Fintan O’Toole: Celtic Tiger lives on in Tory party’s bizarre dreams

Last week, the Celtic Tiger stalked briefly back into view — in, of all places, the Tory Party’s leadership campaign. Jeremy Hunt, who was the nearest challenger to Boris Johnson in 2019, put forward his one big idea: to cut the UK’s rate of corporation tax to 15 per cent.

An ally of Hunt told the Financial Times that this plan would “unleash the growth that’s been missing from our economy for too long: Ireland’s big corporation tax cuts in the 1990s created the ‘Celtic Tiger’ economy; Jeremy’s will do the same for the UK”.

Hunt was distinguished from his rivals by his relative sanity — which may be why he was eliminated in the first round. This makes his belief in the virtues of the Celtic Tiger all the more bizarre.

The late 1990s and early 2000s were the truly transformative years for Ireland, when the overall value of exports doubled in five years

It does, however, remind us of two things that are always worth bearing in mind. One is the casual ignorance about Ireland even at high levels of British politics. The other is the imperviousness to evidence of certain articles of conservative faith.

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The most obvious thing about “Ireland’s big corporation tax cuts in the 1990s” is that they did not happen. In fact, the corporation tax rate went up.

From 1981 until 2003, the effective rate of corporation tax in Ireland was 10 per cent. This applied at first to manufacturing profits, but was subsequently extended to include services, particularly financial services.

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In May 1997, the then minister for finance, Ruairí Quinn, announced that the rate was to be raised to 12.5 per cent. This new regime took effect in 2003 and was extended to companies in the Irish Financial Services Centre in 2005.

The reality, then, is that during the period when the Irish economic miracle was being performed, corporation tax was going up.

The late 1990s and early 2000s were the truly transformative years for Ireland, when the overall value of exports doubled in five years. The US-based multinationals that were making Ireland their European base were not deterred by a modest rise in the headline tax rate — just as they are not worried now by Ireland’s commitment to increase the rate to 15 per cent.

This stuff is not hard to check: just Google it. But why bother? It’s Ireland, after all. Gross ignorance about the island is entirely acceptable in the Conservative Party.

Nor does it seem to matter that the Celtic Tiger is, for Irish people, a hideous beast. It is a source of shame, embarrassment and lingering fury.

For what it actually demonstrated is the deep stupidity of the neoliberal mania for deregulation. If you want a case study in the real-world effects of “cutting red tape”, the Celtic Tiger is Exhibit A.

The Celtic Tiger went quite literally bankrupt. But it has a weird afterlife as a signifier of the bankruptcy of neoliberalism

The first decade of this century was the period in which Ireland adopted the Thatcherite credo of allowing the “wealth-creators” to do their thing. Their thing turned out to be the destruction of the economy and society.

Light touch regulation of banks gave us one of the world’s most spectacular banking crashes. The effective deregulation of the construction industry left us with a vast bill for houses that are falling apart and for the astonishing 80 per cent of apartments and duplexes that have serious structural defects.

The Celtic Tiger period was also the one in which Bertie Ahern, Charlie McCreevy and Mary Harney pursued an idea that seems to be at the heart of the current Tory debate: that tax cuts will be magically self-financing.

That didn’t work out so well either. The erosion of the tax base left the public finances dependent on the drug of stamp duty and VAT from construction and property sales. It was a deadly addiction.

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And yet, for right-wingers, the myth of the Celtic Tiger persists. We in Ireland know to our continuing cost that it is a story too good to be true. But for conservatives elsewhere, it is a story too good not to be true.

It has the appealing simplicity of a fairytale. Ireland was a basket case. It cut taxes and slashed regulations. And lo, Cathleen Ní Houlihán was transformed from doddery old crone to beautiful young girl with the walk of a queen.

Never mind the real complexity of Ireland’s economic transformation. Ignore, in particular, the huge part played in it by that ogre of big government, the European Union.

Tell, instead, a story that “proves” the wisdom of neoliberal economics. For neo-Thatcherites everywhere, it simply has to be true that Ireland cut corporate tax rates (even though it didn’t) and that this created an economic wonderland.

The Celtic Tiger went quite literally bankrupt. But it has a weird afterlife as a signifier of the bankruptcy of neoliberalism.

It exists now as a counterfactual narrative for conservatives. It is much easier to evoke a mythic beast than to explain why typical income in Germany in 2018 was 19 per cent higher than in the UK, and France’s was 10 per cent higher — even though both countries have higher corporate taxes than the UK.

Unable to confront this decline, Conservatives take refuge either in myths of a new post-Brexit golden age or in an Irish folktale that the Irish no longer believe. Hence the wretchedness of the Tory debates.