway? Some fool in Brussels?)

But damage there will be, and already is. At my son’s wedding two weeks ago a young farmer who exports beef to Northern Ireland told me of his woes, with margins disappearing as sterling plummeted against the euro – a vista looming right across the foodstuff  sector, heavily dependent on exports to Britain. The Irish consumer is already voting with her feet by heading north to avail of lower prices as the busy Christmas holiday season approaches. Our tourism figures from our largest market seem destined to take a hammering. That’s just some of the economic aspects. A territorial squabble is threatened over the “ownership” of Lough Foyle, with Britain seeking to claim the lot. And, while we have tended to focus on the border problems likely to be posed for us by a hard Brexit, there is also the likely stance of EU partners and institutions that will baulk at Britain using the Border as a convenient back door for exports into the EU free of EU regulations.

Bertie Ahern told a British Parliamentary Committee recently that, such was the importance of the threat posed by Brexit right across our economy and institutions, the government should appoint a special Ministerial supremo for Brexit. He modestly did not suggest himself for the role. The suggestion was not taken up but perhaps should be looked at again, and one properly resourced, now that there will be additionally a new and radically different US President come January. Our bureaucracy is a small one and fighting on two fronts, three if the Commission gets bolshie over tax, may well be a step too far.  There’s already a small but vocal group now questioning whether we should not follow Britain out of the EU. Small, arguably insignificant at present, but we have seen how things can change quickly.

So far Ireland has avoided contagion from that sense of alienation which bred Brexit, Trump’s election and threatens to impact decisively in elections in several EU states, but these sands could be shifting. February’s election demonstrated record levels of rejection for Ireland’s traditional political parties and we should not forget that  the core anti-EU vote, as measured in various referenda over the years,  is certainly 30% or more.

The anti- EU argument as most recently elaborated is a variation of the “what have you done for me lately?” line. The answer as trotted out is “Not Much.”  We are now net contributors to the EU budget (a constant compelling whinge of the Brexiteers), something likely to increase. The €40-odd billion we have received from the EU over the years is more than offset by the €60-odd billion we paid to bail out the banks – at Brussels’ ( or worse, Frankfurt’s) insistence. Our own profligate spending on public sector wages and unsustainable social welfare benefits together with a populist erosion of the tax base during the Noughties is ignored or discounted as is the fact that the EU dug us out of a hole, sustaining us when no one else would lend us money to keep the country afloat.

Our near neighbour, major market and co-guarantor of the Peace Process is departing and, geopolitical considerations being what they are, our role and influence in the European Institutions is diminishing (12 out of 751 members of the European Parliament, plus more and more issues in Council decided by QMV) while we have no guarantee that our critical national interests will be fought for during the Brexit negotiations to come. Simplistic, yes; but as Brexit and the Trump election have shown, simple messages get across. Remember our own Nice and Lisbon experiences. And being bullied over tax sovereignty will not help.

Trump’s election platform promise to slash U.S.  Corporation Tax rates from 35% to 15%, in a bid to stem or reverse the flow of US companies overseas, poses a threat of a different order.   Ireland has been remarkably successful in attracting investment from US multinationals, based in no small part on the very attractive 12.5% company tax rate on offer. For several years  we have been in the sights of US officialdom and politicians over what are seen as tax avoidance schemes (remember the “Double Irish”) and as constituting a type of tax haven.

Up to now there has been much talk but little action. This may now change, but to what extent existing US investment here will be affected is unclear. The tax break was just one of the planks in our investment package and arguably in the high-tech sector we have achieved critical mass. It’s difficult to see some of our Silicon Valley offshoots relocating to Youngstown Ohio, or elsewhere in the Rust Belt. But new investment COULD be affected – big time. These are very early days, and, as with Brexit, it could be several years before the effects on Ireland are felt. Meanwhile we in in Ireland watch in fascination as the Trump Era unfolds.

Heading into the New Year there are more clear and present dangers to face, particularly in the industrial relations area where a cave –in to the police on pay  is prompting  widespread copycat demands across both public and private sectors. That and the other known and threatened knowns requiring resolution promise an interesting 2017. Still, it will be difficult to top 2016 which was quite a year.  Whether watershed or aberration remains to be seen.

19/11/2016

IRELAND: WHERE WE ARE AT

To recap. Last February’s general election produced no clear winner, with Fine Gael, the largest party, winning less than a third of the seats (FG 50, FF 44, SF 23, Lab 7, Others 34). Taoiseach Enda Kenny was eventually re-elected after concluding a “Confidence and Supply” arrangement with Fianna Fail under which it agreed to abstain on major issues provided its specified interests were taken into account.

While this was criticised at the time as inherently unstable, the Kenny government in early October successfully negotiated its first signposted hurdle – the 2017 budget.  With little change in the opinion polls and no enthusiasm among the major parties for another election, some pundits are talking about the possibility that the government will last the three budgets foreseen in the arrangement.

The arguments in favour, apart from nobody wanting an election, are that the economy is still performing at least as well as could be expected, that there is wide acknowledgement  that there are no magic bullets to solve at a stroke the housing and health issues which dominate domestic politics and that an election is unlikely to change much.

Others are less sanguine. The bookies are giving odds on an election next year with the next government a grand coalition of the two main parties. Certainly there are major issues pending.

The slow burner, which only arose after the May agreement, is the effect of Brexit, now looming ever larger. The first tangible outcome has been the significant fall in the value of sterling, making Irish goods and services more expensive in what is by far the largest market for Irish indigenous industries. And already the-canary-in-the-coal-mine has sounded, with several of Ireland’s mushroom producers, dependent on the UK market, closed down.  There are fears of, if not a tsunami, then substantial job losses and business closures as Irish firms are priced out. Sterling’s fall has also heralded a return of the cross border shopping effect with southern shoppers heading north, as in the past, to take advantage of cheaper prices, and not just on high excise items like alcohol. And Ireland is now more expensive for British visitors, our largest tourist market.

Still unquantifiable, and likely to remain so for some time, is the effect of Brexit on the Common Travel Area between Britain and Ireland, with all the possible implications for relations between the two parts of the island. Given the centrality of the issue of migration into Britain in the Brexit vote, there is increasing concern over where Britain will situate its border controls. It is hardly going to allow unrestricted access from Ireland into the North or via ship or plane to Britain if this provides a back door for third country nationals to enter. The alternatives are to position border controls on the border with the south – which, however organised, will greatly inhibit and discommode cross border movement of Irish people – or require Dublin to impose additional border controls at Irish ports of entry. Neither is very palatable to politicians here, with the additional possibility of a large pool of wannabe migrants to Britain congregating in the south.

