The Annual ritual surrounding the budget will come to an end on Tuesday 10 october when finance minister, Paschal Donohoe, unveils his first package of tax and spending proposals since his appointment earlier this year. Don’t expect too many surprises though, as most of the expected initiatives have already been well aired through inspired leaks from various government and other sources. Once again, and despite the faux outrage of some Fianna Fáil frontbenchers who are threatening to pull out of its confidence-and-supply agreement unless the USC is cut or pensioners given another ver, the reality is that the deal is already done.
It will not take much to cobble what both parties will claim as a victory in relation to cuts to the USC for lower- and middle-income earners while also ensuring that the wealthy are not overburdened and indeed will also gain from fiddling with tax bands and rates.
Varadkar has promised to reward those who get up early and those who create wealth and pay for public services in what is clearly a pitch to the middle-class and better off voters he needs to keep on board if Fine Gael is to regain power. Equally, Micheál Martin does not wish to alienate the same constituency which he hopes will return to the Fianna Fáil fold in greater numbers than the party managed in 2016.
Ultimately, the differences on tax and spending policies between the two main parties are minuscule and any rows over tax breaks for builders, increases in stamp duty, inheritance tax or whatever other measures are largely manufactured.
The real question of the ratio between reducing the tax burden at the expense of improving public services is of course ideological. This makes the contribution of the hardly radical Economic and Social Research Unit all the more interesting.
It has warned against tax cuts while the economy is growing by around 5% this year and an expected 4% in 2018. It submits that tax cuts will only overheat the economy.
“Given the pace of growth over the past number of years there is certainly no case to stimulate economic activity with the budgetary package”, ESRI economist Kieran McQuinn said. He added that, if anything, the Government might need to raise taxes in order to dampen consumption and in order to raise the funds for essential capital spending on infrastructure in housing, health and education.
This is not the narrative that Varadkar needs, to boost his chances of retaining power after the next election which many expect will come some time after the third and final budget to which Fianna Fáil committed in the confidence-and-supply deal. This is subject of course to the upshots of other unexpected events which could prompt a rush to the polls earlier next year or following the abortion referendum.
Others on the Left who oppose the tax-cutting agenda and argue that the housing and health crises, not to mind other social needs, demand that all available resources should go into public services. SIPTU president Jack O’Connor spelled this out at the union’s biennial conference in Cork on 2 October.
In his final presidential address to the union after more than fourteen years in the job, he argued that there should be no tax cuts whatever between now and the centenary of the foundation of the State in 2022. Arguing that all available resources should be put into the construction of social housing, decent health and education systems and a mandatory second-pillar pension scheme, he condemned the main parties for promoting tax-cutting policies and “a value system that precipitated the crisis in the first place”.
“It’s back to be looking the other way, while exponentially growing inequality reasserts itself in our domestic and social affairs. It is absolutely unforgiveable that thousands of our children are homeless, in the aftermath of the collapse of a credit fuelled property bubble”, he told delegates in Cork city hall.
“It is appalling to think that this is happening within twelve months of the celebration of the centenary of the insurrection of 1916, which was fought on the basis of a Proclamation which declared the establishment of a Republic which would cherish all the children of the nation equally. And while this is unforgivable in itself, it is absolutely obscene that our major political parties are again promoting a tax-cutting agenda while children are homeless, in this, one of the wealthiest countries in the world”.
It is unlikely that Donohoe and Varadkar will heed such advice or that Fianna Fáil will do anything more than pay lip service to such utterances. As O’Connor, who is chairman of the Labour Party, also said, it will require an alliance of all genuinely progressive forces in Ireland to achieve his ambition for the common good by 2022. And that is a big ask.