Nat O'Connor: Fine Gael leader Enda Kenny is quoted as saying that Richard Bruton will be Minister for Finance under any FG-led government and that this is "non-negotiable". While this may simply be political posturing, and the outcome of any possible future coalition negotiations will depend on the numbers of seats each party brings to the table, the message to any possible future coalition partners would appear to be that Fine Gael will control the economic paradigm that will guide them in government. So what's different from the present paradigm, if anything, about Fine Gael's economics?
Fine Gael has published a number of economic policy papers recently, including New ERA (its stimulus plan - revised November 2009), A Fresh Start for Jobs in Small Businesses and Hope for a Lost Generation (a plan to cut youth unemployment by a third). These documents are a fair place to start, to look at what Fine Gael proposes to do in office and to see to what extent this represents a break from the economic paradigm that got us to where we are today.
This is not intended to be a point-by-point critique, as I am only looking to identify Fine Gael's economics, not dispute the detailed costings, etc.
NewERA is essentially about managing the semi-state sector better, including using them to borrow money for investment in infrastructure (and creating 105,000 jobs), for which they will seek a commerical return through charges on customers. The major plank of this is renewable energy (Ireland to use 50 per cent renewable energy by 2020). A major broadband roll-out is envisaged, as is upgraded water infrastructure.
So far, this could be a policy objective from the left, right or centre. However, the proposed mechanism is a commercially driven semi-state company (NewERA Ltd) which will manage five merged/restructured semi-states. It will operate commercially, with the CEO and board appointed by the Taoiseach. A big, cross-utility merged regulator will ensure more powerful, "pro-consumer" regulation.
Fresh Start is sub-titled "18 ways to support small business and save jobs". In an introductory message from Enda Kenny, Fine Gael "commit to preserving our low tax model as the best means to promote growth, enterprise and employment." The 18 specific measures include: employers PRSI exemptions/subsidies; a national recovery bank; reducing VAT; abolishing the travel tax; reviewing Employment Regulation Orders (legally-binding pay agreements in hotels, retail, etc); prompt payment from State bodies; cutting red tape; business and employment units in local authorities; reducing energy costs; freezing local authority rates; and supporting start ups.
Hope for a New Generation includes: a national internship programme; a back to education schmeme; Community Employment schemes; workshare; and the above 'jobs tax cuts' (on employers PRSI).
From this snapshot, I can conclude that Fine Gael intend to refocus the State's involvement in the economy towards jobs. There is a recognition of the high multiplier effect of State investment in capital projects. Likewise, the policies also recognise the fact that SMEs provide many Irish jobs and that supporting them is important. There seems to be a reliance on tax cuts or tax expenditure (credits, allowances, etc.) to stimulate economic activity. There is also some long-term thinking about Ireland's energy security and the potential of a good return from investment in renewable energy generation.
The economics underlying the proposals seem orthodox and do not address the major problems shown by the global economic crisis. Although the decisions of recent government added miseries to the Irish case, the global crisis still requires all parties to re-think the received wisdom of economics in a much more fundamental way.
As an example of such a rethink, Social Justice Ireland have published "An Agenda for a New Ireland" (Full PDF here). They argue that "Ireland’s policy-making for more than a decade was guided by many false assumptions" including the assumptions such as: "Economic growth was good in itself"... "Infrastructure and social services at an EU-average level could be delivered with one of the lowest total tax-takes in the EU." ... "The growing inequality and the widening gaps between the better-off and the poor that followed from this approach to policy-development were not important as everyone was gaining something." ... "Low taxation was good." ... etc.
The failures which stem from these false assumptions include: "Failure to take action to broaden the tax base or to promote tax equity."... "Failure to overcome infrastructure deficiencies,"... "Failure to adequately address high energy costs or to promote competition in sheltered sectors of the economy," ... and "Failure to appropriately regulate the banking and financial services sector or to manage the growth of personnel numbers in the public service."
The SJI document alone poses questions for the Fine Gael policies. And the criticisms of recent Government economics cannot all be dismissed as part of 'crony capitalism'. There are genuine questions to be answered by advocates of the orthodoxy. For example, if Fine Gael are commited to Ireland's low tax model, how do they define that? Does it leave scope for a restructuring of the tax system to make it more egalitarian? Does it leave room for some increase in tax, as you simply can't have average European level of services without average European levels of tax?
Indeed, Social Justice Ireland proposes retaining relatively low tax (35 per cent of GDP, p. 26), versus recent suggestions by the ESRI's Prof. John Fitz Gerald, who would prefer Ireland to move to EU average levels (45 per cent of GDP). Where is Fine Gael on this issue?
On a more fundamental level, what about economic growth? Have Fine Gael seriously considered alternative ways of measuring economic progress, including quality of life, health, education, environment, distribution of wealth, etc? What about suggestions that the economic situation of most people could improve, despite a fall in GDP, if there was better organisation of the economy? In the long-term, a green economy cannot rely on continued growth models.
Fine Gael's policies seem to reflect a belief in the commercial sector and market forces that is not based on the evidence of the global crash. For example: banking regulation failed; corporate governance failed; long-term planning did not occur; and wealth was further concentrated in the hands of fewer people. So, why should we have faith in a "commercially driven" semi-state sector or in continued adherence to Ireland's disreputable low tax strategy?
Looking for more insight into the above, Richard Bruton's blog posts add some more detail. In March 2009 he posts the press release for the launch of the NewERA idea. The familiar buzz word "competitiveness" seems to be the driving force behind it. More recently, in January 2010 he discusses the Competitiveness Council’s Reports. These are referenced as reasons underpinnng the NewERA proposals. For example, "dissipation of responsibility across 34 separate public authorities has resulted in poor planning and appalling waste"... "it is no longer essential that the State owns all of the capacity for producing gas or electricity, though the grids must remain publicly owned." ... "All of the investments will be on strictly commercial terms. The companies involved will commit to servicing their loans without a State guarantee. This will bring a new element of commercial realism into the operation of companies and force new disciplines into their operation." This post has a press release feel to it too, nevertheless it further clarifies what Fine Gael envisage 'competitiveness' means.
A serious consequence of the above policies seems to be a shift from taxation to charges - charges for water, waste, energy at "commercially driven" rates. How will waiver schemes work in this context? Currently, private commercial waste collection firms don't always offer them. There is a real risk of a set of charges being levied on household incomes in lieu of a more broad-based and progressive tax system. This would be regressive in effect, as those on lower incomes would pay proportionately more of their incomes.
