Coalition’s last chance to clean up sorry mess

The Government is taking so long to sign off on its Irish Water climbdown because it has just one opportunity left to get things right, writes Political Editor Mary Regan.

IT IS an ironic final twist in Ireland’s recent tale of austerity that just as economic growth takes off, the people have decided to finally rise up against years of cuts and charges.

Just three weeks ago, the Coalition announced the first budget since 2008 that offered some relief for middle Ireland after seven years of relentless pain.

The poorer will have less to pay in the deeply unpopular Universal Social Charge for the remainder of the Coalition’s time in office, while the better-off will see three years of cuts to their top rate of income tax resulting in a boost to take-home pay.

Finance Minister Michael Noonan hailed the beginning of the end of the most difficult years in our country’s recent social history. His budget speech message was singular: The plan has worked, the difficulties endured by the Irish people have paid off, and now is not the time to lose our nerves or undo the hard-won gains.

And with the economy set to be the fastest growing in Europe by the end of the year, Fine Gael and Labour began to feel quietly confident of a return to power — holding out the carrot of further income tax cuts if re-elected.

But by budget night — a time of taking stock of the political landscape — backbench government TDs were already saying that the easing of austerity would only pay off politically if the measures contained in the budget were enough to mitigate the cost of water charges for families.

Under a tax relief plan for Irish Water bills, families who pay €500 a year in water charges — most likely those with teenage children — would get €100 back. Families with two children and an average water bill of about €270 a year will get €50 back.

It was also announced 653,000 people would get a €100 a year allowance to help with their water bills. This includes the long-term unemployed — by definition those who have been out of work 15 months or more — those on disability allowance, carers, most pensioners, and those on widows’ pension.

This did nothing to appease the public anger and public anger rather than abating, has only intensified. And so, the panic-stricken Coalition has been back pedalling ever since.

The failure for these two measures to assuage public anger was twofold. Firstly, there was always going to be a difficulty in terms of selling the benefits of the tax relief measure, as households will have to wait until the following year to see that money returned through their wages.

The budget measures were also unfairly distributed between earning levels. A wealthier family, for example, with a salary of €70,000 and two children, will see an extra €777 a year in their take home pay as a result of income tax changes— significantly outweighing the cost to them of water charges.

Conversely, at the lower levels of incomes, and among the unemployed, households will still be less well-off because of the water charge. A married couple with a single income of €25,000 will have around €190 back in their pockets as a result of changes to the tax on their earnings — a sum far less than the €270 they are likely to pay for water bills.

One problem, according to some government TDs, was that there was such a huge lack of clarity around the charge. The budget measures might have served to increase this confusion and highlight the lack of fairness, they argue.

And, there has been a failure to recognise that there are many people out there who believe they simply cannot pay, and the genie of popular revolt was already out of the bottle when the budget was announced.

The Coalition has already lost a great deal of authority by its failure to recognise the growing public anger over the issue until it was already too late.

One senior coalition source privately conceded that a sense of complacency set in after the announcement of the charges over the summer failed to spark a major outcry at the time.

As they scramble for a response, the government parties are now considering a number of options.

The first includes a referendum that would copper-fasten Irish Water to public ownership, by ensuring that no Government could sell it to private interests in the future. Labour backbenchers are pushing for such a vote and the Labour leadership is not ruling it out.

The Taoiseach, on the other hand, is not in favour of such a move that would most likely ensure the issue of water charges dominated the political agenda in a year preceding the general election.

There has also been consideration given to the possibility of transferring authority for collecting water charges to the Revenue Commissioners. This seemed to work when it came to the unpopular property tax. Environment Minister Alan Kelly repeated yesterday that this was still on the agenda. But realistically, it would be too much of a logistical nightmare and would undermine the ethos of charging for water as a conservation measure.

Whatever about these two measures, one source said that “charging affordable amounts is the only game now”. The Coalition’s task is to communicate that the rationale for setting up Irish Water is still sound, but ensuring that there is confidence in a more affordable system.

The new charging plan is almost certain to include a flat rate that is far below the current assessed rate of €176 for a one-adult home, with an extra €102 for every adult added after that. They are cautious about committing to figures at this stage, but a number of backbenchers are arguing that it should be cut in half.

The charge would be capped until the end of 2016, under plans currently being considered. The thinking in Government is that people will see when their bills land next year that the charge is modest, and set in stone for the medium term. They will also begin to feel the benefits of other budget measures such as increases to child benefit and income tax cuts, and return the Government that restored prosperity.

This thinking is extremely wishful. The result of such a move is likely to mean that Irish Water and how to proceed with charges when a metered system kicks in is likely to become a central issue in the general election —due in early 2016.

And this, according to recent opinion poll trends, will only spell bad news for the Coalition, and a boost for independent or anti-austerity candidates.

The reason the Coalition is taking its time this week in signing off on its Irish Water climbdown measures is because they feel there is just one more chance to get it right. The stakes are high.

Whatever way it decides to proceed, the Irish Water debacle will leave the Government’s authority severely undermined.

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