GERARD HOWLIN: Narrow margins could push Leo to call general election after budget

Peter Fitzpatrick

Things have changed, apparently unexpectedly. The resignation of Louth TD Peter Fitzpatrick from Fine Gael on Monday does not automatically change events, but it may do so dramatically. 

There is no danger of the budget falling next Tuesday. Fine Gael has the numbers — with a few others — to give it a majority, when Fianna Fáil abstains, which it will.

What Fitzpatrick’s departure changes, without making any assumption about how he will vote, is the political context ahead. 

Already on narrow margins, Leo Varadkar now absolutely depends on Seán Canny, a former Independent Alliance TD but still a Government supporter, and former Fine Gael TD Michael Lowry.

Noel Grealish, an Independent for Galway West, also supported the Government on the no-confidence motion in Housing Minister Eoghan Murphy. He is now the national wiggle room.

There is no reason, if continuing on is preferred, why the Taoiseach wouldn’t seek an arrangement with Grealish. 

There is no reason either why the Government shouldn’t continue on regardless anyway.

Fitzpatrick has narrowed the margins and upped the ante; he hasn’t changed facts fundamentally. But he has allowed Leo do so now, if that is what he really wants.

To have called an election when confidence and supply remained on the footing it was founded would have been brave, even reckless. 

Now he can say that context has changed and call an election after the budget. 

Doubtless, some will advise him to do that. He has a week to make up his mind, and act. To stay means continuing in circumstances that cannot be predicted, and until a time unknown. 

The jeer of being in the maw of Lowry will be a constant refrain. It means engaging with Fianna Fáil after the budget, in circumstances where having abandoned the option to go, and losing a single but important vote, relative positions are slightly adjusted.

I think it would still be brave to call an election over Peter Fitzpatrick. But you never know.

The coming week is one for a critically important political judgment from the Taoiseach. And election campaigns can be funny things. 

On February 6, 2016, RedC published a poll putting Fine Gael on 31% and Fianna Fáil on 17%. On polling day the result was Fine Gael 25.5%, Fianna Fáil 24.3%. 

Given the changed position of the two largest parties in seat numbers now, even a small setback on expected seat gains could be a life-changing experience for Fine Gael. 

It never ceases to amaze me how some in that party don’t understand that these are the good old days for them. 

For now, I assume the Government will go on. But please pray for those in high places beset by temptations.

In the meantime, a budget is being prepared and, whatever the economic facts, we have fully arrived back at 2008. 

I know because Paschal Donohoe foolishly told me so. 

Hardly two weeks ago in his speech at IBEC’s annual dinner the minister, in a pointed barb at the unnamed but obvious Irish Taxation Institute, said: “I do not believe the tax system — or indeed the approach to regulation, fiscal policy or overall economic management — that prevailed in 2008 is a useful benchmark or indeed one that we would look to return to. As numerous reports and inquiries have shown, the tax base in 2008 was too narrow, there was an over-reliance on transaction taxes and excessive levels of tax expenditures that encouraged economic activity that was not in the public interest.”

I couldn’t agree more.

The Irish Tax Institute caused umbrage because, in the much longer report, they pointed out that effective rates of tax are much higher than in 2008. 

A single person on €35,000 paid an effective rate of 15% in 2008 and that’s 18% now. It was certainly too low then, and precisely because the tax base — rhetoric aside — hasn’t been significantly widened, it may be too low still. 

Words matter in politics. 

It’s a test of mettle about who owns them. The Fiscal Advisory Council told the minister bluntly on public spending that “improvements on the budgetary front have stalled since 2015”. 

Specifically “non-interest spending has risen at essentially the same pace as tax revenue since 2015 so that the strong cyclical recovery and favourable external environment have not led to any notable improvement in the underlying budgetary position”.

It is back to 2008, because we are frittering away recovery to meet expenditure demands for public services. The reference to 2008 was telling. All preachers speak to themselves.

Far from widening and deepening, the tax base is narrowing. This undermines the economic base and it drives the need to own essential words like prudence. 

Paschal is mad for prudence. Since 2011, the number of income earners paying tax has declined from 88% to 71%. 

Prudent? 

This is against a background of no water charges and a concerted attempt by the same minister to fillet an anaemic property tax. 

If holding the centre is your political philosophy, why are the numbers with no discernible stake in society ratcheted up, while the young who do not own homes are pressed upon so while those who are older and who do, are favoured?

On the property tax, it can be passed on to your estate. The brouhaha about it is an urban middle-class am-dram version of John B Keane’s The Field. 

Some themes are universal. The USC has been chipped away at in every budget since 2015. The Fiscal Council put it bluntly: “It is inevitable that adverse shocks will occur in coming years.”

It continued:

The highly concentrated nature of Irish corporation tax receipts means that substantial reductions in government revenue could arise if even one large firm were to relocate its operations to elsewhere.

The minister deplores the ‘all-or-nothing’ approach that he says, and he is largely correct, characterised Ireland in 2008 and before. 

Yet, decision by indecision, he moves us back measurably closer over time.

Ultimately, politics is neither an academic nor a philosophical pursuit. The contest of ideas certainly shapes events. 

But ultimately it is an unending series of practical decisions. 

Necessity, as defined politically, takes hold even on the virtuous. The lengthening trail of consequences, coming from decisions taken, shapes the narrative. 

In the end, the contest of ideas is more an undignified rush to the lending library for some self-justifying tome off the shelf, than any emanation from first principles. 

2008 is a feared talisman because it was most recently seen hanging about the neck of its supposed antithesis. 

You have to say the magic words intensely and repeatedly to ward it off. 

The coming week will tell a lot about words such as prudence, about holding the centre, and about the key decision on whether to hold on at all.

More on this topic

Government unlikely to heed sage external adviceGovernment unlikely to heed sage external advice

Fiscal Council warns Government over reliance on corporation taxFiscal Council warns Government over reliance on corporation tax

Government announce unexpected €100m Budget surplusGovernment announce unexpected €100m Budget surplus

ESRI: Budget 2019 will hit lower income homes harderESRI: Budget 2019 will hit lower income homes harder


Lifestyle

Guilt offers highly-entertaining drama, while McMillions is among the offerings from Sky's new documentary channelWednesday TV Highlights: Guilt-y pleasure viewing from RTÉ and a Monopoly themed heist

More From The Irish Examiner