Another logical consequence of the above policies include weakening local authorities - by freezing rates for five years and limiting their role in water services to being "agents" of the proposed Irish Water national utility company. There is a pressing need to reform local authority funding, and a rates freeze sends the message of 'no change' for five years, while local services (like roads) continue to deteriorate. How can we have new local politics without funding reform? Also, it is glib to suggest that water leakage stemmed from "dissipation of responsibility" across the authorities. There has been a lack of capital investment in water (and other basic infrastructure provided by local authorities, like sewage and flood protection), which in turn was due to Ireland's low tax base and, in particular, the inadequate funding of local government.
Also, in terms of injecting "commercial realism" into the provision of utilities, what is to stop the State being stuck as the 'insurer of last resort' if commercial power plants threaten to turn off the lights? How will the commercial operation of firms be regulated to prevent short-term profiteering or asset stripping at the expense of long-term investment?
Whether a general election occurs in 2012 or sooner, Fine Gael is reasonably likely to lead the next government. If so, Fine Gael's focus on jobs and stimulus is welcome. But the above documents are more about suggestions for how FG would manage the State's role in the economy, broadly based within current constraints and without challenging the dominant economic orthodoxy.
Hence it is important to begin a more in-depth, open, public discussion about the assumptions Fine Gael (and other parties) make about economics. As a number of posters on this blog have commented, alternative or progressive economics is not the sole preserve of the 'left' (howsoever defined).
If Fine Gael are seeking to control Ireland's Ministry of Finance for the five or ten years after the next general election, then - especially in the context their proposals on New Politics, including open government - I hope that Fine Gael will publish more about their economic perspective and assumptions so that we can examine alternative options and discuss what economics represent the long-term public interest.
One thing Richard Bruton blogged in December 2009 about the budget was "To successfully implement change, you have to build a broad-based coalition to implement it." I hope this is Fine Gael's belief about economics, because any claim to offer "new politics" is an illusion if the economic paradigm to be adopted is "non-negotiable".
30 comments:
I don't see what waivers and aid for those on social welfare have to do with the running of water and energy. Surely charging in proportion to cost is a green-economy thing to do? Why not just give the money to the person in need, rather than dictating that they have to use certain services?
Antoin,
I agree. I would prefer to see measures to ensure everyone had an appropriate minimum income, based on their needs (including extra income for people with dependents or disabilities involving expensive care or assistance). However, that's not in the Fine Gael proposals to date.
I also agree with the 'polluter pays' principle. But I don't think it is reasonable to impose this principle on people who have particularly low incomes. For example, 1 in 7 households in 2008 had incomes of less than €12,455 (the 'at risk of poverty' threshold; CSO SILC).
In the absence of measures to increase household incomes, we have the option of waiver systems to assist low income households. I assume the reason we currently have waivers (rather than generic payments) is to do with cost-efficiency, but I would prefer a social welfare payment to simply increase incomes and let people choose how to manage that money.
However, the worst outcome (and the current reality for many people on low incomes with privitised services) is that they have to pay charges without any waiver scheme. Yet in order for utilities to be commercially viable, everyone may need to pay (without waivers). So I would like to know if Fine Gael can achieve their "commercially driven" approach without unfairly squeezing people on low incomes.
The reason why payment is made 'in kind' as vouchers or waivers or whatever is (a) because the payment is seen as charitable and (b) to cement in the state monopoly. We see this again and again. There is nothing cost-efficient about it.
To be commercially viable, everyone needs to pay, sure, but if social welfare recipients get the money instead of the waiver, what's the problem? It also gives them an opportunity to economise.
'At risk from poverty' actually means 'relatively poor' as CSO/SILC defines it. This is a lazy, slovenly measure. It is not a defensible way of measuring poverty, and certainly not a sound basis for social policy.
I find this stat interesting:
For example, 1 in 7 households in 2008 had incomes of less than €12,455 (the 'at risk of poverty' threshold;
Would the fact that so many people have moved home make a difference to this stat?
- I expect that we have less households now, with higher numbers per household - which I suppose is probably more efficient in terms of energy use.
Antoin,
I think another aspect of the ‘charitable’ conception of vouchers, waivers, etc is a paternalist attitude by the State, which assumes that people on lower incomes would spend their money irresponsibly, and hence not actually use cash increases to pay their water and waste charges. This dovetails with the cost-efficiency argument. While the characterisation is unfair to the majority of people, it will of course happen in some cases – and this in turn will increase costs, through cost-recovery measures like following up on outstanding accounts, etc. The State may see it as cheaper to have waivers if the amount of charges to be otherwise written off as unrecoverable is too high. But I think we’d both prefer to follow the route of increasing people’s incomes and dealing with the root causes for non-payment (e.g. addiction, mental health) as they arise.
As for cementing the State monopoly, some utility operators may seize any opportunity to reinforce their position, but there are other causes. Local authorities are often underfunded relative to the tasks they are delegated by central government. As unitary entities, it seems likely that they use things like waste charges as a source of funding, to cross-subsidise other areas of work. I agree that this distorts the markets and ends up with people paying more for services. The solution (as I indicate in the original post) is for reform of local government funding, within which I would prefer to see a dedicated amount of tax going to fund local services.
I agree ‘relative poverty’ is an imperfect measure, but it has the advantage of existing in time-series data that is comparable across the EU and OECD. The CSO report also reports that 1 household in 7 (13.8 per cent) were in “deprivation” and 1 in 24 (4.2 per cent) was in consistent poverty.
But we can also focus on gross household income. 1 in 7 households live on less than €12,455, according to the report. The Vincentian Partnership for Social Justice produces estimates of the minimum income required for an adequate standard of living. Their method is to give six sample household types and to add up basic costs (food, clothing, health, etc).
All of their 2009 estimates are for annual incomes in excess of €12,455: from €13,739 for a single adult male to €30,590 for a lone parent working full-time who has two children (3 and 10). These figures don't include housing or owning a car. (I multiplied by 52 the weekly figures published for 2009). Of course, these ‘minimum incomes’ would be expected to be higher than the poverty threshold, nevertheless we are discussing the need for everyone to have a minimum income so that everyone can be reasonably expected to pay for their own water, waste, etc out of those incomes.
Hence, I am confident that there are a lot of people who cannot afford Fine Gael’s proposal for “commercially driven” waste and water charges.
John,
There were 2.78 persons per household in 2008, compared to 2.83 in 2007. So, no significant change there. We’ll see if the figures for 2009 and 2010 show a changing pattern once those surveys are reported.
@ Nate
In your original very interesting post, you ask whether FG’s approach is really different to the current orthodoxy. My question back to you is this: Which orthodoxy? Your piece suggests that the only orthodoxy of the last few years was low tax/light regulation. But there were other equally powerful orthodoxies at work, some of which were supported strongly by the left, which your post does not address. You are very critical of the shortcomings of the private sector – and rightly so. However, there is nothing in your post about the fundamental failings of the State over the last ten years and the implications of that failure for public policy going forward.
Full disclosure: I am an advisor to Fine Gael. All opinions expressed here are, however, purely personal and should not be taken as an expression of Fine Gael policy.
