An election more powerful than consensus?

Many people seem to believe that a cross party consensus on a four-year economic plan is a good thing. While agreement  that the budget needs to brought back towards balance is positive, demanding  agreement on the policies necessary to get there is nonsense. What we need is an election and a government that has a mandate to deliver a budget and a four-year plan that will bring the economy back from the abyss.

The public may say they are sick of politicians bickering and that they should work  together but a consensus is simply a fig leaf for the current government and a barrier to  the people holding the  politicians to account. It is nonsense and potentially dangerous for a number of reasons, not least that it would effectively disenfranchise the people. The current crisis may be the most serious in the history of this state but it is not akin to the second world war where the British had a clearly defined enemy. It is also nonsensical from the point of view of expecting the opposition parties to come up with detailed plans following a 90 minute briefing from the Department of Finance which cannot realistically be expected to give full information.

When the NTMA left the markets last month it created a window of opportunity for us to attempt to put our affairs in order. We need to take advantage of this and have an election soon, emerging with a government with a powerful mandate to take decisions. Whatever the details of the resulting plan it will be politically unpalatable for the majority of the population as all parties will need to look at cutting wages as well as raising and introducing new taxes. If the people turn out to vote for such manifestos it would go a long way to assuaging the fears of Europe as well as the markets and the rating agencies that we have both the means and the determination to get out of this. Simply put, if all the parties set out their economic plans and the public vote on them then the resulting mandate is far more powerful than any photo-op with four party leaders on the plinth of Leinster House.  A new government with a fresh mandate from the people can only make the job of selling Irish debt easier.

The other side of that coin is that once you make the decision to leave the bond markets it can be extraordinarily difficult to re-enter. The Commission knows this and realises that the current government simply may not have enough credibility with the markets to allow the NTMA back in the New Year. A consensus would increase our chances of being able to borrow again and EU Commissioner Oli Rehn cannot of course demand an election.

Indeed the Commission and the markets may be far more central to the whole notion of consensus than John Gormley and the Greens. It is worth noting that when the Taoiseach Brian Cowen did a bad-tempered u-turn on inviting the opposition to talks that senior Commission offices were in situ at Merrion Street and the initial planned briefing of Fine Gael and Labour was put back until Monday morning when the officials had left.

Our funds run out next spring and thus if we cannot re-enter the markets before that it will mean that we will have to go to the European Stabilisation Fund and the IMF. Of course, all parties desperately want to avoid the legacy of being responsible for asking the EU and IMF to come in. This is a real dilemma for the Opposition parties.  An election before Christmas  means that the danger period when we try to go back in the markets next year likely occurs on their watch.  A spring election, on the other hand, means the first auctions and the real danger period occurs on the current government’s watch.

Some argue that the intervention of the EU and IMF would be the preferable policy, allowing the hard decisions to be outsourced but the problem is of course that if you lose your sovereignty you cannot make decisions on even the basics such as the balance between tax rises and spending cuts or even the retention of specifics such as the low corporate tax rate which look to be in the EU’s sights. In addition, there is even doubt that if we were to request funds how much would be available., the stabilisation fund is not pre-funded and all involved would be praying that the request would not spark wider bond market contagion.

For now, the detail in the plans to reduce the deficit does not matter to either the Commission or the markets, all they care about is simply that there is a credible plan and a likelihood of success. This is just as well as the prescriptions from Fine Gael and Labour may be radically different. Labour leader Eamonn Gilmore said this week that he would not touch tax for lower and middle-income earners or make changes to social welfare or child benefit. Fine Gael, on the other hand, is talking about hard medicine. This is part of the party’s culture which is so intrinsically bound up with saving the institutions of the state and being seen to do the right thing. In addition,  Fine Gael has indicated that it is looking to a balance of 80% spending cuts and 20% tax rises, Labour has not set out its  plans but they are likely to be the reverse of this. Unless Labour takes the decision to stay out of Government in an attempt to boost an emerging left right divide, compromise will be inevitable perhaps with an even balance between tax and spending. But for that to have credibility the parties cannot be fully bound in now. Thus the Opposition parties have to hope that they do not get full disclosure on Monday morning allowing them to declare once they reach office that things are in fact much worse than they thought giving leeway to make compromises. They also need to stress the radical change needed in political and business culture where both parties are singing off a similar hymn sheet. New politics, open government, reform of party financing, an end to crony capitalism which has transferred seamlessly from Taca to the Galway Tent, are all areas where both parties have a lot in common.

7 thoughts on “An election more powerful than consensus?

  1. An excellent post that gets close to the heart of the matter. Just a few observations.

    1. As determined as the Government might be to avoid recourse to the EFSF (no government wants such a thing to happen on its watch), the political and institutional EU is probably even more determined. Every effort, both overt and covert, will be made to square the market and to get a largish syndicated Irish issue away later in the Spring. The ability to agree and apply a 4-year fiscal adjustment programme (that would survive a transfer of power) is a big part – but only a part – of this effort. The big unknown is the balance of sentiment in the market at the time. There will always be market players who will make money by forcing Ireland into the EFSF, while others will see this as increasing their risk of losing money.

    2. In addition to the balance between expenditure cuts and tax rises, the future of the semi-states (and other state assets) will present a major divide between FG and Labour. As well as investigating the potential to encash state equity investments that are earning inadequate returns and, thereby, to reduce the net indebtedness of the state, the establishment of the State Asset Review Group is proving to be a very clever political ploy. Despite potential broad agreement across a number of policy areas, these gaps will be difficult to close and Ireland certainly can’t afford a repeat of the ’82-’87 government’s approach to fiscal adjustment.

    3. Both parties talk a good talk about political reform, but neither gets close to addressing the fundamental problems of an under-empowered and under-resourced Oireachtas and extreme executie dominance.

