INSIDE POLITICS - BUDGET 3

Translate the following comment of Tánaiste Brian Cowen into English:
“Over recent months the dynamics of the housing market have fundamentally changed… The conditions then (before the election) would have destabilised the market. (The Mullingar Alliance’s) so-called solution would have harmed the market. I have always said that stamp duty could only be looked at within the budgetary cycle. We need to support the market and not destablilise it.”

It looks tricky doesn’t it at first glance? But the translation is very simple.
It can be boiled down to one phrase: “A perfectly executed 180 degree u-turn”.

If Brian Cowen had turned up yesterday looking tanned and well five years after his smashed-up canoe was found on a shore on the North-East of England he would have caused less of a stir than his announcement on stamp duty.

Six months after he accused Fine Gael and Labour of proposing stamp duty changes that would destabilise the market, Cowen himself yesterday announced stamp duty changes that were broadly similar. The reason? Oddly enough what would have destabilised the market six months ago was not being introduced to stabilise the market you follow his logic? Erm, not quite.

Twelve months ago Cowen was portraying stamp duty as a non-issue and talking about a ‘soft landing’ in the housing market. A year later the landing experienced by the construction industry could be described more as ‘crash’ than ‘soft’. And forced by a collapse in revenue from property taxes, especially stamp duty, the Tánaiste has essentially being forced into a 180 degree turn – or as he describes it, a ‘step change’ or overhaul of the system.

His reason for this is inarguable. During his 50 minute Budget speech to the Dáil, he said: “Activity is slowing somewhat and there is some uncertainty as to where prices will settle. The housing market is an important aspect of our overall economy and the sustainability of economic activity can be assisted or impeded by the efficiency of that market.”

And it does make for fundamental change. No duty until E125,000. And the 7% on the balance up to E1million. And over E1 million, it rises to 9% for the portion of the purchase price that is over E1 million. The scheme, as announced, is not all that different from that announced by the opposition parties and by the PDs (though a little simpler). The net is that the two stamp duty initiatives announced by the Government this year will cost E270 million (E81 million for first-time buyers; and E190 million for this year.

It will be welcomed by everybody from home owners (those purchasing a E650,000 will spend a whopping E21,750 less in stamp duty) to the construction industry but also leaves the Government very vulnerable to charges of gross political misjudgement, doing too little too late to prevent the housing slump.

“He waited for the housing market to collapse before he address the need for reform in stamp duty,” said Fine Gael deputy leader Richard Bruton.

Labour deputy leader Joan Burton said that he had allowed the housing market to slump and also argued that the reforms would favour the very rich more than the very poor.
The debate between Government and opposition on this is a simple if polar one. One says the measures should have been introduced while the price curve was going upwards; the other says that it could only be introduced when it was going down, or “countercyclical” to borrow Cowen’s ugly word for it.

Cowen’s Fourth Budget was unusual in that it veered away from his usual low-key approach and had a bit of the ghost of Charlie McCreevy about it. For one, there was the stamp duty stunt, a very Charlie gesture. And secondly, it was a much more expansive budget than anybody expected from the usually conservative Cowen.

The overall economic climate has deteriorated dramatically in recent months and the Finance Minister was forced to pick up the pieces after any Government’s most torrid six months, certainly since 2002, and maybe since 1995.

“It is right and appropriate that we should run budget surpluses when the economy is performing very well. It is equally right and appropriate that we borrow when the growth outlook is less favourable,” he said in the opening passages of his Speech.

But in the run-up to yesterday, he talked about modest borrowing and ambitious growth. But the borrowing was certainly not all that modest. The Exchequer will require to borrow E4.9 billion next year. As a point of fact, Bruton pointed out yesterday that the turnaround since 2006 has been “the biggest in the history of the State.”

Then Ireland had a Exchequer balance of E2.3 billion in the black. Next year, it will be almost E5 billion in the red, a turnaround of a stunning E7 billion in fortunes in recent years.

Cowen’s thinking yesterday was clear. By borrowing to invest in the National Development Plan, he was spending wisely to reap plenty in the long term. The GDP increase will be much more modest next year at 3% but it is still better than many other EU countries. If the decline corrects itself, perhaps that will be prudent. But it does mean that the National debt will increase by a significant 50% by 2010.

The net effect of such a dip into the red is that nobody really loses and there aren’t any cutbacks. Capital spending will increase by 12% next year while current spending will rise by a more modest 8.2%. It means overall spending will be E53 billion, a relatively modest increase of E1.7b.

But there are what the opposition will portray as stealth taxes. The drug refund threshold increases to E90 per month; there are rises in bed and A&E charges, and widening the eligibility of medical cards has essentially been kicked into touch for another year to allow some review to take place.