It will be mid-2019 at the earliest before Brexit becomes a reality. In the meantime there are more clear and present dangers. Ireland has bounced back well from the Crash. Always a good indicator, registration of new private cars in 2015, at 121,110, was up 30% on 2014 and heading towards the pre-bust record figure. The population is increasing, the economic indicators are generally good and the only damper on house sales are the Central Bank’s restrictions on credit, introduced to prevent  a repetition of the disastrous property bubble of the Noughties. Whether the politicians will continue to hold the line on this in the face of increasing public demand for relaxing the rules remains to be seen. While there is no quick fix to the housing shortage, public opinion is fickle. The government could well be wrong-footed on the issue, particularly if Fianna Fail were to embrace it as an election issue.

As I write, the government is facing a slow revolt over public sector pay, with a winter of discontent expected. Pay in the public sector 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 demanding  a pay increase was followed by another cave-in, this time to the ( arguably more deserving) state sector bus drivers. Predictably the queue of state employees seeking 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.

This is a tricky one. There IS a formula for restoring cuts in full, over time as the economy improves and finances permit.  Most of the public sector unions have bought in, so what to do about those who haven’t?  What about those who want more than just restoration? And where should public sector employees, regarded with resentment as having guaranteed jobs for life, come in the queue for restoring other cuts imposed during the recession, including some of the cruel cuts in health and welfare services? All this is negotiable, given luck and no economic setbacks or another worldwide recession. It could go right, but it could go horribly wrong.

One area where the government will definitely run out of wiggle room is that of Irish Water. The issue of paying for water is politically toxic, yet Fine Gael seem unable to grasp this and have saddled themselves – and the country – with another year of wrangling.  To preserve the government the can was kicked down the road last summer with the establishment of an “Expert Commission” to examine all aspects of water in Ireland and report back to a special committee of parliamentarians early in 2017, with a further delay before definite proposals are put to the Dail in mid-2017!

Since Fianna Fail subsequently came out in favour of abolishing charges the issue now is simple: either Fine Gael caves in next year or the government falls. This would be laughable were it not also serious. And waiting in the wings is the issue of increased charges for garbage collection, postponed for a year until July next. Well might a friend remark to me that the country is becoming all but ungovernable, while another friend added more caustically that the country is ungoverned!

As if this were not enough the Abortion issue has slunk back in with increased demands for a referendum to repeal the Eight Amendment outlawing abortion.  A “Citizens’ Assembly” – another delaying device – is to report back on options by mid- 2017. While there is considerable public support for abortion in the case of fatal foetal abnormalities, the small print has yet to be worked out. The battle lines are already drawn and a nasty and emotional debate can be foreseen. One thing is certain. It will not be a shoe-in like last year’s vote on same sex marriage.

All told then, an interesting few months lies ahead.

25/10/16

 

 

 

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

 

 

ROTTEN TO THE CORE

In recent weeks the ordinary Irish punter has received a crash course in corporate taxation courtesy of the European Commission and the Apple Corporation.

This lesson has underlined the reality that taxes, like death, may be inevitable, but who pays them and how much varies greatly.  In Ireland, as in every country, a complicated structure of rates, allowances and exemptions provides lucrative careers for armies of accountants, tax specialists and lawyers employed expressly to minimise the amount of tax paid. And the general conclusion, here as elsewhere, is that the wealthier the client, the better help can be hired and the smaller the resultant tax bill.

There’s nothing fair or equitable about the Irish tax system, notwithstanding official claims that it is among the most “progressive” tax regimes in Europe. Possibly it is, in the narrow sense that once an individual’s income for tax purposes has been determined, taxation at a rapidly increasing rate is applied, so the more you “earn” the more you pay. The devil however is very much in the detail of determining just what you “earn” for tax purposes, with the legislation a mishmash covering personal and company tax law as it has evolved over the last century.  The lines between tax avoidance – permissible – and tax evasion – illegal – can be blurred, and tax defaulters rarely if ever face jail, which hardly encourages compliance.

The elements parcelled together in Irish tax law reflect a mixture of government policy and the fruits of special interest lobbying over decades. Inter alia there are provisions governing non residence, policies of disregarding certain income entirely and others favouring certain groups of taxpayers. Much of the legislation and provisions (or exemptions!) were drafted initially in tandem with and with an eye on other government laws and policy objectives.

The result, on the personal tax side, has been something to annoy everybody. Why should certain people receive a $50,000 plus exemption on income received for writing a book or selling a painting? Why should people receiving one payment from the state pay tax on it while people receiving a different payment do not? Why should some people charge the cost for travelling to work while others cannot? Why should those caught in the PAYE net alone have tax deducted right away?  And why should persons – invariably wealthy – pay no tax in Ireland if they are deemed “non-resident for tax purposes” which is liberally interpreted to apply to anyone not proven to reside here for 184 days in any one year?

One question rarely asked is about Ireland’s low rate of corporation tax. At 12.5% – much lower than that on individuals – the CPT rate has become one of Ireland’s sacred cows, to be defended as fiercely as the level of the Old Age Pension. The reason is simple. That low rate has been identified as one of the major factors in successfully attracting and keeping foreign industrial investment here. And, while other factors making Ireland attractive can be cited, few doubt the importance of the low tax rate. It had its origins half a century ago when Ireland was struggling to establish a manufacturing export oriented industrial base and was attempting to attract inward industrial investment.

We have come a long way since then but the tax rate continues to matter. Any doubts on that score can be dispelled quickly by viewing the various attempts and pressures put on Ireland by the Commission and individual EU states to force a change. Under sustained pressure from the Commission the Government increased the rate to 12.5% some decades ago amid allegations from several EU states that Ireland was poaching jobs and investment.  When we were on our uppers several years ago, requiring a bail out from Europe, concerted and determined pressure to change was again exerted by the Commission and several member States, including France. We held firm on the grounds that national taxation was a matter for member states and not within Commission competency.

We were supported back then by several smaller member states which themselves were applying low rates, again to encourage inward investment. I recall in 2002 Estonian Prime Minister Kallas discussing Estonia’s low tax rate and asking me, rhetorically, what else a small country on Europe’s periphery had to offer. Indeed. The peripherality argument is one that has never been teased out fully within the EU, where there are massive cost savings and advantages to companies (and countries) close to the EU’s centre. And, very importantly, one of the EU’s heavy hitters, Britain, was firmly and resolutely opposed to any encroachment by the Commission into the area of national taxation.

Cue August 30, Apple, and the European Commission, which found under the EU’s “state aid” rules, that Apple, one of the world’s major corporations, had paid little or no tax on billions of earnings through channelling huge sums in complicated fashion through Ireland. There is no doubt that this took place and the Commission called the Irish government complicit in facilitating Apple’s arrangements, instructing it to claw back €13 billion plus interest in taxes dodged by Apple since 2003. The government is appealing the ruling and the matter is likely to drag on for several years.

