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Of honourable men November 22, 2006

Posted by franklittle in Ireland, Irish Election 2007, Irish Labour Party, Irish Politics, The Left, Uncategorized.
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TAXES ARE DOWN AND WILL STAY DOWN. Forgive the caps, but in fairness, Labour felt it was such an important point to make it the headline on the front page of their free news-sheet, The Rose, launched last September.  

Still not clear? Bit unsure? Let’s see what Pat has to say about it:  “I’ll say it again: taxes are down and will stay down! There will be no increase in tax rates while Labour is at the heart of the new alternative Government with Fine Gael.” 

If only Jim Larkin, James Connolly and William Thompson were alive today to watch with pride and satisfaction at the leader of the Irish left utter such a ringing assurance to the denizens of the IFSC and IBEC Headquarters in the lower regions of Hades.  

And it also doesn’t make any sense. Last week, Labour published A Fair Deal, designed to target poverty and disadvantage. It’s 55 pages long and somewhere around page 44 you get your first definite commitment of funding with a specific figure, one of few. But overall, Labour is proposing that:

at least €3.5bn of the National Development Plan funding (a minimum of 5% of total funds over the lifetime of the plan) for investment in designated Fair Deal communities.” 

Fair Deal communities, for those not aware of the concept, is the not altogether bad idea of identifying areas of extreme marginalisation and disadvantage and investing as much as possible into them. The document doesn’t really explain how or where this €3.5 billion will be allocated, instead contenting itself with pious restatements of existing Labour policy, targets and a deluge of statistics. Actual proposals are thin enough, but maybe they’re holding back for the manifesto. 

But to get back to my point, there will be no increase in taxes, but they will spend €3.5 billion on this one specific policy alone. This doesn’t include the money they intend to spend building the 10,000 social housing units a year they committed to in Gilmore’s housing plan, launched earlier this week. Or to provide the hospital beds and primary care centres Liz McManus has promised. Or the schools, back to education allowances and extra teachers Jan O’Sullivan is committing the party to. Or to build the new roads, bypasses and rail networks Labour candidates are promising around the state.  

Now I make no claims to be an economist, but it seems to me that if one is going to increase spending in enormous and fundamental ways, one must find the money somewhere. But there are to be no new taxes or tax increases. It says so in The Rose. Yet billions of euros have already been committed to extra spending.  

Puzzled? A little doubtful about these spending pledges or solmen oaths on taxation.  But worry not, for it must be so, for Pat Rabbitte is an honourable man; So are they all; honourable men.

Comments»

1. joemomma - November 23, 2006

“Fair Deal communities” sounds a lot like RAPID. It doesn’t bode well for Labour if they’re just reheating old Fianna Fáil ideas.

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2. WorldbyStorm - November 23, 2006

Worse again if they’re spending money they don’t or won’t have.

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3. Lorenzo - November 23, 2006

You can have the same tax rates but still get tax rises by not indexing the tax bands. See FF/PD budgets 2002 and 2003 for reference.

Unless of course they are planning to provide the extra cash by making efficiency gains in the public sector… Why me laugh?

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4. Michael Taft - November 23, 2006

One does not have to be an economist to be sceptical about substantially increasing expenditure while maintaining a ‘stay-down’ tax policy. The last time Labour dealt with this issue was back in November 2000 with its ‘New Directions, New Priorities’ document on fiscal policy. In it they proposed higher tax revenue while skirting the issue of where that revenue would come from. A bit tepid but at least more honest. Unfortunately, Labour and some sections of the Left have become completely risk-averse on the issue of tax. Until it addresses this head on, its hard to see how it will come to lead the debate.

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5. Fat Dave - November 24, 2006

A government can, and this current bunch do, pursue a policy of breakneck growth to allow it to continue to increase spending without increasing tax rates. Of course this approach will create bottlenecks where infrastructure is relatively fixed, and this is quite visible in Ireland’s case in our roads, public transport network and primary education system, which should slow that growth over time. The problem will only become apparent when growth, and by extension taxation revenue, slows. When the property market normalises and the economy creates about 30k jobs a year the government will find itself commitments it cant shake (too many public sector staff with jobs for life) and too little revenue to pay for them. It might not be Armageddon but it really is not going to be pretty. It is at this point that taxes will rise. Labour promises are simply premised on the growth experienced in the last few years continuing, and if they get elected to power they’d better hope it does!

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