In the following post I have not sought to deal with the many specific questions that you and the other contributors have raised in this thread, particularly on the issue of taxation. Only the party’s spokespeople are in a position to answer many of them. Instead, I have sought to outline what I think is the general thrust of FG thinking following the Crash, based on the party’s published policy papers. My conclusion is that the FG approach is both more radical and more progressive than your own analysis might suggest.
My starting point is this: The Crash has torn apart two key ideologies – one on the right and one on the left:
1) On the right - Market Fundamentalism: I don’t think that anyone can now seriously argue that markets are automatically efficient and self-correcting. The era of light regulation is clearly at an end. It is also clear that the hallowed notion of shareholder value, as the sole driver of companies, has been completely discredited. Even Jack Welch of GE fame now accepts that the doctrine of shareholder value is just plain “dumb”. Unfortunately, it was this “dumb” idea that helped drive the banks in Ireland to take on, with the active encouragement of their shareholders, completely unacceptable risks.
2) On the left – State Fundamentalism: We all know that if States around the world hadn’t actively intervened during the financial crisis, the globe would now be facing a 1930s-style depression. However, if the crisis showed that markets are ultimately dependent on the protection of the State, the crisis also reminded us that the State is ultimately dependent on the taxes generated by a thriving private sector. It also demonstrated that the State, just like the Market, has limits.
Nowhere are these limits more apparent than in Ireland. Where were the Regulators and the Central Bank when our banks were being turned into casinos for the rich and powerful? Where was the Dept of Finance when the State’s finances were being so dreadfully mis-managed? Why was FAS allowed to waste so much money? Why was the DDDA allowed to engage in wholly inappropriate investment activities? Why were our public services not reformed as part of benchmarking? (If we look beyond the immediate crisis, equally big questions can be asked of the State. Why do we have a health service that has hundreds of people on trolleys in A&E, despite a quadrupling of investment in health? Where was the State when our children were being abused in Church-run and State-run institutions?)
The bottom line is that the Crash has demonstrated, in the harshest manner possible, that both the Market and the State can go terribly wrong. It seems to me that FG is the only party in Ireland that has fully taken on board the essential truth that the traditional approaches of left and right are not going to get us out of our current problems. I don’t claim for a moment that FG has all of the answers – I would claim, however, that it has some of them. I would also argue that some of the most interesting thinking on public policy is now being conducted within the FG party.
Cont'd. FG has moved beyond the increasingly sterile State v Market debate by accepting that the Citizen, rather than the State or the Market, should be the focus of public policy going forward. As I see it, the FG view is that the Citizen has been ignored by both left and right – a somewhat extraordinary development in a country that is supposed to be a Republic. What this has meant in practice is that the producer interests in the economy, both in the private and public sector, have tended to dominate with very negative consequences for the Citizen. Fine Gael is about challenging the entrenched concentrations of power that have destroyed our economy and weakened our democracy. It believes that the Citizen has lost as much trust in the State as it has in the Market, because both have been working to the benefit of the insiders rather than the citizens. This is what needs to change.
As a consequence of this thinking, Fine Gael and Enda Kenny have set out the goal of building of a New Republic in Ireland - with the Citizen at its heart. In his speech to the FG national conference and in his recent Irish Times op ed, the FG leader has laid out the three pillars on which this New Republic will be built:
1) A “New Politics” – the most radical reform of the political system and the “permanent government” (civil and public sector) since the 1930s;
2) A massive jobs initiative, including an €18 bn investment programme (“NewERA”) in key infrastructure to create over 100,000 jobs and substantially improve the competiveness of our economy; and
3) “FairCare” – the biggest reform of the health system since the foundation of the State, moving Ireland over time to the Dutch model of universal health insurance.
What I think is most interesting about all of these proposals is that they are underpinned by a very radical and, I would argue, progressive view of how the State should operate.
1. An activist State. All of these initiatives are based on presumption that the State has a positive, active role to play in society. In other words I would argue very strongly that FG does not have an ideologically driven, negative view of the State.
2. An activist State for the Citizen. While FG does not support the right wing thesis that Government/State is the problem, neither does it subscribe to the “Statist” view that Government/State is the magic solution to our problems. As the New Politic document makes clear, the FG view is that the massive centralisation of power in Ireland is both economically inefficient and incompatible with a real Republic. FG believes that the State must devolve as much power as possible to Citizens, communities and professionals on the front line as possible.
3. An activist State to drive reform. FG believes that the State must also be to the forefront in driving institutional change in Ireland. What is most striking about the last few years is how little genuine reform there has been. We’ve had no political reform. No reform of our archaic budget procedures. Little or no meaningful public sector reform. And a system of corporate governance that has more holes in it than a lump of Swiss cheeses.
The underlying orthodoxy, on both the left and the right, assumed that any problems we had as a nation could be cured by the liberal application of more money (through tax cuts if you were on the right, and through additional State spending if you were on the left), with no real change required. We all know how that turned out. FG, by contrast, firmly believes that institutional and political failure lies at the heart of Ireland’s economic collapse and that there needs to be a complete reinvention of how we govern our country and run our economy. Tinkering at the edges is simply not good enough. Interestingly enough, I heard Fintan O’Toole on the radio the other morning saying much the same thing. That we not only had to reinvent the State, but also reinvent the very idea of the Nation (my paraphrase). I really could not have put it better myself.
Sean,
Thanks for your post. My studies were in the philosophy underpinning democracy and I strongly endorse the call for the fundamental reform of the State and how we do politics. I won’t discuss the detail of FG’s New Politics proposals here. Suffice to say that I agree with some of them, but I think some of them don’t go far enough, and there are major gaps. But I do agree they are “progressive” as you say.
You ask “Which orthodoxy?” My original post was about economics. And the only economic orthodoxy over the last years was indeed low tax/light regulation. The organisation and failings of the State that you refer to were in many respects the result of market fundamentalism, not an alternative ‘state fundamentalist’ economic paradigm that co-existed with it.
I agree that regulation failed – but the Government chose to under-fund and under-staff the regulators, and instructed them to ‘go lightly’.
We don’t know the full extent of advice given to Ministers by officials within the Department of Finance. But many senior advisors are political appointees, and the Ministers for Finance (McCreevy, Cowen and Lenihan) have to be held responsible for the decisions they made. If they didn’t seek a wide range of advice from all sides, they are to blame for not seeking it.
The board of FÁS, the DDDA and other public bodies were political appointees by Government. Internal regulation of public bodies was as weak as regulation of the private sector. Again, the same laissez-faire ideology was in place, along with cronyism.
You ask “Why were our public services not reformed as part of benchmarking?” I can only answer that Government, through social partnership, failed to seek reform. The trade unions acted in the short-term interests of their members, and they too bought into the market ideology; for example the idea that management-level employees should have multiples of the pay of low- and mid-ranked workers.
