The assault by the Fiscal Advisory Council on the Government’s management of the national finances is a severe blow to the coalition’s economic credibility, which undermines its political strategy to promote itself as the guardian of budgetary prudence.
It comes at a time when the Government is realising that it will face politically bruising battles next year on public sector pay with teachers, nurses and other public servants. Ministers will be faced with the choice of collapsing their own creaking public pay (and therefore budgetary) policy or hanging tough against a well organised and very media-friendly public sector lobby.
Some of the more farsighted people in Government realise this, and they believe that Fine Gael has to regain the ground of fiscal responsibility before an election. They have doubts, however, about the capacity of this Government to manage that.
The report of the Fiscal Advisory Council was a dense and well constructed economic argument. The presentation by its chairman, UCC economics professor Seamus Coffey, at the Budgetary Scrutiny Committee this week was more accessible to the non-pointy heads among us. It was all the more devastating for that.
The response of Government has been to say, well, which of the additional investments in health and welfare and education shouldn’t go ahead, then?
And the Taoiseach is hardly wrong that there are pressing social needs – such as housing – which many people want the Government to meet. And that costs money.
But balancing those needs, and prioritising where to spend money and when, isn’t Prof Coffey’s job. It’s the Government’s. Prof Coffey’s job is to examine the macro-budgetary approach and pronounce on its prudence, wisdom and sustainability
Elected
Alright, say some Government figures privately. But Prof Fancy Pants doesn’t have to get elected. He doesn’t have to knock on doors in Donnycarney or Tuam or Boherlahan and justify his decisions, where the audience is less interested in macro-economic stability than it is in the winter fuel allowance or the USC or the fact that the local school is housed in prefabs.
And this is true. In fact, it is a devastating truth about democracy: the political market for good government – which disciplines itself, looks to the long term and meets current needs sustainably – is at best deeply uncertain.
Ireland is not unique in this. But having experienced three profound economic crises in the last 40-odd years, we are clearly more than routinely susceptible to a form of economic mismanagement that expands public spending in response to political demands, and then has to subsequently reduce spending in a painful and socially damaging way.
Why does this happen? Partly, I think, it’s because politicians are so desperate to please people.
The Irish political system has many faults, but remoteness from voters is not one of them. The accusations about political elites being removed from the concerns of ordinary people is one that may be levelled in many polities (in both the poorest ones and the richest ones) but it’s a nonsensical one in Ireland, despite its frequent airings.
Any Irish politician who became cut off from the concerns of ordinary voters would end up losing his or her seat. Irish voters demand proximity, familiarity and responsiveness from their politicians. The ones who don’t keep in touch don’t keep their seats.
Social needs
This is not an abstract observation. It goes to the heart of the debate over budgetary policy. It is one of the central problems in how we do politics and how we talk about it.
How many times have you heard a politician berated on radio for failing to meet social needs in health, housing or education? How many times have you heard the same presenters berate the same politicians for their failure to manage the public finances sensibly?
The fiscal council's report may have been ostensibly about economics, but really it's about politics
Remember 2007. After a decade and more of spectacular, uninterrupted prosperity, the general election inflated into a massive bidding war, with Fine Gael and Labour more than willing to match Fianna Fáil’s promises. This is where the politics of scrambling to give voters whatever they want, no matter the cost, leads. Here’s an excerpt from Bertie Ahern’s pre-election ardfheis speech:
“From next month a family with two children under 6 will get a direct and untaxed payment of €5,840 a year.
We will recruit 4.000 more primary school teachers.
We will provide 2,000 extra gardaí.
We will cut the standard rate of tax from 20 per cent to 18 per cent.
We will cut in top rate from 41 per cent to 40 per cent.
We will index tax credits in line with pay increases.
We will double the home carer tax credit.
We will halve PRSI.
We will Increase the old age pension from €200 a week to €300 a week.
We will introduce a free health check for all.
We will provide 1,500 extra hospital beds and double the number of consultants.
We will join the Luas lines.
We will build metro west, metro north to Dublin Airport and the Western Rail Corridor.”
In a comedic touch that was presumably unintended, Ahern also asserted: “Irish prosperity begins with responsible government.”
Share of the vote
As you may recall, this approach was entirely successful as Fianna Fáil returned with an increased share of the vote. As you may also recall, things did not exactly end well for any of us.
There is a danger now of a return to this kind of politics. The fiscal council’s report may have been ostensibly about economics, but really it’s about politics.
Ultimately politicians will give voters what they demand, whether that is wise or not. This does not absolve Paschal Donohoe of his responsibility to be Prudent Paschal. But it suggests that it’s not his job alone. Political timorousness is only one part of this. Public myopia and our sometimes self-destructive political culture is part of the story too.