There are a number of dogs in this particular complicated fight. There is the multi- layered issue of EU – US trade relations, affecting both sides, and involving the relationships between both tax systems and multinational companies, with agreement for once between the USA and Europe that the multinationals need to have their wings clipped – and their profits taxed. There is, internally in Europe, the complicated issue of what constitutes state aids. There is the separate issue of whether the Commission is trying by subterfuge to extend its competence into national tax policy.  Despite Commission denials, given the history on this one, there cannot but be suspicions that this ruling, if left unchallenged, could prove to be the thin end of a long term wedge.

Then there is the domestic Irish dimension. For decades the long suffering Irish taxpayer has put up with a Faustian –type pact under which it was accepted that multinationals paid less tax in exchange for bringing the jobs, and certainly they have. But this episode has revealed that Apple – and probably other multinationals – has been paying substantially less than the accepted 12.5% rate; indeed creative accounting on a worldwide basis has involved Apple “paying” at less than 1%. The Irish left has been shouting for years that something like this was the case and has constructed marvellous economic plans factoring in missing billions which they allege should be due.

For a cash-strapped economy and taxpayers punch drunk after years of austerity, the prospect of a windfall infusion of up to €19 billion with interest, was, briefly, tempting. But enthusiasm faded quickly as it became clear that other countries could well demand a share. And who, after all, would want to rock the boat of Ireland’s relationship with the multinational sector?  Factor in that this could well have been a glowing and gilded Trojan Horse planted by the Commission and surely the government was right to reject the money and appeal. “Timeo Daneos” indeed.

19/09/16

THE FORTY FIFTH U.S. PRESIDENT

I was asked,at short notice, to write a piece for the PSEU Review magazine on the prospects for the forthcoming U.S. Presidential Election and any likely implications for Ireland from the outcome.

“Like most people this side of the Atlantic, I’ve watched with fascination the developing race for the U.S. Presidency.

The emergence of Donald Trump as Republican candidate has been astonishing. The only person now standing between him and the White House is Hilary Clinton, who if elected will make history as the USA’s first female President. Trump’s candidacy seemed initially bizarre and unlikely, but, as I write, with less than seven weeks to polling day, the outcome is currently too close to call, with Trump having reeled in Hilary’s lead in dramatic fashion in recent weeks.

There is still a long way to go, and, with the caveat that a major terrorist attack could prove a game changer, much may hinge on the outcome of the televised debates, or the emergence of some currently unknown unknown – two weeks ago who could have forecast Hilary’s pneumonia? Or again, one candidate (which most pundits assume will be Clinton) may start to pull ahead in the final few weeks as the undecided make up their minds. But right now in terms of secured states Clinton has a far from decisive lead, with Trump ahead or level in a number of crucial states including Ohio, Iowa, Florida and North Carolina, while the Clinton lead in Pennsylvania is diminishing. Either way one of them will be the next President. What can we forecast about the new administration’s policies and does who wins matter for Ireland?

Taking the easy one, Hilary Clinton, first. She is a Democrat, succeeding another Democrat, for whom she worked as Secretary of State. She is widely experienced in what can and cannot be achieved in terms of getting things done domestically and internationally. Expect therefore more of the same as we have seen from Obama. The main domestic issues are likely to be consolidating the improving economy as well as the healthcare system and attempting again to sort out some form of immigration reform, perhaps helped by a stronger Democratic presence on Capitol Hill.

In the foreign policy area she will push on with closing Guantanamo, and continuing the thawing of relations with Cuba. Outside the hemisphere she will continue with current US policy in the Middle East, attempting to sort out the mess that is Iraq and Syria and further pressing on ISIS. Her options are limited. Much will depend on the relationship with Putin. Ireland is unlikely to figure largely unless there is action to curb “corporate inversion”, where US companies have their headquarters overseas to avoid US taxes, something both Clinton and Trump have called for. She could be involved were there to be an impasse on negotiations over the open Border issue in the context of Brexit; a role here for Bill, perhaps? We could well be in for a Presidential visit.

Trump is another story, and at this stage very difficult to predict. He captured the Republican nomination by being outrageous and stoking passions which appealed to an inchoate coalition of right wingers, Tea Party members and disillusioned blue collar elements. In so doing he alienated many traditional moderate Republicans and his chances of winning rest on how many of them will trickle back. He has recently changed his campaign team, hiring Steve Bannon to intensify attacks on Clinton, but also giving some hints of toning down his rhetoric, perhaps in an attempt to broaden his appeal.The run-in to the actual vote will be interesting.

Should he win, bear in mind that everyone loves a winner! An early indication of how he will proceed will be in Cabinet formation, particularly who he nominates for Secretaries of State, Defence and Homeland Security. But several things can be predicted with some confidence. There will be no deportation of millions to Mexico or anywhere else. Quite simply the US administration does not have the resources to undertake the process. Tens of thousands of additional staff would have to be recruited, vetted and trained, from border patrol officers to judges and clerks to run the new courts required, to detention centre staff to hold the throngs awaiting deportation. Former head of Homeland Security Michael Chertoff commented that without suspending the Constitution and the police acting like North Koreans “it ain’t happening.” Even targeting only criminals would require an exponential ramping up of resources.

Similarly impractical are suggestions to ban Muslims from entering the USA, while the physical problems and costs associated with the Wall idea, including managing the water flows, rule this out except as a long term aspirational project. In Foreign Policy, Trump, for all the rhetoric, will be tied largely by where the USA is “at” currently in the Middle East. A close examination of recent remarks suggests that, stripped of rhetoric, he will adhere to current policy in broadest terms; there are few options to do more. Trump’s unpredictability is legend but whether, faced by reality, his loud mouth threats will come to anything is questionable.

On internal and economic affairs Trump is standard right wing Republican. His “magical thinking” tax plans will reward the rich by cuts, without spending cuts to balance. As well as corporate inversion, of interest to Ireland is his proposal to cut US corporate tax from 35% to 15%. Whether any of this, or renegotiation of NAFTA , will pass Congress is doubtful, while “getting tough with China” and backing out of the TPP could backfire and will probably just amount to empty rhetoric.

One point to interest over-taxed Irish readers. Trump proposes a top tax rate of 33% for those earning over $154,000 pa. Clinton’s sliding scale reaches 33% at $190,150, remains at that up to $ 413,350 and includes a 39% band from $415,050 to $5 million pa!

S.F.
22/9

ISIS

There IS a militant Islamic presence in Ireland. On July 6 a Jordanian living in Ireland since 2000 was deported. What made this gentleman special (300 odd have been deported this year ) is  that his deportation came after a lengthy legal battle, held in camera, in which the judge was finally convinced by the State that he was the main recruiter for ISIS in Ireland and  “ the foremost organiser and facilitator of travel “ for would-be ISIS fighters. His claim to reside in Ireland was on the basis of an Irish born son. While here he had been living on Irish Social Welfare. Justice Minister  Frances Fitzgerald made clear afterwards that the Government would deport as necessary where matters of national security were involved.

