Former UK prime minister Harold Macmillan is largely remembered for a series of one-line zingers. When asked what was mostly likely to knock his government off course, he reputedly said, “events, dear boy, events”.
Macmillan’s rise to the top and his predecessor Anthony Eden’s demise came on the back of the Suez crisis (when Egypt seized control of the Suez Canal from the British- and French-owned company that managed it), an event that shook Britain’s sense of its own standing in the world.
But Macmillan’s drollery wasn’t confined to politics. He explained the great economic debate of the day as follows, “One nanny said, ‘Feed a cold’; she was a neo-Keynesian. Another nanny said, ‘Starve a cold’; she was a monetarist.”
But it is the “most of our people have never had it so good” quote – typically paraphrased as “you’ve never had it so good” – that most people remember.
It was delivered in 1957 at a campaign rally in Bedford shortly after Macmillan became prime minister. Thanks to a postwar manufacturing boom, the real pay of industrial workers in Britain had risen by an estimated 20 per cent.
While painting a rosy picture of Britain’s economy, Macmillan simultaneously warned about a “fragile prosperity” while calling for wage restraint to dampen inflation, seen as the chief villain in the postwar economy. It’s not a million miles from where we (in Ireland) are now. A prosperous but fragile economy with rising prices threatening to unwind our hard-won gains.
If Government ministers, perhaps emboldened by a series of pleasing economic metrics sitting beside the Irish economy (inflation back under 2 per cent, real wages rising, record employment) tried a “you’ve never had it so good” line they’d be frogmarched from Leinster House under a hail of recrimination.
Political leaders can’t talk down to the electorate like they used to. But the Irish electorate could easily, and with good reason, level Macmillan’s line back at the Government. Never has an Irish administration been so flush.
It will collect – if you include the €14 billion in Apple tax money – a projected €42 billion in receipts just from corporate tax in 2024 (albeit some of the Apple money may only land in 2025).
By way of reference, the hole in the UK exchequer (remember the British economy is six times the size of Ireland’s), is £22 billion (€27 billion).
And that’s just one revenue stream bolstering the Government’s balance sheet. Income tax receipts are also buoyant, up nearly €2 billion on last year, on the back of a strong labour market, which in turn feeds into greater consumer spending, boosting VAT receipts (up €1.3 billion on last year).
How else do you think the Government has been able to simultaneously preside over a series of giveaway budgets while putting cash into rainy-day funds and running large budgetary surpluses? In normal times these policies would have involved difficult trade-offs.
If these supercharged public finances sit uneasily with an endemic housing problem and a dysfunctional health service, they’ve also made Ireland a marked man internationally. The State’s windfall tax receipts are now firmly in the crosshairs of the incoming US administration, which is promising to impose blanket tariffs on all imports to improve the US trade balance and boost domestic manufacturing.
Ireland’s exposure to such a protectionist pivot by the world’s largest economy is significant as it exports €54 billion of goods into the US every year, two-thirds of which are pharmaceutical products, the overwhelming majority of which are produced by US multinationals.
“If the US authorities aggressively pursue these [tax] receipts and look to try to bring some of them back to the US that could be the prick that bursts the bubble,” Kieran McQuinn of the Economic and Social Research Institute (ESRI) said at the launch of the institute’s latest economic commentary last week.
He warned that the Government may need to revisit its spending plans if the US specifically targets the pharma sector here. Getting some of this activity back home is said to be the subject of discussions in Washington. “There has been a notable focus on the Irish trade surplus and the role of US multinational profits in the Irish economy,” the ESRI noted.
Might tariffs be deployed to this end, might a lower headline rate of corporate tax be used or might the new US government devise some other method to target big pharma’s offshore operations? We don’t know. The last time Donald Trump was in power he brought in the so-called Gilti tax rate to target income from intellectual property such as copyrights, licences and patents but it didn’t really move the dial (from a US perspective) and in the end triggered a further snowballing of tax revenue here.
Right now Ireland inc might wish it was wearing some sort of invisibility cloak but with another year of record corporate taxes on the horizon and €14 billion of Apple tax money coming in, it’s hard to go unnoticed.
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