Again for the health service; the State is pursuing a manifestly failed ideology with its approach; for example, tax breaks for private hospitals (McCreevy) and private hospital co-location (Harney).
The only thing I can’t link with market fundamentalism is the State’s failure over child abuse in State and religious institutions. I might suggest that these failings occurred earlier in time, when Ireland was governed by a previous ideology of paternalism and conservative deference to religious and secular authority, which rendered so many people blind to abuse for so long.
In summary, I don’t agree when you state “The bottom line is that the Crash has demonstrated ... that both the Market and the State can go terribly wrong.” Instead, I argue that the State went wrong because recent governments followed a toxic mix of cronyism and low tax, low regulation market ideology.
(cont.)
I support FG's challenge to “entrenched concentrations of power that have destroyed our economy”. But, the underlying idea seems to be that if we remove the ‘cronies’ from our ‘capitalism’ all will be well.
Fine Gael’s proposals all seem to rely on the assumption that GDP growth is the goal – not merely one among a series of indicators. How does FG propose to deal with the fact that infinite growth on a finite planet does not work?
All of FG’s policies seem to assume that ‘commercially driven’ markets work well; albeit regulated markets rather than free markets. For example, I’m somewhat suspicious of FairCare. Yes, the ‘payment-follows-the-patient’ is a good idea. But a single, State-run national insurance fund will do that. I don’t see how creating a market of private insurers adds real value. Massive amounts of Dutch money now goes to private insurance companies, their salaries and bonuses. And Dutch hospitals are ‘for-profit’. I’m not sure the profit motive is the best fit with providing healthcare. Some efficiency may result, but profits and the larger number of people who’d be employed across multiple private insurance firms also take money away from core healthcare.
You unfairly characterise ‘left’ economics as just spending more money. Progressive economics includes the State taking a direct role in certain sectors of the economy. To fund this, progressives tend to prefer a higher tax yield. But this doesn't have to be more than citizens would have spent on private providers, and can be less. You leave the tax level question to the party spokespeople. Fair enough. But it does beg the question of where the money is going to come from to allow Fine Gael to implement all its policies.
Fine Gael’s proposals involve tax cuts/tax breaks, which you characterise as ‘right’ policies. But again, I think that over-simplifies the argument. The assumption seems to be that the profit motive will cause people to invest in privatised utilities. I’m not convinced that many of the UK experiments in privatisation have worked out well for citizens. If Fine Gael is going to regulate heavily, how will we pay for it?
And what about incomes? Should the gap between higher and lower incomes rise or fall? Or does it matter? I think it does matter, as despite the efficiencies that are sometimes created, there seems to be a tendency for management classes (in private firms and State bodies) to use their power to increase their own gain without any gain for ordinary people through efficiency, etc. I prefer the situation in Norway where CEOs earn ten times the income of workers, to the USA where the average is 200 times. But it will require major state action to impose maximum wages or to provide a base for sufficient minimum wages so that every citizen can participate (and pay their way, with waste charges etc) on an equal footing.
Also, the focus on private operators and markets forgets that some necessary economic activity is not profitable, like delivering post to remote islands for the same price national stamp. But there are non-economic reasons to do so. And non-economic reasons, like the environment, social cohesion and quality of life all have to be integrated into economics. Engineering a compromise between profit-motive and the non-profit obligations of private contractors is tremendously complex. The same applies for preventing short-term profiteering or asset stripping at the expense of long-term investment. In some cases, once you are going to regulate heavily, it makes sense to create a public body to do the job. However, I am all for real accountability and sanctions for the management of public bodies who perform badly.
I've gone on at length, but I welcome your engagement on these issues. I hope I've reinforced the central point that Fine Gael's policies seem to me - on the basis of available information - to rely on market forces and ideas that were part of the problem that led to the economic crash. Hence, these assumptions need to be examined and discussed.
Nate
I would love to engage with all of your detailed points – but for the reasons stated previously it would not be appropriate for me to do so. However, I will try and respond as best I can.
I think it’s clear that politics and economic policy for the next decade in Ireland will be shaped by the lesson the various parties learn from the crash. Speaking in a purely personal capacity let me outline what I think FG has learnt.
Lesson 1: FG believes that there must be radical and long-lasting political and institutional change. FG has clearly taken the lead on this issue – but I was delighted by Eamon Gilmore’s emphasis on reform in his leader’s speech, even if there were few hard details. In his Presidential speech to the Labour conference, Michael D Higgins called for the building of real republican citizenship in Ireland. I think this is exactly what FG is seeking to do through its calls for a New Republic (see below).
Lesson 2: FG accepts that the crash has undermined Market fundamentalism. Ultimately, this extreme ideology was based on an absurd view of human nature. The whole idea of rational expectations for example, which assumes that all players have perfect information and always act “rationally”, is clearly nonsensical.
Lesson 3: FG believes that the crash also exposed the limits of Statism. This is where you and I part company. Your post assigns much of the blame for the failure of the State in Ireland to cronyism and/or the malign influence of market ideology. While I have some sympathy for parts of your thesis, I think it has three major flaws:
1. It assumes that low tax/light regulation was the only economic orthodoxy in Ireland during the last decade. In reality, low tax/light regulation was combined with massive increases in public spending, funded by a huge borrowing spree. I agree that light regulation has been a disaster and that the tax structure of the Celtic Tiger was unbalanced and inappropriate. However, I would also very strongly argue that the massive public spending increases did not deliver the kind of services, infrastructure or productivity that the people of this island both deserve and require.
2. Your thesis ignores the experience of the 1970s. During that decade the economic orthodoxy in the West was Statism - massive State intervention in the economy, supported by very high taxes/public spending. As such, the 70s were a very good test case for what happens when State fundamentalism prevails, freed from the “taint” of market ideology. Unfortunately, the end result was not pretty. The 70s were such an economic disaster that they allowed the Right to sweep to power in the 1980s, ushering in the era of market fundamentalism.
3. Much of the argument to support Statism is based on a view of human nature that is as flawed as that which underpinned market fundamentalism. Statism assumes that you can concentrate power in the State without vested interests, both inside and outside the State, using that power to further their own interests at the expense of the Citizen. In so doing it ignores the fundamental point that power corrupts and that the more centralised power is, the more open it is to manipulation and corruption.
Lesson 4. FG believes that the Citizen – not the State or the Market - must be placed at the centre of Govt policy. Your post seeks to analyse where FG should be placed on an ideological scale between the State on the one hand and the Market on the other. I would argue that this is the wrong measure. FG’s starting point is the Citizen – not the State or the Market – and the essential fact that we live in a Republic.
