Another broken promise- Leo and those vanishing tax cuts

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By Eamon Delaney, The Times.ie

Its the photo that haunts Ruairi Quinn and the Irish Labour party. Quinn is at the front of gate of Trinity College signing a pledge, promising never to reintroduce fees for Third Level education, only months before such a return was mooted. Like the famous mock Tesco’s ad, which warned of hikes that Labour subsequently helped Fine Gael introduce, it was a broken promise for which Labour was subsequently punished at the polls.

Will it be the same with Leo Varakar and his much-vaunted tax cuts for the squeezed middle? It should be. Last month, the Taoiseach played down any hopes there would be tax cuts for middle income earners in 2018.

Given the way the Taoiseach has been spending public money, this is hardly a surprise. In the last month alone, Varadkar has confirmed plans to double the size of our foreign service and double overall funding on arts and culture. And he has promised to increase significantly the size of Ireland’s overseas’ aid budget which is already 770m euros, mainly going to a handful of African countries.

The overseas aid budget had been almost one billion euros in the Celtic Tiger years but came down when our economy crashed. Now Leo wants to get it back up again. Fair enough, but its more taxpayers money.

Meanwhile, in the last two budgets the Government has increased both the State pension and the job seekers allowance, even though there wasn’t a significant demand for either of these rises, and especially not the latter at a time of almost full employment. But Varadkar has said that he wants to continue increasing the State pension very year, without means-testing, of course, and without any wider societal demand that this be done.

Maybe this is the trick with this Government and in particular its Taoiseach – don’t make any demands and you’ll get your wish satisfied ! There’s one for everyone in the audience.

And yet Varadkar specifically promised that he would address the crushing tax burden on middle income earners. This was a central plank of his Fine Gael leadership campaign, helping the people who get up early to go out and work – for a change. This is where we thought Leo was connecting with his original principles. More fool us.

Last week, in his curiously ruminative but often insensitive way, Varadkar said that although there actually was money in the kitty, he might have to postpone any promised taxation relief as there was a danger that it could overheat the economy.

‘If the economy continues to grow at the rate it is growing now, I think we would have to consider not spending all of the resources available to us’ the Taoiseach said airily, thus sending a real but predictable blow to workers who might have hoped to have some long overdue share in the fruits of an increasingly buoyant economy.

‘In theory, the country could afford to reduce the entry point for the higher rate of income tax and cut the Universal Social Charge (USC), but whether it is prudent to do so is a different question’, he continued in a sort of detached equivocation, that is a far cry from the clear message and passion of those campaign speeches.

‘People will start to feel the effect of the last Budget for real in their pay packets over the next couple of months,’ Mr Varadkar said, about the derisory €4-€6 per week rise that the average worker has now gained. Is he for real? This would get you a cup of coffee and a bun. Or a pint, now that Leo’s government has made it too expensive to buy take outs !.

The reality is that taxpayers still a whopping near 50% on any income over 35k, if you include PRSI and USC. It is way in excess of other EU countries and for the higher earners it is even more punitive. Foreign investors have said what a deterrence this is to job creation.

Above: what we thought would happen – and there’s still time !

But instead the Taoiseach said that the ‘first priority for next year is to keep the economy on track and manage the public finances prudently.’ This from the man who has been lashing out monies left right and centre. Now there’s a danger that the economy might overheat, but also that much resources have already been spent and the room for tax relief is short.

But sure Vardakar must have known this. The dogs in the street could have told him. And that he will need much more money for housing, and for infrastructure overruns, and for Brexit. So why does he keep spending money? And where those promises on tax cuts real or just something to get elected?

Varadkar is very lucky that Fianna Fail are also prone to high public spending, despite their own experience. Both parties are now addicted to more State benefits and neither appears to have learned the lessons of our recent past. Or on narrowing the tax base, indeed.

Otherwise, FF would have a great stick to beat the Government with and something to differentiate itself from FG and maybe even get a rise in the opinion polls, which is what they need. If Michael McGrath repeatedly and validly said, ‘what is it with high spending Leo, when middle earner tax payers are paying 50%?

The irony is that FF and FG keep throwing goodies at the so-called put-upons and using working families (their natural voting base) to pay for it. When are they going to realise that Sinn Fein and the Independents have that ground sown up and they are only alienating their natural base?

At the last budget, nothing substantial was done by the Government for working families and the ‘squeezed middle’, which represents the bulk of support for the two main parties, Fine Gael and Fianna Fail.

Instead, it seems as if quangos, conventional wisdoms and the pressure of Sinn Fein and the far left, has caused the two main traditional parties to desert those often silent supporters and betray the very people who are working hard to keep the country going.

We now know that the bulk of austerity measures in Ireland since 2011 has actually fallen on tax payers and not come in the shape of cuts, as has been usually stated. This is a great injustice and it should be addressed properly and not in a piecemeal way, as Varadkar suggested he might do again, last week. After all, his leadership campaign message was about doing precisely this.

There is an issue of fairness here and urgent respite should be given to struggling families and middle income earners instead of yet more populist spending by a Government that seems to have thrown post-Troika caution to the wind. After all, no one will remember Vardakar for his high spending schemes, but they’ll remember him for keeping – or breaking – his campaign promise.

This article appeared in The Times.ie on 2 January 2018.

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