The stark contrast between the tax-raising UK budget on Wednesday and the giveaway package presented to the Dáil a few weeks ago clearly illustrates the impact that choices made by politicians have had on the fortunes of people living in the two countries.
The UK’s current financial woes are a direct result of foolhardy political decisions made by its political leaders. Opting out of the European single market and customs union in the wake of Brexit and the absurd budget introduced by Liz Truss two years ago are the most obvious policy errors among the litany made by Conservative governments over the past decade.
Labour chancellor of the exchequer Rachel Reeves has responded with a package of £40 billion (€47.5 billion) in tax increases and massive extra borrowing to fund the improvements in public services which her party promised during the UK general election campaign last May.
Whether the medicine, which will also inevitably include spending cuts, will have the desired effect or will do lasting damage to the prospects of economic growth is an open question at this stage. The failure of the Labour government to make any serious moves to address the consequences of Brexit is not a hopeful sign.
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If Britain’s woes are a direct result of bad political choices the corollary is that the benign economic scenario in this country is a direct consequence of decisions made by successive Irish governments. Minister for Public Expenditure Paschal Donohoe, who has been in a key role in directing the economy for the past eight years, deserves a great deal of credit for the current bright economic outlook.
The massive budget surpluses of recent years have come about only because political leaders had the courage to administer a dose of harsh medicine in the wake of the 2008-2010 financial crisis. Those unpopular measures put public finances back on track and laid the foundations for rapid economic growth.
Unemployment, which had been a perennial blight in Irish society, has been reduced from 16 per cent during the crisis to 4 per cent today, with the number of people working rising from 1.8 million to 2.8 million in a decade. This phenomenal increase has made the country, which was for so long an exporter of workers, a magnet for immigration.
The healthy state of the public finances and the growth model which underpins economic policy enabled the Government to come up with a range of measures which absorbed the shock of Covid. Another bout of generous spending programmes cushioned the population from the massive cost-of-living increases that followed the Russian invasion of Ukraine.
Other countries including the UK, France and the United States have struggled to deal with the impact of those two massive economic shocks. As well as the UK budget this week French prime minister Michel Barnier was attempting to convince the French national assembly to accept a package of €40 billion in spending cuts and €20 billion in tax rises.
With an election expected to be announced here in a week or so the big question is whether voters will give the Government parties credit for their undoubted economic achievements or whether, as in 2020, they will be swayed by those offering change as a panacea to all of the country’s ills.
While Sinn Féin’s current woes may hamper its ability to make headway in the coming contest, the Coalition parties have no grounds for complacency
The Irish Times exit poll after the 2020 election provided a fascinating insight into the contradictory impulses that motivated voters to administer a serious rebuff to both Fine Gael and Fianna Fáil last time around and saw Sinn Féin winning more votes than either of them.
Almost 80 per cent of voters told the pollsters that they preferred change to continuity. Yet the same substantial majority took the view that the ability to manage the economy was an important issue when it came to making up their minds about how to vote.
The only conclusion from the findings is that a big majority of voters did not accept the proposition that the Fine Gael-led governments from 2011 had demonstrated economic competence. It appears that the failures on some issues, particularly housing, outweighed the government’s strong performance on basics such as jobs.
What the findings demonstrate is that regardless of the objective facts about strong economic growth, rising employment and increasing living standards, there is no guarantee that the Government parties will get much credit for what they have achieved.
While Sinn Féin’s current woes may hamper its ability to make headway in the coming contest, the Coalition parties have no grounds for complacency. They have a serious job ahead of them to convince voters to give them some credit for what they have achieved and, more importantly, to persuade them that they are capable of dealing with the persistent problems that continue to bedevil the country.
Top of that list is still housing. It is only the most visible part of the infrastructural deficit that represents the biggest challenge facing the country in the coming decades. Radical action, particularly in relation to our cumbersome planning system, is clearly required. Voters will be asking which of the parties appears most capable of addressing those shortcomings in the years ahead.