The spring economic statement which dominated Dáil proceedings this week was widely dismissed as a boring non-event but it did provide a preview of the battleground on which the forthcoming general election will be fought.
It also served the purpose of focusing the politics of the week on the economy, where the Coalition wants it, rather than on the latest controversy, genuine or contrived, where the Opposition would like to have it.
While both Coalition parties made much of their record of achievement on the economy, they both know past performance is no guarantee of future electoral success so the focus was on their plans for the future. There was a clear difference of emphasis in the priorities set out by the main Fine Gael and Labour speakers as they sought to appeal to different, if overlapping, constituencies.
Enda Kenny and Michael Noonan put reductions in income tax at the core of their plans in a clear attempt to appeal to the party’s middle-class base, which has been eroded over the four years in government.
By contrast, the centre point of Brendan Howlin’s speech to the Dáil was the announcement that talks on reversing the cuts in the pay and pensions of public servants would begin later this year. Having lost a big slice of its working-class vote since entering coalition in 2011, Labour needs to hold on to its core public service support if it is to have any chance of making it back to office. Hence the decision to open talks on restoring at least some of the money lost in the pay cuts.
Jeopardising recovery
The challenge facing both parties is to do enough to make a real difference to their respective constituencies without jeopardising the economic recovery or creating expectations that cannot be met.
Kenny opened up the prospect of a significant reduction in the universal social charge (USC) for middle-income earners in an obvious riposte to Fianna Fáil leader Micheál Martin, who promised at his ardfheis last weekend to abolish the tax.
Where the money is going to be found to bring it down significantly neither Kenny nor Martin have specified. In the short-to-medium term there is no realistic prospect of the charge being abolished but in the longer term it would make sense to absorb it into general taxation.
Translating the €750 million that will be available for income tax cuts into meaningful increases in take-home pay for middle-income earners and convincing them that further reductions will follow in succeeding years is the challenge facingNoonan.
Howlin faces an equally stiff challenge to find the resources to restore some element of public pay without starting an upward spiral that would have the capacity to cripple the exchequer all over again while also enraging private sector workers and the self-employed, who have endured the brunt of the hardship inflicted by the crash.
In the period from the height of the crisis in 2009 to the end of 2014, the public service pay bill was cut from a peak of €17.5 billion to €13.8 billion. This reduction of 21 per cent was a hugely significant part of the financial adjustment required to put the country on the road to recovery.
This year, the pay bill is estimated to rise by €500 million to €14.3 billion due to extra provision for frontline staff, so finding the resources from the €750 million allocated for improved services next year to restore some element of the pay cuts is not going to be easy.
The struggle to get their hands on the modest increase in available resources could promote serious tensions between the Coalition later in the year, as well as causing anger among some of the competing interests who face disappointment.
If managing expectations is the difficulty for the Government parties, the challenge facing the Opposition parties is convincing the voters they will not undo all he hard work of recovery.
Fianna Fáil has adopted a measured approach that involves accepting the broad outlines of the Government’s approach while criticising individual policies and suggesting the fruits of the recovery could be shared out in a fairer manner. Its real problem relates to the past rather than the future. Convincing voters it can be trusted with the reins of power after all that has happened will be the real challenge.
Sinn Féin and smaller groups, from the hard left TDs to Shane Ross, have adopted a very different approach, denouncing the entire thrust of the Coalition’s economic policy as “austerity” and vocally supporting the line taken by Syriza in Greece.
Troika rejection
The fact that Syriza quickly abandoned its promise to renege on the country’s debt and appears to have come around to accepting most of the reforms proposed by the EU has not dampened the enthusiasm of its Irish supporters for rejecting the troika’s prescription in its entirety.
Minister for Communications Alex White hit the nail on the head when he told the Dáil on Wednesday the Irish recovery would not have happened if the Government had told the troika to get out and take their money with them, as advocated by Sinn Féin leader Gerry Adams in 2011.
“Had we done that, we’d have run out of money by the end of 2011. This economic illiteracy would have meant no money – no money at all – to pay old-age pensions, social welfare, or to pay nurses, teachers, doctors or gardaí over the last four years. Now that’s what I call austerity,” he added.
Persuading the electorate that its interests are better served by Labour’s way rather than the Sinn Féin/Syriza way is the task facing White and his colleagues.