Settling issue of water charges vital to any FG-FF deal

The talks between Independents and Fine Gael and Fianna Fáil have been characterised by some as a useless exercise designed to stall the inevitable moment when the two big parties sit down together.

Arising from their talks with 15 Independents, both Fianna Fáil and Fine Gael produced documents that would provide the basis for a minority government led by either Enda Kenny or Micheál Martin.

However, the documents, particularly the Fine Gael proposed programme, show that the talks to date have been useful if there is to be some sort of an arrangement between Fine Gael and Fianna Fáil – which, admittedly, is a big if at the moment.

The process has allowed Fine Gael and Fianna Fáil to move away from their general election manifestos and towards a middle ground not only acceptable, in some policy areas, to Independents but to each other.

The changes in Fianna Fáil policies have mostly been made to appeal directly to the Independent TDs it is courting. For example, a super junior minister for disabilities casts an eye towards Dublin Bay North's Finian McGrath and reform of judicial appointments to Shane Ross.

Again, the most movement has been from Fine Gael because it had the most distance to move politically. Some senior party figures have joked in recent days that they never envisaged being pulled so far to the left.

Apartments

Housing and homelessness have been one of the biggest issues in both sets of talks, and the Fine Gael document contains a commitment to reduce the VAT on newly built homes and apartments.

Another proposal contained in the document, but not in the Fine Gael manifesto, is a "help-to-buy" scheme for first-time buyer's facing difficulties getting mortgages because of the new Central Bank lending rules.

The Fine Gael document does not outline how this will work in practice, but the Fianna Fáil manifesto proposes a first-time buyers scheme which would involve a 25 per cent top-up on mortgage deposits by the government up to a maximum of €5,000.

Fianna Fáil sources claim the Fine Gael proposal apes its manifesto but it does bring the two parties closer together on a key issue.

The Fine Gael document also says that the “vast majority” of the available fiscal space – the resources available to the next government – will be “used to fund additional public spending and infrastructure”.

While it is still committed to reducing the universal social charge (USC), Fine Gael’s commitment to abolishing the charge during the lifetime of the next government has been quietly shelved. The future of the charge will be discussed by a budgetary committee.

Personal tax reductions would be funded through the non-indexation of tax credits and bands, as well as other measures such as increased taxes on cigarettes and sugar sweetened drinks.

The moves are an implicit acknowledgment by Fine Gael that the election message of increased investment in public services put forward by Fianna Fáil and others, such as the Social Democrats, struck a chord with the public.

Rural affairs

The rural affairs section of the Fine Gael document, including a full cabinet minister for rural affairs, was also substantially strengthened in comparison to its manifesto.

In the area of health it also contains more specific commitments on primary care and mental health and disabilities.

It also includes commitments to reform the judicial appointments system, again in a nod to Ross.

Fianna Fáil has also committed to USC reductions, and its document circulated to Independents lays out time-frames in which various policy measures will be implemented.

One of those is the abolition of the 1 per cent USC rate that applies on income up to €12,000 within one year. Fine Gael’s manifesto committed it to a cut in the 5.5 per cent rate, which applies between €18,668 and €70,044, in the next budget but its proposed government platform leaves the future of the tax to a budgetary committee.

The Fianna Fáil and Fine Gael moves cost roughly the same – about €250 million – and the differences could be settled relatively easily.

As has been obvious for some time, the main difference between the two parties is on Irish Water, with Fianna Fáil seeking the abolition of the utility and the suspension of charges for five years.

If there is to be an agreement between the two parties, this will be one of the first issues that will have to be settled.

Sinn Féin will seek to capitalise on any shift in the Fianna Fáil position.

The Fianna Fáil document underlines its commitment to its water policy, while Fine Gael’s does not leave any room for compromise on the issue.

Privately, Fine Gael favours reliefs and waivers for lower earners to be administered through the social welfare system, while many in Fianna Fáil believe the charges can be suspended for a period.

The Fine Gael opposition to abolishing charges and a national utility – although Irish Water could be rebranded and restructured in some way – is close to absolute.