(cont'd) In an op ed piece to mark the 60th anniversary of the declaration of the Republic in 1949 by a FG led Govt, Enda Kenny wrote about the need for us to recapture the idea of the Res Publica – the things of the people. In his MacGill speech last summer, he talked about the abduction of our Republic by vested interests in both the private and public sector. Thus his calls for the creation of a New Republic, with the Citizen at its heart.
The classical Republican tradition, stretching back to Aristotle and Cicero, is built on two foundations. The first is fundamentally optimistic and maintains that there is, indeed, such a thing as society and that the idea of the common good should inform State policy. The second emphasises realism about the use and abuse of power. It acknowledges that in any society powerful elements, both inside and outside the State, will seek to have their interests protected and promoted at the expense of the citizen. The job of the State in a Republic is to promote the common good in a way that empowers the Citizen and does not allow the interests of the producer interests to over-ride those of the Citizen.
FG accepts the optimistic view that there is a common good and that both the Market and the State should serve that common good. Because it is not locked into the ideologies of Left and Right, it can combine the best elements of the Market and the State to create policies that serve the Res Publica. But it also believes that Govt’s must create policies that are realistic, i.e., that take into account the likely attempts of vested interests to manipulate those policies for their own interests.
If you look at both NewERA and FairCare, two policies that you mention, I think you can see clearly how these various elements have been combined.
First, they both accept that the State needs to promote the common good. NewERA accepts that the State must intervene to create jobs and key infrastructure. FairCare accepts that the State has a duty to create a one-tier health system.
Second, they combine both the Market and the State. NewERA will invest €18 bn through semi-State companies – that’s the state bit. However, these investments must generate a commercial return – that’s the market bit. FairCare will introduce mandatory health insurance for all in a managed competition system – that’s the market bit. However, most of the funding will still come through a progressive tax system, while the State will pay for students and those with medical cards and subsidise those on low pay. State hospitals will remain in the ownership of the State and it will act as the guarantor of the system – that’s the State bit.
Third, they are realistic about power. NewERA will establish a holding company to re-organise State assets and manage the €18 bn investment. However, it will be established with a sunset clause to ensure that it does not start empire building. FairCare will devolve a huge amount of decision-making power back to patients, local hospitals and their communities, thereby reducing the power of the Centre.
(final bit!) Two final points. You ask what is FG’s view on growth. I think it very clear that FG believes that growth is essential if we are to create jobs. However, it must be: 1) Real – the growth of the last few years was illusory. It was built on massive borrowing and on people selling land and buildings to each other; and 2) Sustainable – one of the key features of NewERA, which does not get enough attention, is its huge ambitions to move Ireland as rapidly as possible to a more sustainable and greener growth path. FG’s Simon Coveney, who is the author of NewERA, has been talking for some time about the dangers of Peak Oil for Ireland. He is also absolutely convinced that Ireland can become a major player in the next green, industrial revolution.
You also ask how FG stands on alternative measures of well-being. FG has not published a formal position on this to the best of my knowledge. However, your general point is well taken – GDP growth is only one measure of a country’s well being, albeit an absolutely vital one in my view. The ability of Citizens to access health services when they need it, to obtain the right education for their children, are also key indicators of how well a country is doing. And it must be accepted that on too many measures, Ireland is either just average or trailing well behind. All of which reinforces the need for a radical reform agenda that puts the Citizen first.
Sorry NAT - typo on your name
@Nat Great blog. You wrote that: 'Indeed, Social Justice Ireland proposes retaining relatively low tax (35 per cent of GDP, p. 26), versus recent suggestions by the ESRI's Prof. John Fitz Gerald, who would prefer Ireland to move to EU average levels (45 per cent of GDP). Where is Fine Gael on this issue?
I think that you may have confused total taxes with total revenues. Total revenues is about 35% this year and total taxes very roughly 30%. SocJust argue for 35% in tax (and implicitly 40% in total revenue). I would go higher than this - but SocJust argument is pragmatic and designed to show that a moderate tax policy and on that keeps Ireland low internationally is compatible with spending more on services and poverty. I would not agree (see blog). However, the claimed gap is much smaller when you take account of total revenue.
Thanks Slí Eile. You are quite right. The SJI figures are probably much closer to John Fitz Gerald's.
Sean,
Thanks for your detailed response.
“FG believes that the crash also exposed the limits of Statism. This is where you and I part company.”
Not necessarily. You seem to be assuming a lot about my opinions of the State and its role in the economy. Let's see if we can agree on some more things.
“low tax/light regulation was combined with massive increases in public spending, funded by a huge borrowing spree.”
Yes, public spending increased significantly, compared to what were previously low levels. But Ireland's total spending always remained significantly lower than other Western European countries. So calling it "massive" is misleading. Slí Eile provides some figures on a recent post, showing for example that public spending was 36.2 per cent of GDP, compared to a European average of 46 per cent. (Even using GNP, the Irish spend is lower than our counterparts). 2010 spending is high versus GDP because economic growth has fallen so much, but when the economy stabilises, spending is likely to be low again.
Also, the "huge borrowing spree" you mention was in the private sector, with citizens borrowing to buy property at ever-inflated prices. This inflated the economy, inflated tax revenues and ultimately funded public spending - but the State didn't borrow the money directly. Indeed, the national debt was lowered.
So, there was no 1970s-style 'half-Keynesianism' where the State borrowed to boost the economy, failed to manage it well and built up a huge national debt. That's the spectre of the 1970s that I think you are referring to (and I’m certainly not advocating it). Instead, there was a failure of short-termism in both Government and business decisions (for example, respectively creating and following property-based tax breaks) that led to the boom-followed-by-inevitable-bust.
“public spending increases did not deliver the kind of services, infrastructure or productivity that the people of this island both deserve and require.”
I agree on this. But I think lack of funding is part of the problem.
“Much of the argument to support Statism is based on a view of human nature that is as flawed as that which underpinned market fundamentalism. Statism assumes that you can concentrate power in the State without vested interests, both inside and outside the State, using that power to further their own interests at the expense of the Citizen. In so doing it ignores the fundamental point that power corrupts and that the more centralised power is, the more open it is to manipulation and corruption.”
There is a stereotype that the trade unions 'captured' the increased expenditure on public services and used it to increase wages without improving services. I don't think this is a fair characterisation, but there is an element of truth in it. Some wages and pensions, particular for senior public servants, were benchmarked against high and rising private sector wages - and also sought to mimic the larger pay gap between management and other workers that exists in the private sector. This was not the best use of public money. But at the same time, most ordinary public servants remained on low to medium salaries. And some frontline services did improve.
I develop some points below about democratic mechanisms to improve quality and efficiency in public services.
(cont.)
"Your post seeks to analyse where FG should be placed on an ideological scale between the State on the one hand and the Market on the other."
