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That cabinet rift… December 13, 2012

Posted by WorldbyStorm in Economy, Irish Politics, The Left.
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This afternoon we’ll see the Social Welfare Bill vote, or as the IT puts it this morning:

All eyes will be on Labour Party backbenchers in the Dáil today during critical votes on the controversial Social Welfare Bill, which is expected to complete all stages by 2pm.

So far so good for the Government for all the froth and rhetoric from some LP quarters so it would hardly be unreasonable to be sceptical in the extreme that we’ll see any defections.

Meanwhile how much should we credit stories that emerged at the weekend that there was a ‘serious coalition rift’ over the Budget? Pat Leahy reports in the SBP that;

Tánaiste Eamon Gilmore led Labour ministers out of the cabinet room last weekend as the coalition experienced its most serious breakdown in relations over disagreements in the budget.
Gilmore later returned with the Labour ministers to express his party’s opposition to a 3 per cent, across-the-board cut in social welfare payments, demanded by Fine Gael in return for a 3 per cent increase in the universal social charge for people on incomes of over €100,000.

According to Leahy it was only resolved by a two hour long private meeting between Kenny and Gilmore after which:

It was at this meeting that Gilmore agreed to drop Labour’s demand for the USC hike, but only in return for a package of capital taxes and taxes on savings.
Kenny agreed, and capital gains tax, capital acquisitions tax and Dirt were all increased by 3 per cent last Wednesday. This allowed Labour to claim that the tax package was aimed at the better-off.

Though as Leahy also notes:

Many of the other tax measures in the budget hit the less well-off harder.

And the scoop from inside is that:

A number of inside sources have confirmed the budget crisis last weekend. Sources with direct knowledge of, and involvement in, Saturday’s events say that it was by far the most serious disagreement between the parties since the government was formed, and threatened the very future of the coalition.
“The tensions were more serious than they have ever been,” said one Labour figure. Senior Fine Gael sources confirm this view.

And the logic of all this brinkmanship?

Labour believed that Fine Gael would accept its proposal for a hike in the USC for higher-paid workers until about ten days ago, when Fine Gael made clear that its price for accepting this was a 3 per cent cut in all social welfare payments – except the old age pension.
There was no way that Labour would agree to such a measure, and Gilmore expected Fine Gael to drop it.
However, Fine Gael argued that if it was to hike the USC, and thus break its promise on income tax, Labour had to take the same pain on its promise to maintain welfare rates.

A number of thoughts come to mind.

Firstly that we have absolutely no way of knowing whether this is true. That’s not Leahy’s fault – but one doesn’t have to be the worlds greatest cynic to have the thought cross their mind that such a story is deeply expedient from the point of view of a Labour Party already in a tricky political (and electoral) position. Stuff like this is handy in generating at least the perception that the LP is ‘doing its best in difficult circumstances’. But in all honesty after last week’s entirely self-serving attack by Gilmore on the Technical Group TDs over the issue of untouched expenses one would have to be wary at taking it entirely face value. And yet, having talked to people closer to such matters than I am the sense amongst them was that Leahy’s contacts are good and that in outline this was largely a correct reading of the situation.

That said if true what does a cabinet walk-out constitute? Is there anyone who genuinely believes that given what was passed at the Budget – and there have been some pretty egregious cuts, all in all, this would be the rock upon which the Coalition would ultimately founder?

It seems unlikely. Highly unlikely. Indeed in another piece on the same topic in the SBP Leahy writes that according to a ‘senior LP source’:

“I think it is damaging, yes. It’s obviously not a positive development. I don’t think anyone thought it [the coalition] was over, but the tensions were more serious that they have ever been.”

But even if true and the walk-out was sincere and there was a full intention to follow through on it were no concessions forthcoming then there is a political effect – despite Leahy reporting that relations between Tánaiste and Taoiseach remain solid subsequent to the walk out.

It suggests a number of things.

Firstly that the Labour Party leadership is not entirely sure it can carry its TDs all the way with it – otherwise why the walk-out?

