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Back to the Future as Partnership Talks Fire Up
Read more about: Economy, Fianna Fail, Government 
Brian Cowen was speaking at some conference today where a panel of international experts stated the obvious need to fix the system of toxic debts and bad bank management practices. I suppose that means getting fingers from the till. NESC meet to advise government on the path forward in social partnership talks. Business interests are posturing of pay cuts, unions are posturing for their ten point plan and we look at a budget now taking place in the midst of social partnership talks – which takes priority? And will it foment a breakdown in government relations?
What policies are put on hold while the partners have their say? What red lines are brought to cabinet by the Dept of Taoiseach / Finance?
Above all the meme of these is union disharmony. The failure of IMPACT to carry the vote coupled with the CPSU decision to continue their action against the levy and sections within the TUI Calling for the resignation of David Begg pull back the curtain on a movement which appears increasingly divided between those in the movement who wish to protest de facto pay cuts and those who seek to keep their job. That some of those voting against action are the higher end of the public service appears to back up the point, made repeatedly here, that in both public and private sectors there was a coterie who did very well at the very top for whom 5% either way is small beans.
The partnership talks will be conducted by most of this group. Where that leaves the final agreement with the rest of those affected by it will be one of the most important factors in the fallout from the April 7th budget. Lenihan’s set piece, a maxi budget to steady the ship and engender confidence in the Irish state’s capacity to act may now be overshadowed and undermined by negotiations across the lawn at Government buildings.
Of course they might be reinforced but the budget takes place and solidifies certain policies that then go to the partners for further discussion? Or do the partners decide what is in, what is out and what is on the long finger and present it to Lenihan?
Cian,
I think it was always on the cards that the Government would go back to treat with the social partners before introducing the April 7 budget or allowing any planned ‘National Strike’ to proceed on March 30. But they held their nerve and bided their time and, finally, the ball bounced in their direction with the Impact vote, which apparently threw ICTU into disarray.
The 9.5% deficit target is slipping because the revenue situation is deteriorating with every passing month. The latest expert predictions are for a 13.5% deficit this year if no corrective action is taken and this trend is expected to be confirmed when the next set of figures are published in the next couple of days. Achieving a 9.5% target deficit in this year may then become impossible without administering so many cut backs and tax hikes that the entire economy would grind to a halt and we’d all choke on our breakfast, that is if we had anything left to eat!
The way out seems to include a focus on the so-called structural deficit – I think I heard Lenihan refer to this in the Dail last evening. This involves making a reliable estimate of the contribution of construction and other ‘fair weather’ taxes to the Exchequer coffers in previous years, which apparently is an exercise fraught with difficulty but allows for a more rational and targeted imposition of tax increases, spending cuts and any innovations they can collectively think up for the package on April 7. Whatever else we know, those fair weather tax sources won’t be coming back any time soon, if ever. The upshot of this would be to allow the Government pull back from the commitment to an overall 9.5% deficit this year; just going for it for the second six months, which would produce an outcome of 11.5% in a full year. What’s more, some of the experts seem to think the Government might get away with pursuing this strategy with the EU and just as important, with the international bond markets.
The Government ultimately have to make the final decisions, but they’re right to consult with the social partners in my view, and at least try and get agreement on a long term pay strategy for the country as well as picking up on any policy ideas on offer that are useful over the medium term that might go some way towards easing the current difficulties. There are a lot of people out there who are falling into poverty, including many who had looked forward to a life of relative comfort without any serious financial worries.
Without some level of social partnership agreement there is very little chance of the Government successfully implementing a draconian Budget in any case; even less of producing a three year plan of more cutbacks and further tax increases that the public could countenance.
What goes on in Government Buildings will be about the national interest, not sectional interests. There’s no room for a repeat of the January shenanigans. What can we do except wish them all the best of luck…and wisdom?
As always, Veronica writes a balanced overview.
If taxes are to be increased, the best option would appear to be on the windfall gains that arose out of the property boom.
Presently, all gains from the sale of a principal private residence are free of CPT. This is not a proportionate allowance. It would be fairer to divide all properties into (a) the site value and (b) the Insured cost of the reinstatement of the building – the real value of the house.
The site could be index-linked and any increase – the windfall gain – would be liable to CPT.
In the matter of the constant deadlocked situations that arise within the complex web of trade unions, it would seem sensible to have just two Unions – one for manual workers and one for all other members.
The union funds might be taken over by the Labour Court – an appelate court – and invested for the benefit of the members – in the case of sickness etc.
Using funds to support the cost of strike action flies in the face of everything that the government needs to do to get the economy back to where it was in 2003, before the Social Partnership railroaded Bertie Ahern into an absurd agreement on bloated wages.
The consequent loss of competitivness, particularly in our manufaturing industries, was the beginning of the bust that crystallised in 2008 & will continue until corrective government action is taken.
If it is necessary to declare a National Emergency, so be it. de Valera did it, with beneficial results.
But sectoral interests cannot be allowed dictate the way this country is run, by threatening to paralyse the activities that have managed to survive, in order to massage the enormouse egos of the likes of Jack O’Connor; David Begg; Liam Doran and other like-minded soap-box orators.
Take, for instance, the brouhaha about the Public Sector Pensions.
It is only fair that all public sector employees, including Government Ministers and Senators etc… pay their proportionate contribution to their final pension.
It is not as though this is an additional tax. It represents savings, towards the future of each individual contributor, for their retirement.
One has only to look at the trend in the higher echelons of the Civil Service where we have the spectacle of early retirees entering Higher Education and becoming barristers etc.; ex-Tax Inspectors becoming Chartered Accountants and advising on Tax avoidance.
This is patently preposterous – and grossly unfair on those who have to exist on much lower wages, and contribute to their pensions.
Brian Cowen says that the Tax System will have to be overhauled.
It is said that the only way that we can have equality is for everyone to have Nothing.
Maybe this will happen if we continue to behave like lemmings.
But there are simple reforms that will cost virtually zero to implement.
A Distributed Profits Tax (DPT) for all limited companies. This will remove the necessity for Government to make Grants for expansion; Research & Development; Innovation etc.
Many of these Grants are misappropriated – to purchase, for example, expensive motor cars for company directors and executives.
Many companies have expanded their operations abroad and it is only their profits that are taxed in Ireland.
Before the calculation of taxable profit, vast distributions take place. Some are benefits to Directors and top executives; there are bonus schemes; share options; swaps; bloated expenses; sports promotions etc…
These are all effectively distributions, along with dividends and windfall gains to shareholders after a voluntary Liquidation.
A DPT would bring all this expenditure within the tax net.
Income tax (IT) is more sensitive. Realistically, everyone should be permitted to retain the fruits of their labours. That is only just.
Income Tax is a lazy tax – “gathering the greatest amount of (goose) feathers with the least amount of hissing” – as Colbert so wisely said more than 300 years ago.
But it is an unfair tax and allows the “Black Economy” and “Tax Exiles” an almost free ride.
A Consumption Tax (CT) collects from all sectors of the community and it can be proportionate (High on luxuries) and fair (Low – or exempt – on necessities), as well as transparent.
A change in this direction would not be simple, but it should be given serious consideration.
In the meantime, Fine Gael’s proposals about the issuance of Bonds is a good one.
As the Chinese say “May we live in interesting times”.
A Time of Change seems very appropriate.