Oh yes, and motor tax will be increased by between 9 and 11% from February (raising E83 million per annum).

Ah motor tax! The stamp duty furore almost completely eclipsed the fact that yesterday witnessed the world’s first ‘Carbon Budget’. A lot of the thunder was stolen from the Green Party’s biggest gain by the fact that the details of the Vehicle Registration Tax were leaked a fortnight ago. Still, the announcement that this year’s C02 equivalent emission of 70 million tonnes will be 63 million tonnes while hardly headline-grabbing is very significant.

Because Estimates were included there were dozens of minor sub-plots, all of them worth of mention, all of them affecting citizens of one hue or another. The E35 million increase in cancer care was a huge disappointment.

There were a couple of eye-catching initiatives like the tripling of income thresholds for family with a child under 18 with intellectual disabilities. Cowen has looked after the lowest earners and those on social welfare, though many of the increases were at a rate just above inflation. Cigarettes went up more than expected by 30c a packet; while there was some vague prose about measures that would favour low-alcohol drinks over high-alcohol ones.

And Section 481 for the film industry was extended another four years until 2012 without any of the resistance McCreevy showed four years ago.

And of course, the Government also had to take a couple of (fully deserved) swipes on the grandiose pay rises they awarded themselves, top civil servants, judges and the rest of the top brass in our society. Oh sorry, there is an efficiency review of the public service promised for next year but it has all the woolly imprecise language we have come to expect since benchmarking.

Fine Gael’s Bruton found the best put-down of it: “(Cowen) joins the solemn chorus, calling for wage restraint and for reform. But like the armchair general ordering his troops over the to into the teeth of enemy machine guns, Mr. Cowen and his pampered colleagues will be a safe distance away. When it comes to their own interests there is no demand for reform or frugality.”

No danger of a U-turn there, was there?

INSIDE POLITICS - PAY RISE

I thought it was only me banging on about the unconscionable pay rise paid to the State's top brass, who have now established themselves as fully-fledged members of the new 'landed classes'.

But it's what we call in the newspaper game as a story with legs. It just won't go away. Two Ministers came out and sounded windy about it at the weekend. And yesterday Bertie Ahern tried to put paid to the dispute with an amazing display of verbal gymnastics - it was all "smokes and daggers" he declared in a classic Bertieism.

But there's been a dishonesty to the way the Government has responded to the criticism. They say it's the first award in seven years. It isn't. An interim award worth7.5& was made two years ago. So the c 15% that Ahern and Cowen and all got was on top of 7.5% they got two years ago.

And the utterly misleading impression was given too that it was the first pay rise they have got in seven years. TDs and Ministers have got EVERY pay rise that's been going, all the national pay awards, benchmarking the lot.

Richard Bruton pointed out yesterday that Bertie Ahern's income has risen by 50% in the past four years (and as a point of fact, it has risen 133% since he came into office). And don't get me started on pensions. The pension bill for the public service is going to screw all other taxpayers by the middle of this century.

I was on Matt Cooper's The Last Word on Today FM with Richard Bruton of Fine Gael. Matt pressed Richard to say what an appropriate salary level for the Taoiseach should be. He refused to go there. But I'll posit a figure - €200,000 would be extremely generous and relatively non controversial.

And that figure should also apply to top civil servants, judiciary, the gardai and the lot. What's happened to the notion of public service? It's all about money nowadays. Greed is poisoning our society.

INSIDE POLITICS - DAY ELEVEN

Bertie Ahern's financial woes have disappeared off the radar screen over the past few days and we have returned to what passes for 'normal' business during an election campaign.

There's a huge element of artifice about what happens. Yesterday, we got a classic example of a phoney war; lots of hot air about an issue (corporation tax) where the policies of all parties (even the supposedly radical SF) are ad idem.

Most days during the campaign, all the parties hold briefings. Meanwhile, the Leader's go on manic whirlwind tours of the country where they do silly things firstly on behalf of upholding democracy and secondly on behalf of attracting the attention of the lenses.

RTE yesterday showed a great piece of archive footage from 1969 featuring Longford-Westmeath TD Gerry L'Estrange addressing a crowd outside Mass (in fact RTE has put a lot of fascinating archive material on its website including FF's embrace of American canvassing techniques in 1977; Pat Kenny explaining the use of computers in 1982; and a Liam Cosgrave address from 1973. You can find them all here.)

Nowadays, there are few speeches. It's all to do with the photo op - the most surreal was Pat Rabbitte and Breda Moynihan-Cronin on top of a jarvey in Killarney, bringing the famous Tom Parlon-Mary Harney donkey and cart photo from 2002 to mind.

