The Budget and the Empty Chair

This was originally written for Irishelections.com

Budgets are like viewing an impressionist painting but in reverse: the closer you are the more clearly you can make out the image, the further back the more vague and indistinct. Stand far enough back and all you see is the frame. With budgets, instant analysis and frenetic comment eventually gives way, in a very short time, to a critical shrug of the shoulders. The reality of wages, poverty, inflation and people’s expectations move on faster than the cheerleading and criticisms of the budgetary particulars.

There are exceptions, but sometimes not for the best of reasons: the 1927 budget that slashed pensions or the 1982 budgetary attempt to impose VAT on children’s footwear that ended in an election. There were the budgets that introduced children’s allowances, tax credits, the PAYE system but, in time, we forget the years it actually happened: we are standing too far back.

Minister Cowen’s budget won’t be remembered either. This is not a ministerial fault. For budgets are largely facilitating instruments whether its policy already stated (e.g. the cut in the top rate, the pensioners increase) or market processes (e.g. the refusal to muck up the housing market with an inflationary stamp duty cut). When they venture too far away from this process they can cause trouble for themselves – Minister McCreevey’s ill thought out launch of decentralisation during a budget speech. But for the most part, Ministers keep to the safe ground.

That is why budgets have a short shelf-life. When we return to debating specific areas – health, education, income distribution, climate change, etc. – we do take on board the budget because its part of the mix, just like all the preceding budgets we have forgotten about.

Take the vaunted social welfare increases of €20 per week. Between 2003 and 2005 real social welfare increases (i.e. after inflation) averaged 6.8% annually. What effect did it have on income equality? Almost none, according to the CSO. The real social welfare increase in 2007, according to the Government’s own projections, will be 7.4%. So we shouldn’t be surprise if the effect is still marginal (contrast that with a single person earning €100,000; next year, with tax cuts and salary increases, s/he will be €3,870 better off - not too shabby).

But budgets are political creatures, too. So what are the political images that will stay with once the number crunchers have worn out their calculators? ‘Buying an election?’ ‘Opportunity squandered?’ ‘Reckless?’ For me it is the sight of the budget debate on Prime Time Wednesday night. We were treated to only two contestants for the main event – Minister Cowen and Fine Gael’s Richard Bruton. Where were the progressives in this debate – the Pat Rabbittes, the Joan Burtons, the Dan Boyles, the Caoimhghín Ó Caoláins? Why is the debate confined to spokespersons from parties that share a similar perspective? Surely, there is an issue of balance for RTE.

Mr. Bruton’s budget critique, in both his Prime Time appearance and his Dail reply was a mixture of traditional oppositionism and a conservative fiscal perspective. Most of his Dail speech was a litany of Government failures (and to be fair, the sins of this Government are legion). His recitation of spending needs would also constitute a litany: capital investment, education, more Guards, carers, health, social and affordable housing, you name it.

And that’s the circle-and-square argument Fine Gael champion: they argue for more expenditure but accuse the Government of spending too much; they demand cuts in taxes and duties but reassure us we can still fund all those things we want. To square the circle, the entire issue of social and economic modernisation is reduced to administrative mismanagement (Mr. Bruton does use the word ‘reform’ a lot, but in many cases as a codeword for cuts such as ‘stamp duty reform’). If only we ‘managed’ better we could increase effective expenditure and cut taxes at the same time. This is a favourite argument of the Right (if Fianna Fail were in opposition they would say the same thing). It’s an old argument. It can’t be verified by any genuine accountancy.

In the end, the Prime Time debate deteriorated into both sides claiming they’re better at reducing taxation and increasing effective expenditure. Where was the Left? They were relegated to a minors match with a Junior Minister from a 3% party even if, because of the ideological distance, the exchanges between Ms. Burton and Tom Parlon had a sharper edge than the main event.

In terms of optics, if one wanted to shift away from the Minister’s party, there was only the Fine Gael representative to receive one’s gaze. But don’t blame the RTE producers. They only present what is on offer and the only offer on the table to a Fianna Fail-led regime is one led by Fine Gael.

The Left has only itself to blame for this. Labour, in particular, voluntarily vacated the metaphorical studio when the big boys entered. This is not a comment either way on the debate over electoral strategy – the election pact vs. the all-options-open strategies which actually have more in common than not. It is a more fundamental critique of a despairing situation whereby the Left refuses the opportunity to lead the critique of what is, at the end of the day, a regressive budget and a failed economic strategy.

They do this by constructing for themselves, not just an electoral strategy that cedes Fine Gael senior status, but a far more existential cage – one in which the very idea that the Left could develop and lead a new alternative, a new combination of forces, is forbidden to be thought of, never mind spoken about. And come election time, when the Party Leaders debate in the same RTE studio, the Left will again be somewhere else, completely silent about new possibilities. The chair will be empty.

After the budget, the Greens John Gormley, questioned outside Leinster House, stated that the ‘Greens are part of the equation.’ Fair enough, but progressives should be concerned that they are becoming a very small part. For in the last Irish Times/MRBI poll Labour, the Greens and Sinn Fein has each failed to increase by even 1% over the four years.

