USING TAX BREAKS TO BUY AN ELECTION IS A ROAD TO RUIN
AS THE disorderly queue was forming to present the usual Santa letters with just so many sleeps to go next month’s Budget, along came the tax receipts for August, some €274m below expectations. Finance Minister Paschal Donohoe would be wise to use them as cold water to douse the ardour of his more promiscuous colleagues, including the Taoiseach.
Leo Varadkar’s generous commitment to postdated tax breaks ad infinitum, so long as Fine Gael is in office, is all too predictable.
As the man in charge of keeping the economy in check, Central Bank Governor Philip Lane warned yesterday we are “at risk of repeating the historical patterns by which economic downturns have been amplified by pro-cyclical fiscal austerity.”
To put it more bluntly, we could go off the rails and plunge the country into another deep ravine if auction politics in anticipation of an election is allowed to run out of control.
Growth may well be the ignition system of an economy, but it cannot be taken for granted – it can slow down or even come to a shuddering stop.
Ruinous pandering to populism has propelled us into perilous straits in the past.
Should Fine Gael and Fianna Fáil get into a bidding war for votes, we will all pay dearly.
So Mr Lane’s timely warning that tax cuts, or indeed any spending, must be tempered by
Pandering to populism has propelled us into perilous straits in the past
revenues has to be recognised as wise counsel.
There are too many imponderables to be profligate, despite the largesse coming from the multinationals.
Our borrowing requirements have not gone away. A sobering Department of Finance report this week reminds us that we have the third-highest rate of national debt per head in the world. Only Japan and the US have higher.
Collectively, we shoulder a national debt of €201bn – or €42,000 per person.
Prudence may not win votes, but it can protect jobs and guarantee a future for our children.
Of course there is a pressing case to be made for a national programme to deliver affordable housing. There is also an urgent need to tackle the crisis in health.
Resources need to be targeted where there is real need. Running up deficits or deepening them to buy votes would be a grave betrayal of all that has been sacrificed to get back on a road to recovery.
Knowing, as we do, that we will continue to run deficits until 2020, major tax cuts can only put us back on a road to ruin.
Mr Lane’s proposal that raising taxes on investment and consumption during phases of strong growth seems sensible.
US politician Bruce Babbitt put it rather well when he claimed: “The notion big business and big labour and big government can sit down around a table somewhere and work out the direction of the economy is at variance with the reality.
“I mean, it’s like dinosaurs gathering to talk about the evolution of a new generation of mammals.”
To stick with the zoological metaphors, we have been made monkeys of too often in the past not to recognise when we are being played.
So as Fianna Fáil and Fine Gael resume their discussions on the Budget: focusing on the “known knowns” could be the key to engineering the necessary buffer Mr Lane recommends, to cushion the impact from the inevitable unknowns coming down the tracks.