The party's choose their own particular schtick each day and then try to anticipate what their rivals are going to say. Sometimes you feel like there's a secret coven where they all secretly agree in advance they are going to spar on an issue. At other times, it's more like throwing all the balls in the air and seeing which ones the media pack will catch and then kick.

Today it was health. Fine Gael insisting that the biggest broken promise of all by this Government was its promise to provide 3,000 extra hospital beds (it's part of the health strategy that runs out in 2011). The Government, particularly health minister Mary Harney countered by claiming that the FG proposal to provide an extra 2,300 beds would be impossible to achieve within five years. FG Deputy leader Richard Bruton insisted it would be, said that that FG would prioritise the first €850 million of the €2.6 billon provided for capital health spending in the NDP.

At least there was some meat in this particular sandwich, if you don't mind the distortion of a political metaphor. There are real differences between the two alternative alliances when it comes to health. And at least when you hear the debate there is a little bit more Gerry L'Estrange about it; a little bit less modern political leaders - there is debate and argument and the welcome (figurative) return of the soapbox.

INSIDE POLITICS - PROMISES, PROMISES

This árd fheis will not be about making promises that we cannot deliver, Fine Gael deputy leader Richard Bruton said on Thursday.

Where did we hear that line before?

Oh, yes, here in fact. In this column last week we quoted Seamus Brennan saying that Fianna Fáil’s árd fheis will not be about making promises that we cannot deliver.

We all know what happened after that. We found ourselves caught in a monsoon. It might have lasted only half an hour, but it left the political establishment wholly swamped.

This column, for one, was suckered last week. It gives me no pleasure whatsoever to admit that it included this ultra confident prediction: “Unlike other party conferences held so far this season, I don’t anticipate any major announcement on tax cuts, on stamp duty, on tax bands, or on anything that’s going to cost a ball of cash down the line.”

How wrong can you be? Very wrong in my case, though, in fairness, I wasn’t alone in being duped.

So when Fine Gael start telling us that they’re not going to make any promises they can’t deliver, forgive us as we laugh hysterically while quickly finding a spare patch of sand to bury our heads in.

In fairness, you can be sure that Fine Gael won’t be making any major tax announcements for the simple reason that they have already made all their major tax announcements already.

The first part of it was the 2% cut in the standard rate, the Labour part of the deal. Fine Gael’s own portion is the proposed cuts in stamp duty Enda Kenny announced on a slow Thursday during a visit to Rathkeale.

That begged a number of questions. Why then? Why not wait until the árd fheis where you can get maximum impact for expensive — yet definitely populist — concessions on stamp duty?

Part of the answer to this became evident last night during Kenny’s opening speech to the conference and his key line that “the General Election this year will be a referendum on this Government’s handling of the health services”.

That is what you’d call a “raise on the blind” in poker parlance. It is by any measure a massive gamble, saying that the election will turn on health rather than on the economy without fully knowing if those cards will be revealed.

Sure, health is always a core issue. But will a party’s policies on health be more swayable for a majority of voters than its economic and financial policies? It’s a big call. But it has been made: you can see this calculation playing through in the themes that the party has chosen for this morning’s live TV coverage of debates — crime and health.

And yes, like Seamus Brennan a week earlier, Richard Bruton insisted this week that this árd fheis will not be a manifesto launch.

But given that the party will have an almost unfettered chance to push its agendas and candidates this weekend, I’ll be very surprised if there aren’t a couple of major announcement.

But the difference will be that big surprises will be in the areas of health and crime rather in tax, stamp duty or other wallet-fatteners.

Seamus Brennan worried about promises the opposition made and their potential to bankrupt the country. I don’t think (here I go again; a fool never learns) anything Fine Gael will promise this weekend will bankrupt the country financially.

But there are other ways of bankrupting a country. At present, the Oireachtas is debating a draconian piece of legislation proposing tough mandatory sentences, erosions to the right of silence, seven-day detention, restrictive bail laws including electronic monitoring. In the dying days of this government, it has been rushed through quicker than a Bertie Ahern árd fheis promise.

The problem is that there’s no opposition to it from the big parties. Fianna Fáil and Fine Gael (and to a lesser extent Labour) do their Big Bad Wolf impressions huffing and puffing at each other to see who’s toughest. And the perverse creation and ratcheting-up of a crime crisis that simply doesn’t exist has led to the most cynical auction of all.

At last year’s árd fheis, Enda Kenny promised drunk tanks, among other hardchaw policies. That was scary. I’m worried he’ll go too far this year, establish Fine Gael’s law and order credentials by suggesting something even crazier than the Government’s crazy policies; and end up overbidding at an auction that can leave us
all bankrupt when it comes to justice, proportionality and morality.

This is my column from today's Irish Examiner.
Read Enda Kenny's opening address to the FG Ard Fheis here