Budget will define FF - but watch Cowen build his power too

ON the night before the 1992 general election, a group of us working on the campaign arranged to travel down to Longford where the then Taoiseach, Albert Reynolds, was holding his traditional eve-of-poll event.

On the way down from Dublin to Longford we took a detour to Birr, Co Offaly. There, Brian Cowen - the local political hero who had recently been promoted to Cabinet by Reynolds - was holding his own eve-of-poll event. It was an open-air rally in the town’s main square, a tradition which had been inaugurated by his father Bernard Cowan in the 1960s.

It was a remarkable evening, the centrepiece of which was a lengthy “back of a lorry” speech by the candidate. It was the kind of event which those of us who are part of the mass media political generation don’t get to see very often.

It was a cold night but Brian Cowen addressed the large crowd in the open air for nearly an hour. For almost all of it he had the crowd eating out of his hand. It was what we now know to be vintage Cowen - articulate, combative, unapologetic, intelligent and persuasive.

In his speech in Birr that night, Cowen touched on the full range of issues which had come up during the campaign, which had been a very difficult one for Reynolds and Fianna Fáil. But I vividly remember that for most of his speech Cowen concentrated on setting out his personal economic vision.

He advocated an open economy, where regulation was kept to the minimum. He focused on the need for a confident Ireland to trade itself a good living by competing in the world’s market place. He talked too of harnessing the new demographic resource then available to Ireland, a well-educated, young, highly skilled workforce. He also foresaw the potential for Ireland to become one of the leading software nations. All this he set in the context of a need also to protect those most vulnerable. That consideration for the less well-off is what Cowen saw as distinct about Fianna Fáil’s economic philosophy.

Twelve years later Brian Cowen is going to get a chance to apply his economic vision directly. The McCreevyite era is over; the first chapter of Cowenism will soon be to hand. On budget day in about 10 weeks’ time, we will get our first taste of Cowen’s economic vision in action.

The bulk of the burden of repositioning the Government after the local and European election setback rests on Brian Cowen’s shoulders. This task falls to him not only because Cowen’s move to the Department of Finance is the most significant change in the reshuffle but also because the Budget is the first occasion when the talk of a listening, more caring government can be tested.

This week, Cowen begins a round of budget-framing meetings with his Cabinet colleagues. As he sets out on the task, he has much to thank Charlie McCreevy for. Wholesale tax reform has been implemented in the last seven years. The recent slowdown in the economy has been carefully charted. The public finances are in a healthy condition, strong growth rates are back. The Exchequer returns published this week leave the incoming minister with much room for manoeuvre.

On the face of it, Cowen could be said to be fortunate that he’s not coming to the Department of Finance in more difficult times. But when resources are more plentiful, the choices can be as hard - and the risks to political reputation can be as stark. A government is defined by where it chooses to cut spending - when they have to cut - and by where it decides to spend, when it has resources to spend.

How he chooses to deploy the additional tax revenues which are now available will define Brian Cowen’s term in the Department of Finance. As well as maintaining control of the public finances he can afford targeted increases in government expenditure.

There should be a substantial increase on the capital side on the school building programme. There should be the largest possible cash pile for the multi-annual ringfenced funding promised in the recently announced disability strategy.

Tackling education disadvantage and targeting funding within the health services are also necessary. Brian Cowen can afford to be generous and these are the areas which need his generosity most.

Another priority should be a further extension of the medical card entitlement focused on those most at risk of slipping into poverty through sustained ill-health. This will require money. No amount of “economies” which the Progressive Democrats hope to find in the health services will fund an extension of the medical card entitlement on the scale now required, so additional funding will - at least in the short term have to be made available.

EVEN though there are funds in the kitty, Cowen should also take tough decisions on the tax side. There will be tax cuts - although these will take the form of raising the tax bands. If it comes to a choice, Cowen should concentrate the bulk of resources on raising the lower tax band rather than that between the standard and higher tax rates. Keeping the maximum number of persons out of the tax net altogether would be the more equitable objective.

Then the process of tax reform should be taken to its logical conclusion by abolishing a number of tax shelters currently enjoyed by some of the country’s very wealthy. Charlie McCreevy talked of revisiting some of these reliefs but he never got around to doing it.

Any government which claims to strive for social justice cannot justify a continuing situation where, for example, people who are about to make additional multi-million-euro fortunes on the takeover of Manchester United continue to pay no tax on their income from the stud farm industry. Here too Cowen can make his mark by taking on vested interests and their tax advisers.

There has been much intense speculation in the British media about the nature of the Gordon Brown/Tony Blair relationship and the consequences for the re-election of the Labour government if that relationship wobbles before next May’s election.

Here in Ireland over the next year or two it will also be interesting to watch the dynamic of the Brian Cowen/Bertie Ahern relationship. Although Charlie McCreevy may have had leadership ambitions, he did not attract the wider support in the parliamentary party or further afield which Brain Cowen clearly enjoys. Now after the reshuffle, Bertie Ahern’s presumptive heir is also Bertie Ahern’s Finance Minister. Like Tony Blair, Bertie Ahern’s prospects of a third term will be shaped in large part by the policies of his Finance Minister.

One can’t but help think that over the next 10 weeks Brian Cowen will be conscious that his first budget will not only set the tone for his tenure in the Department of Finance but could also paint an undercoat for his reputation as a potential Taoiseach.