Secondly that the LP leadership is amenable to some pressures placed on it. This isn’t quite the ‘weakest link’ line that has been put about, because as can be seen by the fairly solid support for the leadership in the last week the stresses, and as noted elsewhere I find it hard to believe that even were there a split in the LP ranks that there wouldn’t be sufficient FG and LP TDs who would remain on board in the Coalition, sufficient to see it through. But it is indicative that they – quite naturally from their perspective – want to keep the show on the road for as long as is humanly possible.

And thirdly – and following on from that last thought, that this can only get worse given the pressures still ahead. I’m finding the rhetoric of the forthcoming Budgets for 2014 and 2015 to be very interesting. Gilmore’s own line about 85 per cent of the adjustments being now made (I paraphrase, but only slightly) is telling. Consider the efforts expended on the most recent €3.5bn and note that there is upwards of €5bn to be addressed in the next two years – and that in the context of Noonan’s near-panglossian growth rates projections for those years. So €5bn and perhaps many more.

Of course those are predicated on the report being accurate, and perhaps it is and perhaps it isn’t. But there’s a further point. The very fact that such a report emerges suggests that the LP wants it to. And that suggests that the LP is conscious that it is very very vulnerable at the moment. And that third point above suggests it will almost inevitably get more vulnerable.

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1. LeftAtTheCross - December 13, 2012

“And that suggests that the LP is conscious that it is very very vulnerable at the moment. And that third point above suggests it will almost inevitably get more vulnerable. “

Perhaps when the LP speaks about measures to protect the vulnerable whet it’s really talking about is protecting itself.

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CMK - December 13, 2012

Probably. What I find interesting is that almost all government politicians’ articularcy (never amazing to start with) is failing them palpably as they try to defend this budget. From Enda Kenny’s woeful performance on the 9 0’clock news on Budget Day (already picked apart by Gene Kerrigan and Fintan O’Toole) to Kevin Humphreys’ performance on Primetime this week they seem to be aware that they are having to defend the undefensible and they can’t just muster the language to do so.

On a different note, and to put the respite carers cut (so dear to hearts of Labour TDs) into perpsective: on Monday 17 December close to 60 million euro will be paid out to six separate unsecured bondholders. Three for EBS and three for Bank of Ireland; all issued in 2006 – 2007.

I suppose it’s understandable that Labour TDs are getting antsy as when the full story of the bond holder payments comes out, which it’ll have to (probably when all the bonds have been paid), they’ll have to stand over statements like ‘we regret the cut to the respite care grant but we’ve defended core payments’ and explain why four days after voting this through they are standing over paying out the equivalent of two years respite care grants to financial institutions who in all probability don’t need it and wouldn’t miss it. But, I suppose, the mysteries of ‘European Solidarity’ are beyond the ken of those of us outside of the Labour Party.

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2. Bartley - December 13, 2012

It would take a huge degree of gullibility to swallow the Labour spin and posturing on this.

Social welfare cuts are not a Rubicon that if crossed would force the LP to jump ship (just look at how their promise to protect SW rates has morphed into protecting “weekly” rates only, as if the frequency of the payment makes any difference to the impact of the cut).

As the next budget will show, the CPA is Labour’s one and only red line.

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3. CL - December 13, 2012

“One of the more alarming aspects of the Budget was the revelation that the Government rejected the proposal to impose a three per cent increase in the universal social charge (USC) on earnings in excess of €100,000 “on the advice of the multinational sector” (Breaking News, December 5th).”

http://www.irishtimes.com/newspaper/letters/2012/1212/1224327773427.html

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4. doctorfive - December 13, 2012

Was interesting to hear backbenchers have been told to stick it out on assurances of growth next year. Noonan didn’t outline on what planet he meant though.

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5. Jim Monaghan - December 13, 2012

Osbourne is saying 6 more years of austerity with a stronger economy than ours. The FG/Lab are saying 85% done, just 2 years to go. I wonder

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6. The Caretaker - December 13, 2012

I find professional wrestling ‘feuds’ more convincing personally.

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