In a previous post I suggested that the debate was getting out of hand. In actual fact, we have almost no fiscal space (not after inflation, demographic pressures and the sleight-of-hand regarding Irish Water investment). Then there are those external events: low-growth, volatility in the equity markets, asset bubbles which rarely end up other than a bust (and still no one talking about Brexit).
Yet we have a promise-land political debate: tax cuts, more public spending, more investment – honey and manna and wine flowing; detached from domestic and global reality. Eerily enough, the debate is even detached from the economy (as if throwing about small bits of money at this or that will change the fundamentals).
But one should be slow to criticise unless there is some alternative at hand. So here’s my go. However, mine has a different starting point than tax cuts or divvying up a tiny fiscal space. I will address three issues– and none of them cost money (that is, impacts on our new friend, the fiscal space). But if pursued, they would make life a lot better for a lot of people.
1. Quality Workplaces
In a recent report the OECD claimed that earnings quality, labour market security and a quality work environment go hand-in-hand with higher employment. Of course; you can’t build a modern sustainable economy on low-pay, job insecurity and poor working conditions.
Therefore, let’s have a Decent Work Act which can help build quality jobs, based on ICTU’s Charter for Fair Conditions at Work:
- Start the process to a Living Wage
- End precariousness – through certainty of hours at work
- Give part-time workers the right to extra hours in the workplace when they become available (this is actually a EU Directive that has yet to be transposed into Irish law)
- A progressive public procurement programme – so that we don’t get images like these from Government Ministers, parading the vests and names of race-to-the-bottom employers
- Statutory Sunday premium and over-time pay
- The right to collective bargaining and a significant extension of Joint Labour Committees to all low-paid sectors and occupations.
This will start to give certainty in the workplace, promote quality jobs, increase domestic demand and investment – and the great thing is that it would actually be a revenue raiser for the government, not a cost.
Lesson: change the power relationship between labour and capital to start favouring the former.
2. Develop New Enterprise models
The debate assumes that we can build a modern market economy through tax cuts and eliminating red tape. If that was the key to success, we should have the largest indigenous enterprise sector in Europe. Instead, we have one of the smallest. So let’s get real.
I previously highlighted Davy Stockbrokers’ assessment of investment in productive activity prior to the crash – that the overwhelming majority of it came from public investment and public enterprise companies. So let’s learn and apply this lesson.
First, create new – and expand current – public enterprises; in such areas as advanced broadband, green technologies and alternative energy (e.g. ocean, etc.), public transport, etc. This can be through stand-alone activity, partnerships with private companies, whatever works.
From this we should enable local government (or create new regional institutions) to establish municipal enterprises – a standard feature in continental Europe and North America. These are essentially local public enterprises but they can be formed in partnership with local and private capital. This would facilitate areas where there are low-levels of enterprise activity (whether urban ghettoes, cities/towns outside Dublin, or depressed rural areas).
But we can go further, supporting alternative business models: community and neighbourhood enterprises, labour managed enterprises, new company models based on commercial non-profit activities (some may find this exposition of alternative business models - from the Democracy Collaborative). And this could be funded – through equity – by the Ireland Strategic Investment Fund, with little impact on the Exchequer.
Lesson: once we get over the idea that jobs can only be created through private capital (and private capital alone) a number of alternatives can arise.
3. Housing, Houses and Homes
We have promises to sell-off council houses (great, we have too few social houses and what few we have we’re going to sell-off at a huge discount), provide cash transfers to people wanting to buy homes (great, pump demand, drive prices upwards and get more people into more debt); and rely on the private rental sector to house most people on the waiting list – at a time when private rental accommodation is falling. Laugh so that you don’t cry.
Two issues here:
First, the Government is expecting to get back up to €4 billion in repaid bank bailout money. They intend to use that to pay down debt. There’s a better way to use that money (which will pay down debt as well): Untie proposed launching a short-term emergency social housing programme – one that will finally eliminate homelessness and start to make inroads in the huge housing list. This would have to be negotiated with the EU Commission – but this expenditure, being a once-off, wouldn’t impact on the structural deficit and, therefore, wouldn’t require derogation from the fiscal rules. It could be strengthened by the Dail declaring a Housing Emergency.
However, if you are proposing to sell of social housing, increase subsidies the home ownership sector, abolish the property tax – well, the idea of a housing emergency won’t be very credible. The over-riding issue is to build houses.
In the medium term we have to radically restructure social housing investment. Ireland is a European outlier when it comes to financing social housing. I have addressed this issue here. We need to move to a pluralist investment model; namely, like many other European countries we need to establish public housing associations which, while remaining in the broad public sector, would build houses on a commercial basis to keep the investment off-the-books. This can facilitate, along with continued traditional state financing, a significant increase in social housing investment. Further, it can provide rental housing on a cost-rental basis (that is, rents that reflect building costs only) for low and average income earners; thus eroding the distinction between the public and private sector (you can read more about this here).
Lesson: maximise the public space from which we can both provide and invest in housing for all low-income people – not just ‘the poor’.
* * *
So that’s the start – workers’ rights, public-led enterprise and greater reliance on the public space for housing options. And all this with little impact on the fiscal space or Exchequer finances. Indeed, to the extent that these promote business investment they can grow the fiscal space through increased potential GDP. But more importantly, we can start talking about the economy – the economy of work and enterprise activity, and the resolution of one of our leading social crisis.
With that under our belt – now we can talk about fiscal space: resources for public services, for social protection (so that nearly half don’t have to live in deprivation conditions) and for investment. Because now we have sustainable economic growth, providing us more resources to meet these needs.
And all because we started with work, enterprise and homes.