The deportation came a week before the mass murder in Nice of eighty five by an ISIS sympathiser. The spate of recent lone wolf terror attacks, including the horrendous Bastille Day massacre, has left much of Europe on edge wondering whether anywhere is safe. The simple answer is “Nowhere” but clearly there are degrees of threat. As elsewhere, threat assessment is being conducted here.

Irish people have had several brushes with Middle Eastern terrorism. Three Irish holiday makers were among those murdered in Tunisia last year and Irish people were among those wounded in the Paris Bataclan massacre last November. The roll call of murders and beheadings in Iraq included a couple of Irish citizens. And, going back a generation, in 1986, a young, totally innocent, Irish woman in London was duped by her Jordanian fiancée into attempting to carry a bomb disguised in a suitcase onto an EL AL 747.

It would be surprising if there weren’t some elements of radical Islam here, given the proximity of Britain, Ireland’s relatively easy going and open society and the number of immigrants to arrive since the Millenium. The official line is that threat of a direct terror attack here is moderate. This despite a bragging ISIS video last November which identified Ireland as part of the “kuffars” ( the n-word favoured by ISIS to describe Christians and others)forming the global “Coalition of Devils” opposed to the Islamic State. This may just mean that we are, like all infidels, fair game and clearly the possibility of a lone wolf attack can never be discounted totally. However, with this caveat, the official threat assessment looks reasonable for several reasons.

Realistically there are easier and more obvious targets. Ireland is not a NATO member; we are a militarily neutral country and not part of the coalition fighting ISIS ( a reason cited by ISIS when claiming different terrorist atrocities). It is true that Ireland permits US troops to stopover at Shannon Airport, but, against that, geographically Ireland is remote, an offshore island behind an offshore island, rendering logistics for any attack that more difficult. Moreover, for what it’s worth, Ireland has been seen as pro-Palestinian and Irish troops on UN Peacekeeping operations in the region have a high reputation.

The nature and position of the Muslim community in Ireland are also factors. Mao’s aphorism that a “guerrilla must move among the people as a fish swims in the sea” is relevant here. While there are a small numbers of ISIS activists known or suspected to be living here – the deportee was reported to be one of a group of about thirteen –   the overwhelming majority of the Muslim community in Ireland, as elsewhere,  are law abiding and have no truck with ISIS or militant Islam. The community is numerically small, roughly 50,000 or 1% of the population in the 2011 census, and, therefore hardly constituting a critical mass within which ISIS – or Al Qaida – could move with impunity. Indeed in Western Europe only Finland, Portugal and the Baltics have less Muslims, numerically and proportionately.

Moreover, Islam in Ireland, which is mainly of recent origin, has developed in a different pattern to those other European countries with large Muslim communities.  In Germany most are Turks, in France and Belgium most are from North Africa, in Britain most are from the Indian sub-Continent.  Muslims here appear more diverse in terms of race and ethnic origin and most came with established skill sets and for specific purposes rather than as refugees or economic migrants. An important consequence is that Ireland has no predominantly Muslim or immigrant ghettoes akin to Molenbeek  in Brussels or  one of the Parisian banlieues , where extremism flourishes among sections of the alienated young ( or indeed to Leeds, where three of the London Tube bombers grew up) . There is no sense or feeling that a separate community within the community is evolving here.

Yet a problem, however small, clearly exists and with alarm bells ringing in the aftermath of the July terror attacks,  the facts such as they are are being picked over by the media here . Security briefings suggest that up to fifty young Irish Muslims have gone to fight for ISIS. While this could be partly written off as rebellious and impressionable youth, there have also been calls in recent months from some of the Imams here  for closer engagement by the authorities with their communities as well as claims by them that extremists are active, lecturing and proselytising.  One factor is that  the common travel area with Britain makes it easy for radical preachers and recruiters  to travel here and hold private sessions. And, as experience elsewhere has shown, grooming over the Internet is virtually impossible to monitor.

The adequacy of our surveillance measures to combat any threat, particularly for a police force shredded by cuts since 2008, has been questioned. More resources have been promised to the Gardai to beef up the existing structures but these have yet to come on stream and there has been criticism from some Garda representatives that the force is ill prepared to deal with an atrocity.

There have been complaints also about the  lack of information and transparency on Ireland’s anti-terrorist security structures and operations  generally, in contrast to Britain. This, and the sharing of information with other security services, is clearly a delicate issue. Surveillance of terrorists here has traditionally been directed at republican terrorism , where for various reasons very little was divulged publicly and old habits die hard. Moreover, the threat from dissident republicans remains a real one, with men, weapons and explosives very much here on the island and constituting a real quantifiable threat.

Indeed the proximity of Britain adds another worrying dimension. Up to now attention and resources in the North have concentrated on dissident republicans, who constitute a clear and present danger,  both locally and in terms of possible infiltration, into Britain. There is now the additional possibility of Ireland being used as a base by Islamic extremists from which to plan or even mount an attack against Britain. However remote this may appear the British have been worried enough to brief at (anonymous)Ministerial level pointing out that Northern Ireland is not part of the U.K.’s “Prevent” strategy to combat violent extremism. Thrillers have been written around the subject. With increased vigilance let’s hope that nightmare scenario remains in the realm of fiction.

16/8

 

 

BRITAIN PUTS THE CLOCK BACK

BREXIT. Occasionally an event of major significance occurs. After it things are never the same.  In Ireland we’ve just finished celebrating the centenary of one such event – the Easter Rising. Hiroshima was another, the fall of the Berlin Wall a third, Nine Eleven a fourth.  On June 23 arguably another such event happened when Britain, the world’s fifth economic power, voted – narrowly – to quit the European Union. As I write the shock waves internationally, not least in Ireland, show no sign of diminishing. A new, ostensibly gung-ho government is in power in London, determined to push through with exiting, a process likely to take several years.

The inquests and recriminations are well under way. Europe’s establishments and chattering classes, including in Britain itself, are baffled and dismayed. Britain was seen as a sometimes petulant but important partner, not only as one of the Big Four but also as providing an important counterweight in internal policy discussions, usually to be found on the side resisting further or speedier European integration. Its EU credentials were never in doubt even though it maintained a semi-detached position on key EU areas like the Euro and the Schengen common travel zone, stances it could more easily take given the financial clout of the City of London and Britain’s position as an island.

Britain’s increasingly vocal Eurosceptic wing, represented by UKIP and a sizeable minority within the Conservative Party, was ignored or discounted. Britain was regarded as too deeply embedded within Europe for trade, investment and social reasons, seriously to contemplate the leap in the dark that leaving constituted. The warning signs were ascribed to the same mixture of discontent, disillusionment, dissatisfaction with the status quo and vague xenophobia evident in a number of other member States, where right wing parties were starting to garner significant electoral support. All true, no doubt. What made the British situation unique was that, staggeringly, a country with little or no tradition of deciding important matters by referendum,  was asked to vote a simple yes or no on a proposal to undo involvement in almost half a century of  political and social construction and cooperation within Europe. The resulting Mother of all Protest Votes was then compounded by the (narrow) victors proclaiming there could be no going back on the result.

