A fundamental shift… but in party politics only?
On Thursday morning, the Irish Independent led with a poll that showed 65 percent favour fixing the deficit through spending cuts than increases in taxation. Well, of course, no surprise there. Even aside from the impact of the Universal Social Charge, people don’t like paying taxes. They don’t mind public services, but don’t feel the marginal differences in changes to their provision. The Financial Times reported this week on a seminar with Denis Healey, Labour Party Chancellor of the Exchequer from 1974 to 1979, who was asked why he cut spending rather than increase taxed after the IMF crisis in 1976. His answer was simple, “Because spending cuts are less unpopular, of course. I’m not a lunatic, you know”.
What I wonder is how permanent a shift this recession and deficit crisis will cause in how people think about state spending. Is the era of big government over, or merely on standby? One certainty now is that there will a fundamental shift in the party system, with the consistently dominant Fianna Fáil likely to lose more than half its seats. This will have been a wasted opportunity if we don’t also take the time to consider that it was not just the personalities in Fianna Fáil that brought us to this position. Jason O’Mahony has warned Fine Gael to be careful that we don’t end up with the sort of people who joined Fianna Fáil in the past simply to be with the party of power.
But more than that, as a country, we need to think in economic terms about public spending, even after we finally feel that we have left this recession behind. I finished reading today 22 Days in May, the account by the Liberal Democrat David Laws of the negotiations with the Conservatives last year, and his brief spell as Chief Secretary of the Treasury. He was responsible, along with others like Nick Clegg, for moving their party in a direction that sought to face economic realities, downplay populism, while maintaining social liberalism. Throughout these negotiations, they stayed steadfast on social issues like a pupil premium in the capitation fee for poorer students. But as Chief Secretary, when it came to necessary cuts, universalist approaches were easy targets to be cut. He explains scrapping the Child Trust Fund, “No longer would we be conning children that they were richer, by going out and borrowing money to give them at age eighteen, after which they would have to pay higher taxes to pay off the public borrowing incurred to fund the scheme”. In short, “public borrowing is only taxation deferred”.
Despite the assumptions of Ricardian equivalence, this is easily forgotten. If politicians are responsible, they will remind the public of this in their rhetoric, that all public spending is derived from taxation, not a gift from the sky. Phrases such as “free fees” rather than “taxpayer-funded tuition” hint at money coming simply from a benevolent government. In some form, our mentality should change. Perhaps something simple to start like seeking to join gatherings such as David Cameron’s recent invitation to the eight Nordic and Baltic leaders, self-identification with the more sober northern Europe than the troublesome Mediterranean countries with whom we have been so tied lately in the global mind, could prompt such a discussion.
But of course, we live in a democracy, and politicians like to be re-elected. How long again, after a few years of sobriety, before we see a return to auction politics, each party trying to win most votes with taxpayers’ money?