INSIDE POLITICS: How is the Government to make tough decisions if people object so strenuously to a modest tax on second homes? asks STEPHEN COLLINS.
THE LEVEL of controversy during the week over whether the €200-a-year holiday home tax should apply to mobile homes is a staggering reflection on the frivolous nature of much of the debate over the economic crisis. If it actually reflects the public mood, then the country’s agony will be prolonged indefinitely.
Whether the €200 second homes tax should apply to mobile homes is utterly trivial in the scale of things, but the heat generated on the issue was a chilling reflection of how many people are still living in a fantasy world where economic reality has no place.
How is the Government to make decisions on the report from the so-called An Bord Snip Nua, expected to recommend cuts in welfare and a whole range of State services, or implement a genuine property tax, if people object so strenuously to a very modest tax on second homes? The fact that Minister for the Environment John Gormley felt obliged to back down, after such a short skirmish, on applying the tax to mobile homes does not augur well for the Government’s ability to carry the day in the bigger battles ahead.
The report of An Bord Snip Nua, as the Expenditure Review Committee has become known, will be the first signpost pointing to the scale of the task ahead. While there has been talk of €5 billion in cuts next year, most people find such large numbers hard to grasp. It is only when the practical detail is spelt out that voters will realise what is going to happen. That’s when the screaming will start.
The report will be formally handed over to Brian Lenihan on Monday, and he is not expected to bring it to Cabinet for a week or two. While there has been some pressure, notably from Minister for Foreign Affairs Micheál Martin, not to publish until autumn, when the Lisbon Treaty is out of the way, it seems as if the Government will go ahead and publish it before the end of this month.
While publication will inevitably stir up controversy and give hostages to fortune by enabling pressure groups to mount opposition to many of the specific proposals, there is a lot to be said for getting the report out in the open as quickly as possible.
For a start, it might help to wake the public up to the reality of the choices faced by the Government. The Fianna Fáil-Green Coalition will, meanwhile, have the luxury of being able to say it is not committed to accepting any particular cut until budget decisions are made later in the year. It should also put pressure on the Opposition parties, to say what aspects of the report they would accept. So far, the main Opposition parties have been able to make political capital out of the Coalition’s difficulties, without offering alternative policies. Fine Gael has given broad brush strokes focused on spending cuts rather than tax increases, but has not spelt out the details, while Labour has mainly relied on denouncing every Government initiative.
A debate on the Snip report might flush the Opposition parties out because, at the very least, they would come under pressure to say what aspects of it they found acceptable. It might also educate a public which so far has been deeply reluctant to accept the need for the kind of action that is required to get the public finances in order.
A feature of the public response to date is that there has been far less resistance to income tax increases than spending cuts. The irony is that while the Government itself knows that the future prosperity of the country requires that the emphasis be placed on getting public spending under control, the softer political option is simply to dip into peoples’ pockets for more income tax.
As well as cutting back on spending, there is a strong case to be made for raising more revenue for the exchequer by broadening the tax base. However, if the paltry second home tax is anything to go by, a genuine property tax will provoke the same kind of resistance as spending cuts, particularly if it is designed to raise a significant amount of money.
The report of the Commission on Taxation, which is expected to recommend a property tax, among other things, will form the second prong of the Government’s approach; its report is expected at the end of the month. Along with the spending cuts report, it should help to frame debate going into the autumn, and preparation of the critical 2010 budget.
Another important element that will feed into budget considerations is the review of the programme for government, on which the Greens are placing a great deal of emphasis. There is an assumption in Fianna Fáil that the Greens will hang in there no matter what, but there have been clear signals that the junior Coalition party is considering all its options.
The decision by the Green leadership to consult party members indicates a willingness to raise the stakes. The problem is that once members are given a say, they may not be all that easy to control. Polls have shown Green voters very unhappy with the Government. This is bound to have rubbed off on a significant number of party members.
The dilemma faced by the Greens is that while they could face a wipe-out in an early general election, the party might cease to exist in all but name if its Ministers sign up to the kind of austerity programme that the country requires in the autumn.