With a general election in the Republic of Ireland looming sometime between now and this time next year it is timely to consider what choices and policy options are appropriate. The Nevin Economic Research Institute is not associated with any political party or platform. Our job is to undertake economic research informed by the evidence. However, we are interested in how economic policy will evolve in the coming years and how it can contribute to a different vision and model for Ireland in the long-term. To that end, this blog offers some ideas, questions and suggestions – written as always in a personal capacity - in regards to how a new Government or programme of government could be shaped in a way that moves this part of Ireland in the correct direction (I almost wrote ‘right direction’!). It focuses on economic issues only.
Many of the suggestions are general in nature but sufficiently focused as to identify the main outlines of a possible ‘left alternative’ policy approach. Irish politics is reflecting European developments. Old allegiances are breaking down and new movements and parties are emerging across Europe (and not always in a desirable way).
The danger, now, is that many lessons of the crash of 2008 and what led up to it have not been learned and mistaken policies are being pursued. One clear example of this is the widespread endorsement of the idea that taxation is too high and tax cuts for this group or that group is a necessary and good thing to pursue (usually this comes with the proviso that tax cuts must be our group or interest but not for others). True, political parties do not win elections on the basis of promising tax increases. However, if we are to be honest with ourselves, whether as voters or political activists, we have to ‘join up the dots’ between what is emerging in areas such as health, education, childcare, transport, energy as well as the troubling signs of increased poverty including poverty among those in work struggling with rising bills and charges of one sort of another.
The debate in the lead-up to the next election needs to be informed by a vision of what sort of society we envisage and how we are going to get there. It will take many elections and many decades to fundamentally change the economic and social landscape. Moreover, it will require a root and branch reform of political institutions and culture – something that is not addressed in this article. At this time, a progressive political agenda needs to focus on four things:
- Living standards
- Employment – quantity and quality
- Public services
- Homes
Many areas are important from the competitiveness of businesses to the role of research and enterprise. However, what counts in terms of people’s economic and living conditions is access to employment, income and services built in a dynamic and diverse enterprise economy.
Living standards
A key problem in Ireland is the unbalanced structure of the economy with over-reliance on foreign direct investment and, as a consequence, a low share of wages in national income. Add to this a growing inequality in wages (before taxes and social welfare payments). This puts huge strain on public finances and, at the same time, leaves Ireland extremely exposed to international shocks. Changing this will take time. However, a start can be made by focusing on:
The national minimum wage (currently €8.65 per hour).
Low pay just above the minimum wage (typically under €12.20 per hour) as well as precarious work contracts and conditions.
Social welfare payments and eligibility where a tightening of conditions and a lowering of some payment rates took place during the recession need to be reversed especially where poverty rose as a direct consequence of cuts to welfare.
Reform of the welfare system and a movement to reduce and eventually abolish low pay goes hand in hand with the establishment of the principle and practice of a living income that allows all persons and households to live with dignity (something that is surely not unrealistic in a relatively prosperous country such as Ireland).
Employment
Creating ‘full employment’ means creating enough well paid jobs that can sustain individuals, families and communities. This will require a co-ordinated approach to strategic investment, banking, lending to firms, upskilling and a growth in new forms of economic activity based on co-operative ownership and public and community enterprise. Moving towards full employment will mean creating enough full-time and part-time jobs for everyone who wants to work and can work on a living income with proper conditions. Investment in sustainable sources of energy could give an important boost to employment creation as well as move Ireland’s towards a medium-term goal of lower dependency on imported oil and gas. The potential for revenues coming from oil and gas off the Irish coast should be re-assessed and, where warranted, the rate of corporation tax on such profits raised.
Public services
Given Ireland’s growing population as well as a higher proportion of people over the age of 65 there is a need to create a more efficient, expanded and accountable public service. Government should invest in, and provide directly, early childhood education and care for children in the 2-4 age bracket. A key to funding a European level of public service will be an expanded and properly resourced social insurance fund. This will involve an adequate level of contribution from employers and employees. A start could be made by raising the employer rate of social insurance contribution by 3 percentage points on all wages above €100,000 a year.
Homes
Shortage of accommodation, escalating rents in the private sector and the re-emergence of a property boom shows the failure of the current developer-led model. An emergency programme of social housing provision needs to be introduced allied to controls on rent which are normal in many European countries at least until such time as the supply shortage has been rectified.
Moving towards full employment, higher wages, better public services and more homes for our rising population will demand an honest debate on:
- How much taxation/revenue Ireland needs to pay for public services, income protection and public investment in social infrastructure?
- What role is there for the State along with other partners in areas such as banking, economic infrastructure, new commercial enterprises (e.g. municipal) and social services?
Specific proposals – costed and checked against experience and practice in the past in Ireland or in other countries in recent times need to be worked through. While it is difficult to predict what policies could be brought forward and agreed to by a critical number of political forces prior to an election it is suggested the following are core points:
- A planned upward movement in basic social welfare rates, secondary rates and entitlements and in the national minimum wage to a level where material deprivation is dramatically reduced in the lifetime of a new Government.
- A commitment underpinned by timelines, targets and detailed policy instruments to invest in education, health, housing and early childhood care with a fully costed programme and how the money will be generated (taxation, borrowing or buoyancy).
- A commitment to develop a stronger native enterprise sector through collaborative research, investment, upskilling and new forms of ownership.
Finally, it may be objected that any progressive or left-of-centre programme is unattainable due to the inability of parties on the left to agree even on the principle of working together. That is a political choice for such parties. Indeed, the very notion of what might constitute a progressive or left-of-centre party is not agreed. In any case, the realities of political contests and the outcomes of elections will shape the actual choices and possibilities after the general election. Before then there is plenty of scope for parties to be honest – if they wish – and spell out:
- What sort of vision they are aiming for
- How they will get there and how they will fund any additional public spending
- What constitutes ‘red line’ issues for them on which they will never, ever compromise. Really. Voters deserve honesty and choice so that if and when parties compromise post-election (which they will if they seek entry to government) voters have been given a real choice and have not been misled.
(this blog is similar to an article that appeared in the March 2015 edition of The Village Magazine http://www.villagemagazine.ie)