    4. Labour seems to be getting increased support from social welfare recepients, public sector workers and those disposed towards a progressive-left mind-set, but the percentage level is only about that which similar parties throughout the EU would consider their core support. It would be in its strategic interests to forgo participation in government at this stage – but the lure of the extreme executive dominance exercised in Ireland – and the power of patronage – will probably prove too much.

    4. If an early election were to be held, FG might find that a decapitated and suitably chastened FF might make a more congenial bedfellow than Labour. The institutional and politcial EU would certainly approve – aswould the markets and this would make the NTMA’s market re-entry much easier. (Labour in government will impose a premium on the cost of borrowing.)

  2. A key ingredient for a four-year plan is, of course, a Government that will be in office for that period to carry out the plan. The present Coalition is staggering from one difficulty to another. It is highly dependent on Independents who could leave the Coalition ranks over one issue or another. The preferred option is for all parties to study the Department of Finance’s numbers, each devise their own detailed plan, then Mr. Cowen should put country before party and call an election and have the voters decide who should be given the task of restoring the nation’s fiscal status.

  3. @Jane Suiter
    Very good points

    “New politics, open government, ”
    Apart from changing the electoral system, I am not aware that there is much actual drive for any other specific measures. Have I missed an emerging consensus on reducing the size of the Cabinent, the no. of TDs, the abolition of the Senate? If so, I will have to get out more!!!

    Have I missed the calls and/or promises made to simply repeal the 2003 Freedom of Information Act prior to embedding a Swedish-style FoI in our constitution as I suggested here

    Perhaps there are stirrings in the long grass, but who/what parties is calling for checks and balances to limit the scope for excess by the powerful, whether they be elected or appointed, public or private?

    It seems to me that much comment is confined to the time-honoured practice of reading the tea-leafs emerging from successive opinion polls. While this matters, it seems to be a poor basis for new politics – if you mean some serious changes to how our power (as citizens, we own the power of the state) is delegated, used, transferred, moderated etc.

    It is not the kind of thing that I normally associate with interventions by the EU Commission, ECB, EFSF or the even the IMF. Have I missed something?

    Even if there is consensus on a multi-year budgetary “strategy” before and after an election, in what way will this differ – from a democratic process perspective – from the corporate statism of the partnership process which got us into the crisis we are now in?

    IMO, here we go again – the urgent driving out the important eg.
    1970s – join the EEC to get FEOGA funds;
    1980s/2000s – defer changing the tax structure until things improve – delay being the deadliest form of denial;
    1990s – we must have the 12.5% Corporation Tax Rate with little or no consideration of the impact that has on the rest of the tax structure;
    2000s – Intel’s Craig Barratt now says that of the 14 reasons Intel came to Ireland, the Corporate Tax Rate.
    Yet, smug, complacent and inert governance here has now result in what seems to a credible threat to that too.

    “The preferred option is for all parties to study the Department of Finance’s numbers, ”

    see my postings on a previous thread for a details on why I wonder about the competence and capability of the Depts of Finance in particular and the senior public service in general

  4. It happened on all their watches whether they like it or not and that includes Labour who had surrogate power through social partnership compliments of the unions traipsing in and out of government buildings.

    If indeed they are now staling, looking for the most opportune moment to grab power, it just shows us clearly that the party political games are proceeding unhindered by this so-called national economic calamity.

    The Labour FG coalition will take to running the country under the auspices of he EU IMF like a duck to water! They are all waffling in equal proportion now and the government are opening the books so that they are all waffling from the same hymn sheet. How are they going to convince the international bond market when they cannot even convince the vast majority of their own people who are now scrambling to set up citizens assemblies? The RDS is already booked out for Oct 30th as people power starts to flesh out some alternatives to a jaded government that is even prepared to spend tax payer money in defense of not having an election in Donegal.

  5. There are about 200,000 businesses in Ireland, if not more, and it can’t be beyond the realms of possibility for a plan to be built around each one of these, retaining the staff they have and aiming to take on 2 more staff.

    Also, it’s worth Fine Gael finding its voice and pointing out that this crisis should have been tackled from July 2007 onwards, when Northern Rock went bust, not when Lehman’s went under in September 2008.

    But all Cowen and Lenihan have done since then if borrow borrow borrow to avoid taking any decisions or reforming anything.

    A line by line item by item spending review of every single department should have been done about 2 years ago. For example, when Irish officals go to Brussels or Strasbourg for meetings they fly business class and get overnight accom, whereas there is no reason they can’t fly economy and come back the same day, so instead of spending thousands, hundreds ca nbe spent, that’s just one example out of hundreds of thousands of items of expenditure.

    Also, there must be hundreds of different pension schemes across the entire civil service, reviewing and reforming each one to a defined benefit pension with a retirement age of 65, should be a basis major reform to be done and there are plenty of ways a defined benefit pension can still be pretty decent secure investment over a 40 year career, that would of course require monumental reform of financial regulations.

    Also, reforms can reduce the actual cost of living in Ireland and when the cost of living, to include mortgage, childcare and transport costs.

    But before any of these can happen, the political class need a radical wake up call starting from a 60% cut in all salaries and pensions and expenses and perks for every single person in the public sector above €100k, be they President, judge, Consultant or whatever.

    When you have the likes of Peter Sutherland, Alan Dukes & Garret FitzGerald, conveniently all Fine Gaelers, calling for other people, to take cuts while they accept huge private income as well as a pension from the State, you know the penny hasn’t even begun to fall, never mind drop.

    But why would it given the Irish people do nothing, how many have bothered to write a letter, email, ring a programme, write to a blog, go on a march etc etc. Very few.

    So why would the political class change when there is zero pressure for them to do and even as the country is going down the drain, FF can still get 30% of the available votes.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s