London on the night of an England game is always a bit tense. The pubs are overflowing, Three Lions is being roared out of key by lads with more than few on board – and it’s only 6pm. If you have spent any time in this city you’ll appreciate the “after work” pub thing is such an important part of London’s popular culture. After days of rain, the sun is out, St George is flying and an England team just scored.
Over the past week, people have been trying to digest what really happened in the general election. Did the UK, and specifically England, switch to the left or the right? On paper, obviously the parliament is more left than at any stage in the past half century. However, when you drill down, the numbers are at best inconclusive. Britain’s first-past-the-post electoral system distorts the relationship between the number of seats and their share of the popular vote.
Labour won 34 per cent of all votes but now commands about 64 per cent of the 650 seats. Meanwhile, the Tories with 24 per cent of the vote secured just 121 seats – their worst result since 1761. Only the Liberal Democrats – with 12 per cent of the vote and 11 per cent of the seats – look representative. The story that no one really wants to talk about is the re-emergence of Ukip in the guise of Reform, which won a pretty spectacular 14 per cent of the popular vote yet has only a measly 1 per cent of the seats in parliament, the same number of seats as Sinn Féin that secured about 1 per cent of the total UK vote. The BBC analysed all elections over the past century and found that Labour’s recent win ranks as the most disproportionate on record: a 30 percentage-point gap between the share of votes won and the share of seats won.
The State has to take the lead to protect the economic and social template that Ireland has created which is to use other people’s money to create our own wealth
Talking to people in London this week, there is a sense that the aim was to get the Tories out. Quite how that was achieved, by whom and what it says about the country appears to be of less interest. The Labour mood is one of relief not jubilation, no one is outside Number 10 singing Things Can only Get Better. In truth, this was an election the Conservatives lost rather than one that Labour won. And the most fascinating aspect of the vote was that where they went head-to-head against the Tories, Reform took more Tory votes than Labour.
You could argue that the Conservatives were more injured by Reform than Labour. After 14 years of chaotic Tory rule, where on almost every economic and social metric British society has fallen backwards, this is not a great reflection on Labour. It has been said before but it’s worth reiterating: the victorious Keir Starmer garnered less of the popular vote than Jeremy Corbyn. For political observers, the big talking point is the four million voters who abandoned the Conservatives for Nigel Farage’s Reform party. Farage is the politician who the centre-right and left can’t seem to overcome.
That being said, politics is about power and Labour are unassailable with a massive majority until around the end of the decade. But what’s the point of power without money? The big problem is that there’s not enough money about. Without cash, what can Labour do and how can they halt the progressive decline of the UK?
Contrast the UK budgetary problems with its deficit of about 2 per cent of GDP to Ireland’s almost embarrassing abundance of revenue. The difference is the multinationals, the Irish inward investment model and the fact that Ireland has imported an American capital base to fuse with local talent. If it wasn’t for this, Ireland could be Little Britain.
On many other measures, such as productivity in the non-multinational economy, the housing disaster in terms of rents, prices and lack of accommodation, the comparatively low number of hospital beds and medical professionals per head, Ireland and Britain are outliers in Europe. Without US money, we too would have very similar social problems to those that pertain across the water. The major difference is we have money to throw at the problems, Britain doesn’t.
Bizarrely, despite the fact that tax revenue for multinationals has continued to rise every year, many people refer to our corporation tax take as a “windfall”. What does this mean? Is the money going to disappear? Is someone going to take it from us? It’s very difficult to understand what lies behind the unwillingness to accept that the tax surpluses are real.
We’ve been warned by finance mandarins and economic prognosticators every year for the past 10 years that the corporation tax revenues are unstable, fragile and could dry up at any time. Yet every year they get stronger. This is because of one simple fact – the tax system is set up to generate surpluses. It is extraordinary that the very people who apparently designed the tax system to generate a surplus don’t seem to have confidence in their own creation.
When a small country sets up a tax system to tax the capital of richer countries deployed within its borders, it will always generate a surplus. When it does this at scale the surplus will become enormous. If it manages to remain attractive to that capital, the surpluses will endure. But if it does not spend those surpluses on improving the quality of life of its citizens – and by extension the managers and talent that work in the multinational companies – it will break the model itself. Nothing else has to happen bar local inertia to destroy this economic paradigm.
For example, if Ireland fails to build a Dublin metro or 60,000 homes a year or finance free childcare, by not spending this surplus, it will break its own highly successful economic and social prototype. We have the money to do these things. It is so obvious that it shouldn’t have to be said. An economy overheats because of too little ambition, not too much. Houses prices fall because you build them, not because you don’t. Congestion eases because you build more trains and public transport in general, not because you encourage people to buy more cars. Economies overheat when there is too little building, not too much. We need to spend money now.
The State has to take the lead to protect the economic and social template that Ireland has created, which is to use other people’s money to create our own wealth. It’s an entirely legitimate approach to economic development but to get the most of this opportunity, Ireland must cultivate a growth mentality – and that means abandoning the relentless narrative that the tax revenue is a “windfall”. It is not an accidental windfall, it is the intended outcome of 30 years of policy.
When looked at from Britain, the problems of Ireland are ones that the new Labour administration would love: too much money, large tax surpluses and politicians choosing where to spend, not where to cut. Our surpluses are reaching petrostate dimensions, but the difference is that petrol runs out and, if we continue to attract international capital, international money and technology flows don’t have to run out and can last for generations.
At least we can be champions of Europe in one area.