Saturday, 30 January 2010

No return to business as usual ...

"Unless there is radical reform of governance worldwide, the recovery, when it comes, is likely to be followed by yet another recession".

You can read the rest of Paul Sweeney's op-ed in yesterday's Irish Times here.


Paul Hunt said...

A well-reasoned and compelling piece...until - perhaps the IT sub-editor wielded the computerised scissors - the final sentence. I'm not sure the views of the forces of darkness are excessively represented in the media, but, even if they are, that is not how these forces exercise their power. This is exercised via the capture of policy and regulation. Only the people themselves can prise loose their grip.

Proposition Joe said...

Few Irish economists supported our policies against tax breaks, for increases in direct tax

ICTU were certainly against property-based tax breaks for the fat-cats, no doubt about that.

But did they really advocate for increased direct taxes?

Well, lets look at the fossil record ...

ICTU Pre-Budget Submission 2007:

In this context, it is imperative that the Budget be used – both in respect of direct and indirect taxation measures – to support the income increase effect of the agreement by increasing real incomes and moderating price increases.

A. Income tax
(a) Tax Credits:
Increase employee Tax Credit (TC) by at least €350;
Increase personal TC by €60.6
(b) Tax Bands:
Single person’s standard-rate band should be increased by at least €5,000 pa.
(c) Age tax Credit:
Raised to €350 Single and €700 Married.

PRSI & Health Levy
(a) Increase income exemption limit for 2 percent Health Levy from €440 to €515 pw (to restore year 2000 relationship with Average Industrial Earnings);
(b) Increase the income level for exemption from 4 percent PRSI from €287 to €420 pw (to restore year 2000 relationship with Average Industrial Earnings);
(c) Increase weekly PRSI-free allowance from €127 to €210 (to restore 1998 relationship with Average Industrial Earnings with a corresponding increase in the allowance for modified PRSI Classes from €26 p.w. to €45 p.w.)

Gainsharing - Encouraging Employee Financial Participation
Towards 2016 recognises the important role that Employee Financial Participation plays in deepening workplace partnership.
The state has been active in encouraging the development of employee financial participation by providing for favourable tax treatment of earnings from approved profit sharing and share option schemes.
Gainsharing schemes, unlike approved profit sharing schemes and approved share option schemes do not attract any form of favourable tax treatment. This was a deficit recognised by the Enterprise Strategy Group, who in their report Ahead of the Curve suggested that this was an area that should be revisited.
Congress is seeking agreement for arrangements which will result in earnings from approved gainsharing schemes attracting favourable tax treatment.

Well there's a lot of raising and increasing going on there. But the effect would be to reduce the direct tax burden.

Funny also that a body dead set against tax breaks should be advocating for a whole new set of "gainsharing" tax breaks. Seems that its not tax breaks per se that are badness, rather its tax breaks for the wrong sort of tax-payers.

Well maybe 2007 was an outlier, the height of the boom and all that. Lets look back a further year at the 2006 pre-budget submission.

Whoops, more cuts to the direct tax burden, and more advocacy for increased or new reliefs with ICTU recommending "the ceiling for tax relief for union subscriptions should be raised" and "introduction of tax relief measures designed to assist parents in meeting childcare costs, in Budget 2006".

I could go back further in time, but I suspect I'd find more of the same in the older pre-budget submissions.

Paul Hunt said...

@Prop Joe,

I think it is easy, but, perhaps, a bit unfair to criticise the union movement in hindsight. Yes, it was strategically inept - and certainly not in the public interest - not to mobilise more effectively against the pro-cyclical policies that generated large, temporary, unsustainable, mainly windfall-based surpluses. But it was tactically sensible to ensure workers and SW recepients received a share of these surpluses. The movement's credibility in the eyes of its members depended on it.

But, going forward, the union movement is seriously misleading iteslf of it believes it can cut a deal with this entirely discredited government (that is operating as an elected dictatorship without a popular democratic mandate for the policies it is pursuing) that will protect workers and SW recepients from further cuts in pay and benefits.