No. I didn't mean to give that impression. For example, the economic question of Ireland's level of tax does not mean that the State role in the economy will automatically be bigger. For example, higher tax could be used to fund a minimum income for all citizens, which would eliminate most poverty and simply provide people with more money to spend; it doesn't have to mean that the State keeps the tax money and provides more services in lieu of providing more equal incomes.
But there are some ideological questions, such as should public services be managed just like private sector businesses or is public service distinct? I think there is an ethical element, where serving the public should be a partial motivation (along with pay and conditions). And I think there is a strong not-for-profit/public service ethic in many areas of the public service - such as teaching and nursing. I'm not sure FG's commercial, for-profit health insurance model fits with a public service ethos.
"...the idea of the common good should inform State policy"
I agree that there are things which represent the 'common good' (like clean air), but I'd need to look at the detail of what FG means by it. Too often in the past, social conservatives thought they knew what was 'right' and many decent people suffered. In our plural society, the common good has to accept wide diversity and give moral responsibility for many decisions back to individuals and families.
"...in any society powerful elements, both inside and outside the State, will seek to have their interests protected and promoted at the expense of the citizen. The job of the State in a Republic is to promote the common good in a way that empowers the Citizen and does not allow the interests of the producer interests to over-ride those of the Citizen."
I agree about the existence of powerful elements seeking to promote their interests. The question, for me, is democratic reform. What matters are the democratic institutions that genuinely deliver power to citizens and (by definition) take power away from vested interests, and indeed from the Government itself.
For example, access to official documents (through Freedom of Information or other means) is one way of giving ordinary citizens (as well as journalists and civil society organisations) the chance to see for themselves how things are run. The fact of openness forces public bodies to clearly justify their decisions. FG's New Politics proposals include various measures for more openness, and I strongly agree with that. The test will be in the detail of these measures once implemented. For example, I would like to see the accounts, board minutes, policy documents, etc of all public bodies made freely available on the Internet. I would like to see statistics made easily available and citizens invited to offer alternative analysis of them.
Likewise, I would like to see all public bodies automatically come under FOI with no exemptions. (Obviously, some files need to be kept secret for personal privacy or commercial confidentiality, but that does not extend to whole organisations, even if most of their documents would remain secret).
(Cont.)
"Because it is not locked into the ideologies of Left and Right, it can combine the best elements of the Market and the State"
Going 'beyond Left or Right' is an old idea. Tony Blair promised a 'third way' in 1992. Various centrist parties have existed over time, here and abroad. Indeed, Fianna Fáil’s odd mix of low tax light regulation and social partnership could also be seen as going beyond left and right. The problem was that FF’s balancing act was undermined by its own contradictions.
And realistically, every party in power that genuinely tries to govern on behalf of all the people will find itself drawn to the centre as it seeks to reconcile or balance the goals of different sectors. Yet, sometimes there is a need to sweep away old certainties and mainstream ideas that are not longer fit for purpose and the logic of Ireland’s ‘low tax economy’ might be one of those ideas.
"FairCare will introduce mandatory health insurance for all in a managed competition system – that’s the market bit. However, most of the funding will still come through a progressive tax system, while the State will pay for students and those with medical cards and subsidise those on low pay. State hospitals will remain in the ownership of the State and it will act as the guarantor of the system – that’s the State bit.
My disagreement here is not ideological, it is practical. It looks like a terribly inefficient way to provide universal health insurance.
The requirement of mandatory health insurance is a State bit too. That will have to be policed. Managed competition is another State bit. Health insurance will need a lot of regulation so that people with existing conditions will not be dropped when their illness progresses, etc. We’ve seen a lot of the debate on this over in the USA.
Hence, where is the value added by private, for-profit health insurers. FG needs to state the rationale. Is it because they can adopt a hire-and-fire approach that gives them more flexibility than a State actor? Is it because they can manage their funds more flexibly on the global market (perhaps investing in guns, oil and polluting industries)?
And going further, state subsidy of low incomes assumes that some people will always have low incomes. Why not provide a State-guaranteed minimum income and get rid of the idea of the ‘subsidised poor’ once and for all?
"...they are realistic about power. NewERA will establish a holding company to re-organise State assets and manage the €18 bn investment. However, it will be established with a sunset clause to ensure that it does not start empire building. FairCare will devolve a huge amount of decision-making power back to patients, local hospitals and their communities, thereby reducing the power of the Centre."
This may be where we really part company.
I don’t believe that the board of management of a holding company will provide more accountability to citizens than Ministerial accountability to strengthened Dáil committees (which, in fairness, FG also proposes and I agree with).
Is your definition of power close to what David Cameron is saying in relation to Conservative Party policies? For example, giving citizens 'choice' over health insurers; keeping lower taxes so people have more money in their pockets; etc. If so, this is only one kind of power, and if Government doesn't share other power then it won’t empower ordinary people very much. Indeed, my earlier comments still stand – low income people are likely to see a disproportionate increase in charges under the FG proposals, compared to higher income groups. I support higher taxes, so I’d be increasing their costs too... but in contrast I’d be increasing taxes in proportion with people’s income and wealth.
Real empowerment would be a minimum income for all citizens that eliminated most poverty. But that will require tax increases and a determined economic policy of redistribution.
(finally)
"I think it very clear that FG believes that growth is essential if we are to create jobs. However, it must be ... a more sustainable and greener growth path."
I agree with this for the short-term. In the long-term, we need to replace not just the word 'growth' but the whole concept of permanent expansion and instead look at achieving more equal quality of life through the more efficient use of dwindling resources.
This is where the economics comes in again. Growth is not just a 'yes word', like progress or advancement. Of course most people want things to get 'better'. However, economics is based on mathematical models involving multipliers, compound interest, inflation, etc - all of which assumes that economies keep expanding. But infinite growth is impossible on a finite planet, so we are reliant on utopian visions of technology to bridge the gap. Hence, we need to really change a lot more mainstream ideas on how the economy of the future will work.
"You also ask how FG stands on alternative measures of well-being. ... GDP growth is only one measure of a country’s well being, albeit an absolutely vital one in my view. The ability of Citizens to access health services when they need it, to obtain the right education for their children, are also key indicators of how well a country is doing. And it must be accepted that on too many measures, Ireland is either just average or trailing well behind. All of which reinforces the need for a radical reform agenda that puts the Citizen first."
I agree with you on this too!
@ Nat
I suppose it is in the nature of exchanges like this that they tend to focus on areas of disagreement rather than on the broad areas of agreement that clearly exist. I think we both agree on the failure of market fundamentalism and on the need for substantial political and institutional reform, even if we might disagree on the details. Let’s see if we can extend that agreement to the role of the State. Once again, all views expressed are personal.
