Populism is flowing into Irish mainstream

From water charges to public service pay policy, our largest parties are shifting ground in the name of expediency, writes Colm McCarthy

THE mainstream European media have been venting about the rise of a new populism, concerned that far-right anti-EU parties will do well in elections in the Netherlands last week, in France in April and May, and later on in Italy. But they are downplaying an important political truth: populism is as old as the hills, nothing new anywhere in Europe, Ireland included.

Comparisons of Marine Le Pen, Donald Trump and the UK Independence Party to the fascist movements of the inter-war period are overblown. There have long been populist parties, and populist tendencies in the mainstream parties.

France’s Front National made its first electoral breakthrough as far back as 1987. Silvio Berlusconi’s Forza Italia party first propelled him to the prime minister’s office in 1994 while in the Netherlands, where the Freedom Party is polling well ahead of Wednesday’s election, its precursor first polled strongly in 2002. The Austrian Freedom Party attained participation in government two years earlier. The economic downturn since 2008 has fuelled the rise of right-populism in Europe but did not summon it into existence.

Populism in its current manifestation in these countries has an anti-immigrant tinge and increasingly an anti-EU dimension too. The distinguishing feature in economic policy is, and has always been, a short time-horizon and simple solutions to complex problems (build a wall, take back control, keep out imports). In Italy, there is a real prospect of a right-populist majority whenever the election is held — it cannot be later than May 2018. Parties opposed to Italian membership of the eurozone, the European Union, or both, have been receiving the support of around half the electorate in recent opinion polls. But the greatest significance of the populist drift is in the impact on the policy positions of mainstream parties. Even where the insurgent parties fail to win power, they already exercise profound influence on those parties already in government.

This has been most dramatically illustrated in Britain, where today’s Tory party has embraced a narrow English nationalism beyond anything contemplated by Margaret Thatcher. The price of marginalising the UK Independence Party has been the adoption of its policies, including the hardest form of Brexit and an anti-immigrant stance.

The Republican Party in the United States is now overtly protectionist for the first time since the 1930s. In Germany, the threat from the new right-wing Alternative für Deutschland party has provoked a rightward shift in Angela Merkel’s centrist coalition, which faces national elections in September. Something similar has happened in the Netherlands and elsewhere. A degree of capitulation appears to be the preferred strategy of the European centrist parties in the face of the populist onslaught.

Since no significant voices in Irish politics favour anti-Europe policies, or have taken an anti-immigrant stance, the populist advance seems to have passed Ireland by. The diminished popularity of mainstream parties at recent elections has seen voters turn to new groupings on the left, or to non-party independents. Despite the severity of the economic downturn from 2008 to 2012, there has been no new Irish right-populist party. But there is more to populism than a dislike for immigrants or the EU. Since this country’s exit from the troika bail-out programme at the end of 2013, there has been a markedly populist shift in the economic policy positions of all mainstream Irish political parties.

This is best illustrated by the water charges debacle. No serious person believes that water supply and wastewater disposal is anything other than a natural monopoly utility, to be organised along the same lines as electricity or gas and paid for by users. Ireland is the only EU country to have declined to organise some form of user charging for residential water supply. But the three largest parties in Dail Eireann, Fine Gael, Fianna Fail and Sinn Fein, have now completed, with varying speed and elegance, a full 180-degree pirouette on the issue. All three were at one stage in favour of residential charging. Sinn Fein was first to reverse engines, followed by Fianna Fail, and Fine Gael now appears to have embraced the indefinite deferral of a proper charging scheme. The Greens and Labour seem to be sticking to their earlier support for charges but that will make no difference to the outcome. There will be no scheme of charging sufficient to fund even half the costs of the system for many years, or until the EU enforces compliance with its rules.

Irish Water must now be utterly demoralised: its funding model has been undermined and nobody seems to know how its capital programme is to be financed. The Exchequer will presumably have to fund the cost from general taxation, along with whatever fines may be imposed from Brussels for non-compliance with the Water Framework Directive.

Decisions in principle to extend charges to urban residential users were first taken in the early 1990s, a quarter of a century ago. This has been one long and shambolic exercise in capitulation to political expediency.

A more recent example has been the unwillingness of all parties to face down the challenges to public service pay policy, initially through the mishandling of the Garda pay dispute. The concessions made to gardai have undermined the Lansdowne Road Agreement and threaten the control of public spending in the years ahead.

Since the minority Government assumed office last year, there has been a complete disappearance from political discourse of any concern about the continuing additions to state debt. The recent regime of very low borrowing costs for government is likely to come to an end during 2017. The European Central Bank has been purchasing government debt on a large scale in the secondary market, driving down debt service costs. This has been particularly beneficial to the heavily-indebted countries, which can re-borrow maturing debt at low cost. This ECB policy cannot last forever, interest rates for government have already risen and further rises are inevitable, as the chief executive of the National Treasury Management Agency pointed out to a Leinster House committee last week.

The level of outstanding state debt is about 2.8 times the government’s annual revenue. This is one of the highest ratios in Europe, lower than Greece but similar to Italy. A comfortable ratio would be about half the current figure and it will take a decade of decent economic growth and a period of budget surpluses to achieve the necessary reduction.

But the political class appears to have concluded that Ireland’s public finance crisis is over, and that future budgets will feature tax reductions and expenditure giveaways. If Brexit goes poorly from an Irish perspective, and the interest costs on re-borrowing continue to rise, the need for fiscal restraint could become urgent very quickly.

Without benefit of an actual populist party, the Irish political leadership, in Government and Opposition, has reverted rapidly to type, and has slipped back into a distinctly populist style of thinking about economic policy. The external threats from Brexit and from corporate tax changes are substantial and there is little an Irish government can do to avert them. But the damage can be contained by ensuring sustainable public finances, ideally without a return visit from the troika.

‘The political class appears to have concluded that our finance crisis is over’