Sinn Fein and the painful learning curve

If, as some believe, Sinn Fein is in dire need of critical friends, it could do worse than get Damien Kiberd to come along and talk to their economic policy unit. Whilst he throws a big McCarthyite haymaker at RTE and others in the southern media, he reserves his cleanest punches for Sinn Fein’s fiscal policy makers.He criticises the EIU for basing its critical analysis of Sinn Fein’s role in politics, “on negative political assumptions about the direction being adopted by Republicans, rather than on any worked out projections of the consequences of Sinn Fein’s future role in government”. But he then goes on to argue that Sinn Fein has left the barn door wide open:

The party apparently wants to increase the rate of capital gains taxation (CGT) but its (leaked) document is unspecific about the rate it would prefer. The party is apparently ignoring the fact that Charlie McCreevy’s decision to cut the basic rate of CGT from 40 per cent to 20 per cent some years ago triggered a massive surge in asset transfers which generated huge revenues for the state and trebled the aggregate yield from capital taxation, while simultaneously pumping up the yield from stamp duties on property sales to a level equal to about 40 per cent of the total garnered each year by the British exchequer. This is the money that pays for state services.

Why Sinn Fein’s think-tanks are spending their days concocting ways to raise overall tax revenue in a state which has been running substantial budget surpluses defies belief. It is the application of public monies that has been the central economic problem south of the border in recent times, not the manner in which taxes have been collected. The Dublin government has trebled the amount of cash allocated to health since 1997 yet this has not resulted in a better deal for the sick. The numbers qualifying for medical cards have fallen substantially, the hospital networks have been cored out with large geographic areas stripped of emergency treatment facilities. The extra cash has simply been dissipated in the form of higher wages for a 100,000 strong health workforce that is simultaneously top-heavy on administration and apparently unable to improve front-line services for the poor and those on modest pay.

The southern economy tried super-taxation in the not-too-distant past. Dr. Garret Fitzgerald (ex-Taoiseach), Alan Dukes (now head of the Institute for European Affairs) and John Bruton (now EU ambassador to Washington) imposed a marginal tax rate of 65 per cent on incomes that were about 1.5 times the average industrial wage. The policy failed abysmally. It did not create equality, it simply discouraged real economic activity. The public does not want to re-visit these failed policies. What it does want is a state apparatus that delivers services appropriate to the 21st century. What it would tolerate would be a rationally constructed insistence that the resources that are available be allocated in a way which provided a better deal for those people and districts that have lost out in relative terms in recent years.

Perhaps the air of unreality is not so much a reflection on Sinn Fein, so much as the product of a polity (Northern Ireland) that has been for too long disconnected with the harsh realities of having to find a practical way of covering the costs of what you spend. For all the deficit in its current fiscal thinking, the party may simply be starting a long and painful learning curve that may eventually have to be climbed by all the local parties in Northern Ireland.