I was struck by a conversation between Pat Rabbitte and Vincent Browne on the latter’s show some time ago. Browne was arguing for significantly higher taxes along the line of the Scandinavian model. Rabbitte’s response was that the Irish people are simply not prepared to accept such a proposition. I agree. The reasons for this are many – our history, our political culture, our tendency to look to the US and the UK for economic models. However, I also think it’s because a great many Irish people are sceptical as to whether they would receive Scandinavian levels of service and competence in return for Scandinavian rates of taxation.
In any society and in a Republic in particular, there is a basic social contract between the Citizen and the State. A key part of that contract, though not the only part, is that the Citizen pays taxes – the price we pay for a civilised society - and the State delivers services fairly, efficiently and competently. I would argue strongly that the State in Ireland has in several key areas, particularly in health, broken that social contract by not delivering services fairly, efficiently or competently. This is not an attack on workers in the public sector, the majority of whom do a terrific and frequently under-appreciated job, or on the necessity for strong public services. It is a very specific criticism of the way in which the State is both organised and managed. I am happy to acknowledge that the massive annual increases in State spending over the last decade or so were from a low base and involved a lot of catch-up. However, I also believe strongly that the improvements in public service outcomes have not nearly matched the increases in spending.
Let’s take education as an example. I support the idea, as argued by studies like the Spirit Level, that more equal societies tend to produce better social outcomes – even for the better off. We know that education is one of the key determinants of a more equal society. Which is why the recent ESRI report on drop-out rates is so alarming. It shows that there has been only small changes in Ireland’s drop-out rate since the mid-90s (it’s now about 1 in 6 nationally and substantially higher in Dublin city), despite huge increases in education spending on a per student basis. Between 1995 and 2006, spending per school pupil in Ireland increased by 104% in real terms. In the same period, average OECD spending per pupil increased by 39% and spending per pupil in the EU19 increased by 45%. Again, I understand that the Irish spend was from a low base. Nevertheless, the spending increases were very significant and should have resulted in much greater progress, particularly given the fact that we have a well-educated and professional teacher population. My conclusion: Something is clearly wrong with the way in which our education system is organised.
My fundamental point is this. I think that those who wish to see the role of the State extended should be to the fore in arguing for its radical reform and should be prepared to back up their arguments with detailed proposals for change. This is all the more essential given the extent of the economic and financial crisis we are facing. All too often, however, this does not happen. Instead, we get arguments for enlarging the State that are fixated on inputs - how much we spend as a % of national income compared to other countries – and pay relatively little attention to outcomes, i.e., what are we getting and what should we get for the money we spend. In education, for instance, Finland spends less than us per pupil (primary + secondary) yet is ranked number 1 in the OECD for educational outcomes and has a significantly lower drop out rate than Ireland. This suggests to me that the problems in education and elsewhere in the public services go well beyond the issue of resources.
Turning to your specifics:
Borrowing: You are of course right that the borrowing spree of the last few years was through the private sector rather than the State (although we have now nationalised much of that debt through NAMA and the bailouts, a development which FG has vigorously opposed). However, that is not my fundamental point. My point is that the taxes on that spree were used to fund very significant increases in public spending, a development which the low tax/low regulation narrative does not capture.
The 70s: I refer to the 70s not because I believe you want go back there, but to argue that State fundamentalism has as many flaws as Market fundamentalism. That is why I think we need a radically new starting point – the Citizen rather than the State or the Market.
Centralisation of power: You suggest that I am adopting a stereotypical view of trade unions. However, I think that in this case it is you who are assuming a lot about my views. When I talk about how pressure groups manipulate centralised power I am not just talking about the unions. I also include groups such as business (through regulatory capture and lobbying) and the senior civil service (the more centralised a system is the more control the senior civil service generally and the dept of finance, in particular, exercises).
Public service ethos: I fully agree with you that we need to maintain that ethos in health and elsewhere. However, FG personnel, including Enda Kenny, have made a number of trips to the Netherlands and in meetings with healthcare professionals have detected no decrease in the Dutch public service ethos. Patient organisations are pretty happy with it (see the Prime Time special on it from last year).
The Common Good: I completely agree that the common good has to accept wide diversity. That is why the FG analysis starts with the Citizen. The goal of State policy should be to empower Citizens so that they have as much real freedom and choice as possible, both economically and socially. The key word here is “real”. A kid who leaves school at 16 is free to apply for any job. The reality is that he is unqualified for almost any well-paid jobs. This is bad for him and bad for society. The job of the State, as I see it, is to help him acquire the skills and capabilities that will allow him to have real freedom and choice in society.
The Third Way: The FG approach is definitely not the Third Way. New Labour sought to occupy a mid-point between the State and the Market. As I have argued above, FG’s goal is not to position itself in the mushy middle between the State and the Market, but to represent the interests of the Citizen. It is, in many ways, a complete paradigm shift. New Labour, at least until recently, had no theory of the Citizen. Individuals were consumers rather than Citizens. In the drive to please the consumer, they gave too much credence to the market and introduced a target-based culture in the public service that made it even more centralised. FG, by contrast, has a much more realistic view of the market (strengths and weaknesses) than New Labour and wants to redistribute power within the State. I absolutely agree with you that any new Government will find it difficult to resist the centralising tendencies of the system. But that is why FG is spelling out so much of its reform agenda in advance – so that, if it gets into power, it will have a clear mandate to tackle the command and control model that currently exercises such a hold over the State.
Health policy. The rational for FairCare is three-fold. 1) FG is against a two-tier system on equity grounds. 2) FG likes the Dutch system on practical grounds - it’s number I for quality and number 2 for value for money. 3) FG believes that competition between insurance companies, where none of them are allowed to cherry-pick their customers, will help drive innovation and give Citizens greater choice - we regard choice as a key part of empowering the Citizen, as indicated above. My question to you is this: Why, after the disaster of the HSE, are you so confident that a centralised health system will work in the future?
NewERA: FG has not argued for the NewERA structure on the basis of accountability. It has done so on the basis of efficiency. The job of the NewERA board is to reorganise the assets of the State and to provide a funnel for the €18 bn investment by the State. However, and this is the key point I was making, it is only intended as a temporary structure. There will be no empire-building. I agree that there needs to be accountability – but that can be taken care of through regular reports to a reformed Dail committee system and transparent reporting of its figures and strategy.
The Conservatives: There are crucial differences between FG and the Conservatives on the issue of people power. First, FG is in favour of an activist State, as my previous posts indicated. This is certainly not the position of the Conservatives. Second, Cameron’s Big Society is about withdrawing the State from crucial areas of policy and allowing volunteers to fill the gap. It actually draws a great deal of its inspiration from the policies of George W Bush, who wanted to hand bits of the social system over to “faith-based” charities. FG, as I see it, sees the work that civil society does as absolutely crucial. However, civil society complements the work of the State – it does not replace it. FG wants to distribute power to the Citizen within the State – not to outsource it to external groups.