The “Why” has been parsed and analysed since. The philosopher Roger Scruton, in a brilliant article in Prospect Magazine, has traced the alienation of the English working class in recent years, and their feeling that, above all, their sense of identity was being eroded. In a striking phrase he has identified a vital flaw in the EU as it is: “the European people have not been merely SUBJECT  to a treaty, but GOVERNED  by it.” Add the hubris of a wealthy faction in Britain, convinced that the country would do better “going it alone.” As far back as 1994 a junior British Tory Minister explained this attitude in detail to me; depressing but prophetic. Taken together, and in a campaign notable for its chauvinism and churlishness as well as its deceitfulness, the mix proved a potent one.

The referendum outcome has shattered the comfortable Establishment near-consensus of a Europe moving steadily if slowly towards an “ever closer union” a vision which has sustained Europhiles for over half a century. This cosy vision has it that the then EC, when Britain joined  in January 1973, was  little more than a post-war free trade area between six members, with one or two transnational dimensions, in coal, steel and a limited number of agricultural products. It had aspirations to be a lot more, and wording in its treaties to allow for organic growth. And, over the decades, it HAS grown, dramatically, sometimes lopsidedly, changed its name and now comprises a shaky and incomplete union of five hundred million spread over twenty eight countries. It has established a zone of unprecedented economic and prosperity across Europe with landmark standards in human and related social rights. A queue of countries waits to join.

With up to twenty eight countries, each with its own national priorities and particular requirements, for the EU getting to where it is has not been easy. Progress has been slow and tortuous. There IS a common currency – the EURO, but not all twenty eight are members. There IS a Common Travel Area – Schengen – but again some countries -Britain and Ireland – are outside. There are serious differences evident over national attitudes to the Refugee problem. There is serious economic imbalance between the wealthier North and the poorer South, something exacerbated by the 2008 Financial Crisis. Yet overall the consensus has it that Europe has muddled through and worked hard at solutions. The various landmark Enlargements, culminating in the 2004 admission of the Central Europeans, are testimony to the vibrant European idea. And significant progress has been made in making the EU more democratically accountable, a process that is ongoing. Throughout, Britain has been an important and valued component in the evolution of the Union.

That vision now lies in tatters. What happens next is unclear. We are now in a kind of phoney war situation. The process for exiting the EU, stuck in as an afterthought as Article 50 of the Lisbon Treaty, must first be initiated by the UK, with afterwards a two year “sunset period” to complete the separating process. How quickly the new British government acts to invoke Article 50 remains to be seen. Teresa May has appointed Brexiteers to lead the exit charge, which could be a Machiavellian tactic, though others see it as filling the posts with what remained after the purge of the pro-Europeans.

Thus far these have made predictable noises about negotiating bilateral trade deals with third countries. Yet eight of Britain’s top ten markets, including Ireland, are EU or EEA members, accounting for the bulk of her exports. Britain already has thriving trade with all major third countries, on foot of existing trade deals negotiated by the EU Commission; whether any new deals will prove more fruitful or beneficial for Britain must be moot. There’s no pot of gold out there that the evil EU has been withholding. A lot of similar hard economic realities are likely to be aired in the coming months as the small print of Britain’s economic and social entanglement with the EU is picked over. And politically there’s Scotland, which voted 62% to remain, with every prospect of a constitutional crisis before long.

For Ireland the issues are profound. We have major concerns, quite apart from the economic ones which are potentially more serious for us than for the other EU members.  The Common Travel Area – a vital element in our bilateral relationship with Britain – is under serious threat. The EU’s one land frontier with Britain is within Ireland. Given the posturing of the Brexiteers over curbing immigration from the EU, that Border – and with it that special relationship – is now an issue. Arguably the Common Travel Area has sugared the bitter pill of Partition over the years and is part of the fabric underpinning the Peace Process. Is it possible that the casual passing whim of English voters will “do” for Ireland yet again? Perfidious Albion?

20/7

QUO VADIS BRITANNIAE?

I’m still trying to come to terms with the BREXIT outcome. The bald truth is that Britain, the fifth economic power in the world, the second in Europe, has signalled its intent to walk out of the EU. Can it be fixed? Can it be reversed? At this point in time this does not appear likely, but as the dust settles something may emerge. Some personal reflections follow.

I felt a waft of déjà vu last Friday morning as Britain woke up to the result. The whole establishment, the chattering classes, bankers, businessmen, even the Archbishop of Canterbury, came out solidly for a vote to remain in the EU. Sound familiar? Ring a bell? It was Ireland the day after Nice One and later after Lisbon One. To the dismay of the elite, the referendum result was not what had been confidently expected.

There the resemblance ends. In Ireland’s case the treaties as originally framed had been rejected but our membership of the EU was not at stake and there proved to be enough wiggle room, not to mention good will and anxiety to reach a deal on our specific concerns from our EU partners, to resolve matters. Cameron and the British government, however, have metaphorically bet the house , precipitating a crisis not just for Britain but for Europe itself. It remains to be seen whether there is any scope to undo the damage. An important element in Ireland’s case was the willingness of both sides to accommodate to reach a solution. Britain is currently leaderless, so one side is unable to engage, even should this prove feasible. The early indications are not encouraging.

It’s now Wednesday and , déjà vu again, the spectrum of reactions resembles that here – and in Europe – in the wake of our “No votes,” writ much larger of course but not dissimilar. On the BREXIT side, triumphant hubris, a chorus of anti EU sentiment and flat assertions that the vote was final, there can be no going back and no second vote. On the domestic losing side, numbness, dismay, disbelief, and a feeling of helplessness not helped by Cameron immediately choosing to fall on his sword. In Europe at the political level similar reactions of dismay and disbelief, with an obvious fear that the contagion may spread and encourage others to contemplate leaving. European leaders seemed asleep to the danger in advance, as the extent of panic among them as June 23 approached demonstrated. It was yet another example of the disconnect between Europe’s elite and the people. Some of the first public statements from Europe have not helped.

Several days before the Vote I wrote in my IAN column that the result was at that stage too close to call, noting that the latest polls were showing the Leave camp slightly ahead. I pondered whether the momentum – clearly with the Leave faction – would be halted by the hiatus following the murder of Jo Cox, and observed that the “Stay” campaign were mounting an Operation Stable Door. My gut feeling subsequently – wrong – was that the Stay side would win, based in part on the expectation that the undecided would plump in the end for the devil they knew. I also took heart from the poll analyses of experts and the bland assumption that an electorate would vote, even with misgivings, in their own best interest and take any promises from the Leave camp with handfuls of salt.