We shouldn’t be satisfied with being just ‘a part’. We should, even if only in the privacy of our party rooms, start seeing ourselves as an equation in our own right, with our own logic and perspective that has the potential to speak to a considerable section of society. If we don’t we should be worried that, even if we were eventually invited to the table to express our views on the budget, there may be no one in the audience interested.

Comments

[Niall]

Opposition politicans are on a hiding to nothing with the manner of media coverage. Firstly, the Agenda is effectively set by way of leaks in advance. This current Govt. has also rationed access to senior politicians and the media in particular RTÉ have been compliant. Senior ministers rarely debate with the opposition and prefer one to one discussions with journalists.

Irish journalists are incredibly lazy with very few making any serious efforts to get behind the story. There are a few like Kathleen Barrington of the SB Post who make an effort to get behind stories, but they are the exception.

The only interesting debate in the past 24 hours was the short sharp discussion between Joan Burton and Tom Parlon. Ms. Burton scored heavily on the treatment of one income families, who have been discriminated since individualisation. Parlon understood what she was saying but had no answers and just mumbled the mantras.

The role of Congress must also be considered. ICTU seem unwilling to attack the Govt., because of course they are their partners. Instead of being a natural part of the opposition, it has become a cheerleader for the Govt. and in reality irelevant.

Taking the individualisation as an example, Congress clearly supports the process. In a Prime Time appearance some time ago, Sally Ann Kinihan rubbished the discrimination. The theory behind it of course, sees people as tools of the economy rather than as people enjoying the fruit of the economic development. It is interesting to see the shared views of former WP Stalinists like Ms. Kinihan and Charlie McCreevey and latterly Cowen.

There are around 75,000 one income married couples in the €45,000 to €80,000 bracket, most of whom I would suggest are union members and are down an average of €5,500 per annum in 2007. It is also probable that the reason they are reliant on one income only is because of caring roles, children or elderly relatives.

The Budget is now part of a wider process, which involves destroying the role of the opposition and other groups in favour of so-called consensus with various "partners".

[Lorenzo]

Did you see article by Tim Callan (a research professor at the ESRI) in the Irish Times today? It is entitled "Budget gives boost to low-income earners". It is very interesting. I don't want to post its entire contents but here are some relevant extracts:

It starts:"While high-income groups have seen greater absolute rises, the incomes of workers in lower brackets are growing faster"

He later says:
"Analysis using the ESRI tax benefit model indicates that this was one of the most progressive budget packages over the past decade and a half. The chart shows the average percentage gain of each of five equally-sized income groups, from the poorest one-fifth of families (quintile) to the richest. Poorer families gained substantially more in percentage terms than those at the middle and top of the income distribution." (sorry, but there was no chart in the web-edition of the article.)

"On average, the poorest one-fifth of families gained close to 5 per cent from Budget 2007 (over and above what a neutral budget would have brought). By contrast, the gain for the top one-fifth of families was 1 per cent."

Maybe he pre-empts your article when he says: "Some debate about the distributional impact of this year's Budget has focused on the fact that high-income earners have seen greater absolute rises in income due to tax cuts, while welfare recipients received greater proportionate gains in income. A progressive budget is one which sees greater proportionate rises in income for lower income groups."

It really was a something-for-everyone-in-the-electorate budget that was hard to grapple with - your point on it being like an impressionistic painting was a good one. I've noticed a dearth of critical comment about it in the blogosphere, which given the general left-ish slant amongst bloggers is unusual - though I could well have missed some postings.

[Michael]

Niall, can only say that I agree with your comments fully - especially about the one-income couple. I note that the Revenue's latest figures from 2003 show that there are as many one-income couples as there are two-income couples (and this of course doesn't count 'unmarried couples'). I hope to do a future blog on this subject and would look forward to your comments.

I will say this, Lorenzo: if we had a post for Economist-Laureate one of my top nominations would go to Tim Callan. His work on income distrubtion, poverty and general welfare state issues makes a real contribution to the debate. Unfortunately not emough are listening. One of the reasons is that Mr. Callan cuts through many lazy assumptions made by both Left and Right on these topics. He regularly publishes, on behalf of the ESRI, a distributional impact report on budgets. I must say that there is something that niggles at me when I read these. I'm not in any way quesitoning Mr. Callan's methodology. It may be that he 'measures what he measures' and that the picture I am looking at is different from the one he is examining in precise terms. However, I will address this issue in the future. And, if after examination, I find that I have put wrong emphasis on some aspects that Mr. Callan has examined, I will admit it. That is what debate is supposed to be about. And I fully take your comments on the blogosphere and the dearth of comments. It's not that there isn't material to criticise (Stephen Collins and Garret Fitzgerald have good comments on the budget in this morning's Irish Times), its just that much of the blogging is taken up with the anectodal or opinion-assertion. Nothing wrong with that - some of it is quite thought-provoking. But a more detailed analysis grounded in some empiricsm is also needed. I find that Gerry O'Quigley of ie-politics and the Cedar Lounge Revolution are very thoughtful and there are some good contributions on Irishelections.com (there are more worthy blogs, of course). I hope that my blog has helped in a small way to address this 'gap in the market' and hopefully in the new year we will see more regardless of their ideologiclal orientation. We all benefit by constructive and thoughtful debate.