Such a deal would sideline the Oireachtas, be socially divisive and would be used by a publicly discredited Government in an attempt to shore up its almost non-existent competence.

It is time for the union movement to act, not in a narrow sectional interest, but in the piublic and national interest. In this failed and dysfunctional polity it is the only mass-based organisation left in civil society that is able to speak for the people.

But I fear that Ireland, more and more, reeembles rats fighting in a sack that is sinking in a lake.

paul sweeney said...

Prop Joe, I think you missed the point. Congress sought changes to deal with "fiscal drag" annually. This is what any organisation would do to maintian its position. In 2004, Congress, in every which way, said income taxes were too low in "Tax Cuts did not Create the Tiger". Also minor changes such as gainsharing which would boost productivity were sought periodically. Overall the policy was counter cyclical. Uniquely.

Paul Hunt said...

@Paul Sweeney,

I agree it is important - and tactically wise - to attempt to distance the union movement from the policies that led to this economic and financial debacle. And I agree that the unions did not cause it. But, rightly or wrongly, there is a widespread public impression that the unions were willing participants in the temporarily over-flowing trough - and that their participation in "social partnership" provided "cover" for successive governments to pander to the interests of privileged and influential sub-sectors in a way that has seriously damaged the broader public interest. Furthermore, there is a sense that many key decisions were made behind closed doors in a way that effectively by-passed the Oireachtas.

Now that the "social partnership", effectively, has broken down, there also appears to be a widespread public impression (again rightly or wrongly) that the unions, having been spurned by the Government, are "throwing their toys out of the pram". As a result, any attempt by the union movement to "cut a deal" with this Government is likely to be greeted with derision and contempt by many, many people.

To paraphrase Oscar Wilde, to be on the wrong side of history once is a misfortune; to be there twice is downright careless. The union movement has a historic opportunity to decide to be part of the solution or to continue to be seen by many of the public as part of the problem.

I have a horrible feeling that the union movement will fail to meet this challenge.

Anonymous said...

@Paul Hunt
I completely agree with you. People are taking too narrow a view of our country’s accountability and governance problems. The fundamental problem is our current government.
The reason for the narrow scope of our bank inquiry is the current government.
The reason why so many of our institutions, public and private, banks or state boards, have the governance they do is directly and indirectly due to the current government.
The continuance of the present government would only be morally possible if all ministers gave a complete and truthful account of their actions in relation to the building and lending bubble from 1997 right to the present. As well as a full and truthful assesment of our situation now. They will never willingly do this. Therefore this entirely discredited government must go.

I say this not for any party political reason it would be the same no matter what parties
made up the government.

Paul Hunt said...

Thank you, Anonymous, whoever you might be. The union movement's current behaviour evokes an apochyphal exchange: "Willie, why do you rob banks?", "Because that's where the money is" and the behaviour of a beaten dog. The union movement is contemplating trying to cut a deal with this discredited Government because that's where the power is. The beaten dog will dance around the farmer's door, not wishing to get too close, but still wanting to re-establish some rapport - and to secure a supply of food. The farmer wants the dog as well, as it has some use, but won't hesitate about beating it again if it annoys him in the future.

Once the Government's support in the Dail holds, there is no constitutional means of removing this Government. Only by mobilising the people, possibly by means of a mass petition, might it be possible to force some change. But, despite the frequent calls for politcial mobilisation on this site, the union movement has no desire to, or interest in upsetting the farmer who might provide the leftovers from his table.

The people are also uncertain about the benefits of a general election. As one person put it: "We'll just be offered the chance to vote for the same clowns who created this mess." Deputy Rabbitte's inquiry bill is a good initiative, but it is doomed to failure and he and his collegaues would be far better employed engaging with FG to hammer out a radical programme for an alternative government. The people might then be more encouraged to push for the removal of this Government.

However, I despair of any rational action in the interests of the people by those who exeecise some authority and influence. It's every man (or woman) for him/herself - and the devel take the hindmost. It's very sad that we've come to this.