There was a particularly devastating assessment of Cameron by Max Hastings (who voted Remain) in the Daily Mail several days ago which painted up his limitations and tactical ineptness. Certainly a lot of blame must attach to David Cameron, in calling the referendum, in choosing to hold it when he did, in framing it as a simple In-Out choice only and then for running an inept campaign. It’s not as if a referendum was necessary, and indeed the result is only – theoretically – “advisory” rather than “obligatory.” But having decided on one, its terms and wording should have been set with care. Even with those particular dies cast, a more astute politician would surely have thought long and hard about the date, which was only announced in mid-February, without any pressure to hold the poll so early.

And Cameron should surely have reflected at the very least at how the political scene elsewhere in Europe was evolving. I wrote last week as follows: “ Little-England nationalism aside, the Brexit movement should perhaps be seen in the context of the sizeable and almost universal Europe-wide popular disenchantment with the way society is perceived to be evolving, with the existing establishment and party political dominance under threat from populists on both the left and right.” Cameron could hardly have been unaware, from his frequent meetings with fellow HOGs, and from those briefing him, including reports from British Embassies sur place, of the extent of this disenchantment, often inchoate but also often organised, and expressed in elections when opportunity presented itself, whether in Spain, Greece, Ireland, Austria and in state elections in Germany, and otherwise reflected in opinion polls throughout the EU. Did he think the British voter was immune?

So why do it now? Was it overconfidence? Cameron had a comfortable Parliamentary majority following his unexpected General Election victory last year. He had also the experience of the Scottish referendum in 2014 and perhaps thought, that having headed off the threat from the Scottish nationalists he could head off UKIP and the Tory malcontents by a short swift campaign, particularly having extracted, as he saw it, fresh concessions from Brussels. The concessions – cosmetic – fooled no one, while his reading of Scottish nationalism was myopic – symptomatic of his whole approach. Even the framing of the question – an “X” in the Remain or Leave box – was less nuanced than that in the 1976 vote (“ Do you think the UK should stay in the EC?).

Yet having decided to plough ahead with a vote, he and his government seemed content to run the campaign on autopilot, only waking up to the danger recently as the Leave campaign gained momentum. Again there are interesting parallels with the approach of the Irish governments to the first Nice and Lisbon referendums. Satisfied that the majority of the Irish electorate knew where there bread was buttered, Irish governments twice campaigned “softly” and paid the price, while their opponents hammered away on a few basic themes. On Nice it was a brutally effective poster campaign – “ You will lose Money, Power, Influence.” On Lisbon the opposition focussed on the partial loss of an Irish EU Commissioner and fears of involvement in a European army as well as playing on public unfamiliarity with the contents of what was primarily a technical tidying-up treaty. Again, ceteris paribus, sound familiar?

For Farage and Co. it was Immigration, over-regulation from Brussels and slogans about sovereignty and “getting our country back.” They also played on the basic unfamiliarity of the man-in-the-street with the EU and how its institutions worked. Moreover they could and did point to the Europe –wide disenchantment with governing elites and to the Brussels bureaucracy. The deliberate distortions and misinformation from the Leave side were deplorable. It was win at all costs. The EU was demonised, Britain’s net contribution overstated and the complexities of unpicking complex legislation and benefit structures minimised. A major platform plank, that the cash-starved NHS would benefit by billions annually after leaving has since been disavowed. Apart from that the Leave leaders post –referendum have confined themselves to bombast or to minimising the likely difficulties of any forthcoming negotiations. There appears to be no Plan B.

Cameron apart, the chattering classes have no shortage of villains or scapegoats, whether Farage or Johnson or Gove or the tabloid press which pandered to the deceitful and misleading campaign the Leave side ran. All true, but hardly sufficient to explain the results as with the assertion that Jeremy Corbyn and Labour campaigned less than enthusiastically for the Remain side. Which leaves those who voted Out. We are told that the old, the less prosperous, the less well educated and the racists all voted to leave.( In a particularly nasty aside the old are being accused of having ruined things for the young.) All apparently true, but again, why?

Immigration was clearly portrayed by the BREXIT side as a major issue and immigration from other member states (shorthand for the 2004 Accession countries) has been identified by Cameron as a reason for much of the leave vote. Yet I don’t see the 52% of the British electorate who voted Out as being racists or necessarily anti-immigrant. I have little doubt that, had the vote been 52%-48% to remain, those same chattering classes would now be preening themselves about the “ maturity” of the British electorate in rejecting Farage and co. and racism. Millions of immigrants have entered Britain since Powell’s 1968 “Rivers of Blood” speech and have been successfully, and on the whole seamlessly, integrated into British society. There have been incidents, certainly, but in terms of the massive multicultural influx into Britain, particularly after 1980, such incidents have been inconsequential. And indeed some of the more humorous T.V. interviews aired have been with immigrants or the children of immigrants who last week voted to leave the EU.

It seems to me that Immigration – or rather the perception that Britain was unable to control its own borders – became the lightning rod for a variety of grievances in Britain, rather as Irish Water did in elections here in 2014 and 2016. The last thirty years have seen the significant erosion of the great achievement of post war Britain – the Welfare State. This has been accompanied by the collapse of many of Britain’s traditional rust-bucket industries. Pressure on resources in health and education, limited employment opportunities and an obvious growing gulf between the rich and the rest have generated a sense of alienation and discontent, particularly in the lower socio- economic groups. The recent economic recession, increased taxation and reduced benefits fed into this.

With the 2004 EU Enlargement came the arrival in Britain of a million plus migrants from Eastern Europe (far less, incidentally, than the numbers who arrived in the twenty five years before from the sub-Continent, the Caribbean and Africa) , perceived to be willing to work harder and for less and also to be receiving state benefits. This could have been avoided, or at least postponed, had Britain chosen to follow the example of twelve of the other Fifteen, including Germany and France, in restricting workers from Eastern Europe for seven years. It’s worth pointing out here that of the EU three who allowed unrestricted access, while relatively few workers emigrated to Sweden, proportionately far more came to Ireland than to Britain. Even today the percentages of Poles Latvians, Lithuanians, Slovaks, Hungarians and Czechs living and working in Ireland are far greater than in the UK., though you’d never think it from reading the British tabloids. There’s an interesting “Compare and Contrast “ study to be done on this.

The new arrivals, highly visible, on the one hand, and the catalogue of what appeared an ever-growing number of EU regulations affecting everyday life on the other, melded with the other senses of grievance and alienation, with EU membership becoming an obvious blanket scapegoat for all these perceived ills. Cue Farage, Johnson and the others playing on these fears and on misapprehension and misunderstanding of how membership of the EU had benefitted and was still benefitting Britain. The vote last week was a protest one. It has proved to be the Mother of all Protest Votes!.

