Three self-inflicted recessions since the foundation of the State do not seem to have impacted on the way politicians and voters conduct their business. When an election comes into sight, auction politics moves to centre stage and the larger the concessions on offer, the more positive the response tends to be. Promises to reduce the Universal Social Charge (USC) or to abolish it entirely are at the heart of the current election campaign, although Sinn Féin would use its proceeds to pay for other concessions.
There are parallels between this election and that of 1977. Some 39 years ago a Fine Gael/Labour Party government was attempting to become the first coalition regime to be re-elected. It campaigned on a positive record in government, along with a promise to reduce local authority rates on domestic dwellings.
In contrast, Fianna Fáil offered not just to abolish rates on homes but to get rid of car tax as well. The outcome was an unexpected Dáil majority for Fianna Fáil. But the removal of rates on homes opened the door to their abolition on farmland; the hollowing-out of local authority finances and decades of partial, makeshift fiscal repairs.
Minister for Finance Michael Noonan spoke of the USC at the weekend as a “hated tax”. But all taxes can fit that description. He also maintained it was an “emergency tax” that could be phased out because the emergency was now over.
In recent months, however, both he and Taoiseach Enda Kenny have emphasised the fragile nature of the economic recovery and the need to “keep the recovery going” through a continuation of cautious economic policies and prudent management of the public finances.
Abolition of the USC at a time of worsening international trading conditions could hardly be described as a cautious commitment. Since last year, Fine Gael has held conflicting positions on whether the tax should be retained, removed for lower-paid workers – as proposed by Fianna Fáil and the Labour Party – or eliminated for all. Because of his 1977 experience, Mr Kenny may have resolved to outbid Fianna Fáil and to become the first re-elected leader of a Fine Gael-led coalition. In any event, it was he who confirmed a policy of abolition.
At this stage of the election campaign, it may be too late for Fine Gael to formally resile from its commitment to get rid of the USC. But, having regard to the critical responses from the International Monetary Fund, the Fiscal Advisory Council and IBEC over this narrowing of the tax base, it would be wise to make its implementation conditional on strong economic growth.
Not only that, reassurance that investment in capital projects and services for a growing population will take precedence would represent political maturity. Remember what happened after 1977?