Growth: I agree with you on the impossibility of indefinite growth and on the need for economic theory to start taking that into account. However, perhaps naively, I am reasonably optimistic about the potential of green technologies to make a real difference to the sustainability of growth in the medium-term, if backed up by credible Govt strategies. Which brings us back to NewERA.
@ Nat
Have posed a reply earlier this week. Any sign of it?
Sean,
Apologies. Your mails seem to have been caught by an automatic filter to prevent spam. I have released them just now, will read and reply to them soon.
Thanks,
Nat
Sean,
Thanks again for your comments.
“a great many Irish people are sceptical as to whether they would receive Scandinavian levels of service and competence in return for Scandinavian rates of taxation.”
I agree. But I think the challenge is to put in place a system of open Government that builds up people’s confidence about getting high quality services for increased taxation.
One of the key differences between Nordic political systems and our own is transparency. Sweden introduced its first freedom of information (FOI) legislation in 1766. Finland, Sweden and Denmark all had FOI in place before the USA’s influential law in 1966 caused a wider spread of this idea. We need to give people access to current government records, statistics, minutes, agendas, reports, drafts, etc. We need a culture where Ministers will publish all the advice they receive, including what they chose not to follow, along with explanations for the final decisions they took. I believe that this is the route to gaining public trust that the State can deliver better services.
Take for example the Primetime (29 April 2010) report on how Ministers' constituencies have benefitted disproportionately from public spending, while disadvantaged areas have in some cases suffered neglect. Some people will see this type of ‘pork barrel’ politics and be repulsed. Others will see it as confirming their suspicion that you need to be on the right side of those with power who will dispense largesse to their loyal followers. I am in the repulsed camp. We need to end this type of politics, which politicians from all parties have reinforced over the years. We need to have open government so that we can see where public money is being spent, so we know Ministers’ constituencies are not benefitting disproportionately.
The ‘pork barrel’ example also applies to part of the reason why education dropouts continue despite spending increases. One of the researchers explains how funding for schools is affected in an Irish Times article. But a larger difference between Ireland and Finland is income equality. Ireland is 22nd in the OECD, whereas Finland is 7th, as measured by GINI. You note the Spirit Level’s findings, but how will Fine Gael provide for more income equality? I think the focus on commercially driven service charges in NewERA will have the opposite effect and cause disproportionately increased costs for people on lower incomes.
The civic republican, social contract approach that FG is adopting also requires citizens to increase their sense of solidarity for one another. I believe that solidarity requires a more progressive system of taxation, with more distribution of money across society, including taxes on wealth as well as income. A higher level of taxation is needed to sustain an effort to remove the social and economic structures that cause inequality to be reproduced the same areas or the same occupations generation after generation, with the resulting school dropouts and so on that are highly geographically located.
Just by the by, ‘citizen’ can be an exclusive term. I include migrants and other residents as equally entitled to participate in the social contract alongside people in Ireland who have full formal citizenship.
(Cont.)
The State has “broken that social contract by not delivering services fairly, efficiently or competently.”
There can always be improvements in efficiency and I agree that money in isolation is not going to be sufficient. Major policy change is needed. But it is not just a truism, you really can’t deliver Finnish or Dutch levels of quality public services without a broader tax base and higher taxes.
"I think that those who wish to see the role of the State extended should be to the fore in arguing for its radical reform and should be prepared to back up their arguments with detailed proposals for change."
I have worked on a short book TASC will be publishing in early Summer. It details proposals for more open government, across a range of areas, developing the points I mention above. I believe that if more people had direct access to how public money is used and the evidence underlying policy decisions, we’d quickly generate better quality public decision-making and go some way towards the reform we are both looking for.
“My point is that the taxes on that spree were used to fund very significant increases in public spending, a development which the low tax/low regulation narrative does not capture.”
Agreed. Essentially the Government’s policy of a ‘low tax’ economy plus ‘high spending’ on public services was unsustainable. I argue that we want the level of public spending, but made sustainable through tax increases. Fine Gael seems to want to keep ‘low taxes’ but is dodging the funding of public services through privatisation and instead proposes paying for services through user charges, which I believe will have a regressive effect on people with lower incomes.
“NewERA: FG has not argued for the NewERA structure on the basis of accountability. It has done so on the basis of efficiency. ... I agree that there needs to be accountability – but that can be taken care of through regular reports to a reformed Dáil committee system and transparent reporting of its figures and strategy.”
A great many Irish people are sceptical as to whether they would receive Scandinavian levels of scrutiny and competence from Dáil committees. ;-)
In fact, I fully support the call for a reformed committee system. I would go further than Fine Gael’s New Politics in this regard, as I think you need to provide committees with budgets, research staff and a career path for TDs to provide valuable public service as legislators and scrutinisers of public policy. Committees should endure beyond elections, and staff and better records would provide them with an ‘administrative memory’ to deal with changes in the TDs who sit on them.
“Why, after the disaster of the HSE, are you so confident that a centralised health system will work in the future?”
I don’t think that all of the problems of the HSE stem from the fact that it is centralised. After all, many health systems in Europe are centralised. The Dutch system is an exception. I agree with Fine Gael that we need to create a one-tier system and a more rational funding system, where money follows patients. But why not create a single national insurer and leverage economies of scale? The amount of regulation required to avoid people being excluded by insurers will involve a near-Government-run approach anyway (see this FDL blog for example). And you still haven’t said why you believe competing insurers will be more efficient. Is it lower wages? More freedom to invest their funds in less ethical areas? There is a risk that few companies will enter the market, creating a cartel in effect, with little real choice or innovation, but higher premiums than a State-owned insurer operating on a non-profit basis.
(Cont.)
“FG is in favour of an activist State ... FG wants to distribute power to the Citizen within the State – not to outsource it to external groups.”
This is an important point. You can’t have more open and transparent government without the Central Government giving up power, and giving it to citizens (and civil society organisations, journalists, etc.) Some of whom will use their power to pick on every mistake or misjudgement laid bare by the new level of openness. But if Fine Gael really mean to give power back to citizens, then I hope we can move quickly to a more mature, widely inclusive public discourse on policy and a new direction for the country, made possible by more openness.
@ Nat
Thx for all your comments. A very interesting exchange (at least for me - may be incredibly boring for others!). Although I could come back on a number of the specific points you raise, I think it probably makes sense for all concerned if we draw the debate to a close. We have reached the point where the issue of taxation needs to be addressed directly - and this, as you know, is something I am not in a position to do. Thx again for all your time.
Sean,
Thank you too for your time and engagement on the issues. I think it is very useful to tease out some of the detail of current proposals that are contending to become Government policy in the near future. We can agree to disagree on a number of points, but we can do so openly and transparently!
Nat
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