As to what to do now, no ready solution seems on offer. If indeed the Referendum result is considered to be irrevocable and not to be revisited, which at this point in time appears to be the case, lengthy and complex negotiations lie ahead. Whether these can be concluded within the two years specified by Article 50 once invoked remains to be seen, but this is technical and can surely be tweaked .Yes, an IGC could easily amend the time limit if in everybody’s interest. Alternatively surely the EC old device of stopping the clock could be used. The significance of Article 50 is that invoking it is the starting gun.

Any such negotiations will be of major importance for Ireland. From our national point of view the consequences of BREXIT are enormous, not only economically – Britain is our largest trading partner – but because of the Northern Ireland dimension, involving as it does the whole Peace Process, the land border ( the only one the UK has with the rest of the EU) and the vital Common Travel Area between the two countries. Will that survive? And how will it be regulated? What if Ireland were to become a back door for entry into Britain? And what of the Peace Process? A landmark success but arguably still bedding down. Noel Dorr has an interesting piece on the importance of this for Ireland in today’s Irish Times One Scottish columnist lamented what he referred to as the “casual vindictiveness” with which the English had voted. Most in Ireland would concur. And indeed, what will befall Scotland?

The formulae for getting around the Irish vetoes hardly offers a way forward, though if there could be agreement on the end to be achieved that would be a start. (In Ireland’s case there was a willingness on both sides to achieve the necessary compromise and none of the fundamental foundations of the EU were in dispute.) Here the first and perhaps fundamental red line, if and whenever any negotiations actually begin, appears to be for both sides the issue of free movement of labour. Could this be tweaked? A lengthy derogation perhaps? And what about EU citizens already in Britain?

If this issue could be sorted, by both sides showing willingness, it might be feasible to contemplate a new British government, with or without an election, taking the plunge on a second referendum. There are already signs of the “Oh Jesus” factor emerging – i.e. “ Oh Jesus! Did we really vote for that?” with the subtext that we might vote again. Wishful thinking? Perhaps. But Britain already has a major opt-out of arguably another of the EU’s cornerstones – Schengen. Right now there is a huge hole threatening in the fabric of the European economy, with possible worldwide consequences. The nature of the EC/EU has been to stagger on and advance crabwise; not ideal but practicable. We should be considering all options and agreeing on what is least-bad for all.

29/6/16

BANANA SKINS

First hearty congratulations to my old friend the new Irish Senator, Billy Lawless,  well known to Chicago’s  Irish community. I know you’ll do Ireland and the Irish Community overseas, including the Undocumented, proud.

How long Billy will serve will depend on how long the current government lasts. The jury is very much out on this as the new administration feels its way in its first weeks. What is clear is that there will be frequent “crises” with Dail defeats for the government  on banal populist motions with no legislative or practical effects beyond stoking  unrealistic sentiments of entitlement on  various issues. And, of course, taking up a lot of Dail time and energy as well as generating publicity for the usually leftist advocates.

Whatever about letting off steam ,  none of these  constitute “confidence issues” which could bring the government down. Banana Skins apart, any crunch is most likely to come on issues involving actual allocations of money  especially where there is choice involved or some need either to increase tax or reduce benefits. On this the current outlook is “so far so good.” The economic indicators are all positive  and  tax revenues buoyant, permitting – already – some allocations from the “fiscal space” wiggle room on which the last government , ironically, fought the election.  As long as the money keeps rolling in cuts can be restored and even modest improvements made, though nothing sufficient to meet even a fraction of the official wish list. October’s Budget should prove manageable  and perhaps indicative of the government’s life expectancy.

Yet Banana Skins internal and external remain a constant threat. Indeed by the time you read this one major external banana skin could have arisen, with certainly long term and possibly short term  effects on politics here. This is the June 23 British referendum  on leaving the European Union. As I write it is certainly too close to call, with the polls actually showing a majority in favour of leaving (Brexit). A surge in support for Brexit in recent weeks has caught the Establishment, in Britain, in Brussels and throughout the Union by surprise. What appeared until recently unthinkable could well become reality.

Should Britain  vote to stay in the result is likely to be close but settled for several years at least. Should Britain vote to LEAVE there would  obviously be particular important implications for Ireland. To name but a few: we are the only country sharing a land frontier, hence the resurrection of cross –border issues thought long buried, with possible implications for the Peace Process; Britain is our major trading partner and business connections are many; both countries are home to sizeable numbers of expats from the other and we enjoy a common travel area. There could be immediate currency fluctuations ( Sterling falling) which could sabotage our recovery.

For Britain the process of exiting would  take time (several years ), be complex and complicated and  involve inter alia negotiations  of  sectoral agreements across the spectrum of the EU  internal market, probably resulting in arrangements along the lines of agreements with Switzerland and Norway. There is universal acceptance here, and in Europe, that  Brexit and its aftermath  are likely to be disadvantageous for Ireland, possibly considerably so.

The appeal of Brexit to a sizeable proportion of the British electorate has dumbfounded the chattering classes across Europe. As I write an “Operation Stable Door” is being mounted by the “Stay” campaign even involving Taoiseach Enda Kenny  urging the Irish in Britain to vote to remain. The final week could be decisive.  Momentum has been with the Brexit side; whether the hiatus after the murder of British M.P. Jo Cox could change this remains to be seen.

Little-England nationalism aside, the Brexit movement should perhaps be seen in the context of the sizeable and almost universal Europe-wide popular disenchantment with  the way society is perceived to be evolving, with the existing establishment and party political dominance under threat from populists on both the left and right.

Potential domestic banana skins are beginning to emerge. The government has a date with destiny next year over the  Irish Water issue when the expert commission reports. In the interim there could be further trouble over  pursuing those who haven’t paid for existing water bills –  possibly  half of all households – with the responsible Minister  (Coveney) and the Taoiseach insisting on payment and threatening action on this. And nobody has yet posed the question what happens politically if the commission early next year recommends charging consumers for water.

The last government missed the warning signs over water and political antennae should have been  up. Yet incredibly until very recently the July 1introduction of a new system of charging for garbage removal seemed likely to slip by unnoticed. Anti- garbage- charge protests have a history with over twenty  people jailed in 2003. The protests then petered out,  and most garbage collection services were subsequently privatised, with charges inching up. The new system , based on weight, backed up by an EU directive and dressed up as preferable environmentally, was presented as being no more expensive. Fears that the garbage companies would gouge consumers with  doubling charges or worse have panicked the government. Action is pending to suspend the new regime. Watch this space.  Caving in to populist howls on any issue does not augur well for the government’s long term survival.

An undoubted looming banana skin relates to the head of steam building up  to repeal  the Eighth Amendment which in 1983 copper-fastened  the legal ban on abortion. Subsequent referenda modified  the total ban – by a very narrow margin in 2002 – by providing for abortion where there was a threat of suicide by the mother. The pro-choice lobby  are calling for the whole amendment to be revisited.  It was an electoral issue, albeit a minor one, and considerable interest has focussed recently on distressing cases involving  carrying non-viable foetuses to term (fatal foetal abnormalities). The Taoiseach’s position is that a “citizen’s assembly” is to examine all aspects of the issue and report to the Dail, for a promised “free vote”, presumably not until well into 2017. As always on this highly emotive issue, the devil will be in the detail of anything  put to the vote, with  differences among politicians already demonstrable, many  too coy to commit and the threat to the government’s survival evident.

There are other known knowns threatening. Following  settlement in a lengthy  dispute involving drivers for LUAS, Dublin’s light rail system, the message to unions is that persistence with unreasonable  wage demands is likely to be rewarded with an eventual  cave in by the official side. Sectoral relativities are prompting a rash of similar claims as well as demands for the restoration of wage cuts in the public sector ( a huge headache for the public finances) and action over  minimum wage levels. While these are unlikely to bring down the government, the political fallout, in terms of a steady drip of accompanying defeats on Dail motions cannot but be demoralising.

Then there are the true Banana Skins – the Unknown Unknowns. What else is out there in the long grass? Irish politics is never boring!

18/06

 

ENDA’S GOVERNMENT

Enda Kenny is assured of his place in history. Despite a disastrous election, which saw his party slump to 25% of the popular vote and win less than one third of the seats, he has become the first Fine Gael Taoiseach to secure re-election. He was elected Taoiseach with just over a third of the House supporting him (59 to 49) courtesy of an abstention agreement with Fianna Fail. Should his government, a fragile minority coalition including several independents, last a year Enda Kenny will become Fine Gael’s longest serving Taoiseach.

The agreement and the accompanying legislative parameters have been hailed as a signal victory for Fianna Fail and its leader Micheal Martin, since theoretically the plug on the Kenny government could be pulled at any time . However, without good cause this could backfire. There is, after all, a country to be governed and not wrecked. How long the new government will actually survive remains to be seen – the bookies and the early opinion polls favour one or two years. But with little appetite for a fresh election right now, in or out of the Dail, and barring a major banana skin like Irish Water or some unexpected economic upheaval, it could last until the end of the three –budget gentleman’s agreement with Fianna Fail.

The negotiations between the two main parties were hard and heavy, with most of the time and effort over what to do about Irish Water. This was hardly surprising. Without a solution, any future minority or coalition government would be hamstrung on the issue – toxic to legislators and a significant proportion of the electorate. Yet positions were entrenched, chiefly over the principle of consumers paying something, with a wide gap between what was regarded as reasonable. One commentator quipped that the Fianna Fail position appeared to be that only someone who had an elephant to wash daily in the back garden would be liable to pay.

The eventual fudge – to kick the can down the road by setting up an expert commission to ponder all aspects of water in Ireland and report back in about nine months to another committee, this time in the Dail, and then the Dail to vote after solemn deliberation – could have been sorted months ago instead of becoming a self-inflicted wound for the last government. Indeed the solution begs the question of why this detailed examination of what has been billed as the second greatest infrastructural project in Ireland’s history was not carried out in the first place.

While the disaster quango is effectively dead and buried with a stake through its heart, legacy and related issues remain. There is the ticklish issue of how to reward the 60% sheep who paid some or all of their water bills and also deal effectively with the 40% goats who didn’t ( one new government Minister has belatedly paid up). Watch the politicians tie themselves in knots over this one. There’s also the “me too” chorus being heard from the 120,000 rural dwellers who have paid for water for decades through local water schemes. There are the implications for the existing organisation and staff of any root and branch overhaul. And finally what everyone accepts to be the case – the need for major infrastructural investment to bring Ireland’s nineteenth century water supply system into the twenty first century and how the several billions required are to be raised in the absence of charging consumers.

Which brings us neatly to the issue of the new Programme for Government and how its aspirations and hostages to fortune are to be financed. It’s a weighty document – 156 pages, 16 chapters and an executive summary – but is conspicuously lacking in how its lengthy wish list could be financed. The document was drawn up having regard in the first instance to the prior Fine Gael /Fianna Fail agreement and then after negotiations with and attempts to bring on board various groups of independents, only some of whom seem to have bitten. The result is academically interesting as a lengthy check list of first world issues which we would all like to see addressed on the assumption of virtually unlimited resources and an ability to “freeze” certain issues while action is taken on others.

There are vague commitments to soak the high earners (who else?) – in order to “ensure the tax system remains fair and progressive” – an aim somewhat undermined by “not indexing personal tax credits and bands”. It promises further crackdowns and sanctions on cigarette smuggling and fuel laundering, and a commitment to improve “tax compliance.” There are also measures, parcelled up as altruistic “key public health interventions,” to increase duty on alcohol and cigarettes ( we are to be “tobacco free” by 2025, surely a fiscal oxymoron) and to tax “sugar sweetened drinks.”

All this is hardly the stuff to bring in the extra €6.75 billion promised for public services by 2021, let alone suffice to phase out the detested USC. And this is before investment in water and the many small print undertakings in the programme are factored in. Some hope is attached to an extra €4 billion available for capital investment apparently following a “redefinition” by the European Commission of Ireland’s “structural balance” which may help on the investment side. With fiscal limits now set by Brussels, it’s going to take particularly favourable economic developments over the coming years to generate the fiscal space just to tread water.

There’s a reality here that requires addressing. While health, housing, homelessness, crime and the curate’s egg nature of the extent of economic recovery were the main issues in the election, Irish Water was indicative, indirectly, of what is becoming a chronic issue in politics here – the unwillingness of the public to pay for the services they demand. The Left (5.5% of the vote) and Sinn Fein (13.8%) have cleverly stoked resentment about austerity while demanding more and better welfare payments and services to be financed from some limitless pot of gold accessed by punitive income and wealth taxes on those defined as wealthy as well as hiking corporation taxes. While this is manifestly unrealistic, the Programme has bought into some of this at least in its wish list.

Quite how the first Hundred Days of the government – in which much has been promised – will pan out is unclear and it’s as well to remember how the original Hundred Days ended. The housing and homeless morass will require years to sort out and a banana skin may be in the offing here as the number of house repossessions seems set to rise dramatically. Ditto the structural problems in the health service.

Overall, given budgetary constraints the scope for any initiative is limited and the government would seem fated for however long it lasts to continue the general approach of its predecessor, with effectively the independents who have bought in replacing Labour. Its duration will depend on its ability to negotiate some minor matters to keep the Dail happy and on having enough political nous and antennae to avoid calamities like Irish Water. Yet Enda Kenny remains as Taoiseach and may well prove as difficult to dislodge as Haughey. Remarkable.

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