Author Archives: Michael Taft

From top: rush hour traffic on the M50 around Dublin this morning; Michael Taft

The Business Post (paywall) reports that Fianna Fáil and Fine Gael are discussing various fiscal responses to reboot the economy when the emergency is over.

‘Initiatives such as temporary VAT cuts across a number of the worst affected sectors, rather than just the tourism and hospitality industry, are expected to be in the mix.

The plan will also seek to answer calls from business groups for the write-off of rates bills and access to working capital for business.’

There is nothing wrong with this approach in principle. We need to get our enterprise base back up on its feet.

The question is: how can we optimise any incentives, subsidies and supports? In this respect, we can learn lessons from the last time the Government intervened to boost a sector with the VAT cuts – in the hospitality sector back in 2011.

One of the first things the Fine Gael / Labour government did on entering office was to launch a Jobs Initiative which included a temporary cut in the VAT rate from 13.5 percent to 9 percent.

This was intended to do two things: reduce prices to incentivise demand, and help repair balance sheets. These, in turn, were intended to drive hospitality employment and, so, help overcome the jobs crisis at the time.

Temporarily reducing VAT to boost economic activity is a classic Keynesian, social democratic or counter-cyclical tool.

During the crisis one commentator taunted the trade union movement with the success of the VAT rate cut, not realising that it was the trade union movement who had first come up with the idea.

Focusing on the hospitality sector, the headline results were impressive. Numbers employed in the sector topped out at 147,000 in 2007. This bottomed out at 113,000 in 2011.

However, from that point, at approximately the same time as the VAT cut, employment rose so that by 2015 it surpassed pre-crash highs and by 2018 – the year the VAT cut was reversed – there were over 180,000 employed.

How much of this was due to the VAT rate cut is open to debate. For instance, the number of visits to Ireland from abroad fell to 6.1 million in 2010. This started rising in 2011 and by 2015, the numbers increased to 8.6 million. By 2018 this rose again to 10.6 million.

The hospitality sector benefited from foreign demand (that is, it was reliant upon the spending capacity of people from outside the country). Most of this increased foreign demand would have been down to rising incomes and consumer confidence in other countries.

Nonetheless, we can be reasonably satisfied that the VAT rate cut was helpful, even if we can’t quite identify its precise contribution to employment growth.

However, within the sector, there are some issues to consider.

According to the CSO, value-added in the hospitality sector rose significantly after the VAT cuts.

Value-added rose by 28 percent in the period between 2009 and 2018 while wages stagnated, rising by less than 4 percent.

Eurostat reports that, in 2008, profits made up 7 percent of value-added. After going into negative territory during the height of the recession, profits started rising in 2012, going from four percent to 24.6 percent in 2017. Meanwhile wages stagnated, rising only 3.7 percent during this same period.

We can see a similar pattern of profit growth in industry surveys.

Crowe Howarth charts the rising level of profits per hotel room. Profits more than doubled between 2012 and 2018.

The failure to match wage growth with profit growth – so that the benefits from a cut in VAT (which is subsidised by everyone) are spread out evenly – not only constitutes a social inequity and industrial injustice. It imposes costs on the public and other businesses as well.

Suppressing wages means less tax revenue (income tax, PRSI, consumption taxes) and higher social protection costs (Working Family Payment, Part-Time Unemployment Benefit).

Consumer spending is hit – not only by low wages but by precarious work contracts where income is uncertain from one week to the next. This has a negative impact on other businesses that rely on workers’ purchasing power.

In short, by suppressing wage growth companies in the hospitality sector externalised, or imposed, costs on to other sectors of the economy, so that they could grab ever-higher profits.

Cutting VAT rates remains a potentially beneficial strategy in reviving economic activity. However, the strategy will be costly and inefficient if it follows the pattern of the last VAT cuts.

How can we make it better?

We can make it better by ensuring that workers in these sectors have a voice at the table, by creating sectoral collective bargaining bodies in those sectors directly benefitting from any proposed VAT cuts such as hospitality, retail, business services, etc.

Representatives of employees would negotiate an agreement with employer representatives covering issues such as wage increases, overtime, pay scales, working conditions (e.g. health & safety) and contractual certainty (e.g. secure hours, minimum hours, secure income).

Such sectoral collective bargaining should be accompanied by the right of employees to bargain collectively at firm level.

And neither employees nor employers would have the right to undermine these bodies by boycotting them (as is being done currently by employers with the Joint Labour Committees).

This could be done by implementing the principles in the private members bill introduced by Senator Ged Nash last year (now a TD).

VAT cuts must be accompanied by stakeholder justice – the right of employees to participate in the benefit that a public subsidy provides. This would ensure such state interventions are socially equitable, fiscally beneficial and economically optimal.

In other words, common sense.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. .


From top: Grafton Street, Dublin 2 on Saturday; Michael Taft

We’re all fiscal expansionists now. From the fiscal orthodoxy to the radicals of the Left there is one message: throw money at it, don’t worry about the deficit, do whatever is necessary and worry about the cost later.

Absolutely correct. But progressives should now start debating the implications of that ‘cost later’. Because after the emergency the issue will turn to ‘who’s picking up the bill’.

A good starting point is the ESRI’s current Quarterly Economic Commentary. While normally these contain forecasts, such is the uncertainty that the authors produced a scenario instead. For 2020:

GDP falls by 7.1 percent

Unemployment more than doubles to 12.6 percent

The deficit rises to nearly €13 billion with a deficit-to-GDP ratio of -4.3 percent

And the ESRI says this scenario could be on the ‘benign’ side; that is, it could be worse. They assume a short sharp hit in the second quarter, with the recovery coming on stream in the third and fourth quarters.

However, we don’t know how big the hit will be, when the recovery will start or how robust it will be.There are assumptions layered on assumptions.

For instance, the ESRI assumes the trajectory of unemployment to be:

The unemployment rate in the second quarter of 18 percent suggests nearly 450,000 unemployed, falling to approximately 260,000 by the last quarter if the national and international recovery starts in July.

However, what happens if the second quarter is worse and the recovery is more sluggish? What if there is no vaccine or effective treatment found by the end of the year? Will we see another round of infections, isolation and lockdowns? Even the fear of a fresh round would depress investment and consumer spending, prolonging the recession.

In terms of the budget, what should have been a surplus in 2020 will now be a deficit of nearly €13 billion in the ESRI’s scenario, or -4.3 percent of GDP.

Though the ESRI doesn’t provide a scenario for public debt, we can extrapolate. Based on the pessimistic Brexit budget projections, the Government estimated a debt level of nearly €200 billion, or 56 percent of GDP (97 percent of GNI*).

They produced new more optimistic projections earlier this year, but didn’t include debt numbers. However, based on the budget projections, the debt could rise to over 70 percent of GDP and over 120 percent of GNI* under the ESRI scenario.

A return to growth should help to bring this ratio down, but it may be some time before it returns to pre-crisis levels.

What can we expect?

1) On the other side of the emergency, the Government will need to engage in another bout of spending to resuscitate business activity. These will be the stimulus measures (the current measures can be better described as ‘disaster prevention’).

Those measures may include nvestment increases (though this takes time to come on stream), VAT cuts, cuts in employers’ PRSI, continued liquidity to businesses, etc.

2) At some point, the argument over fiscal retrenchment will start – to rein in the deficit and debt. It will be austerity but it will be called something else (‘consolidation’, ‘stabilisation’, etc.).

However, there could be political limits. For instance, after experiencing a single-tier health system, will people tolerate a reversion back to the two-tier regime and the old normal of waiting lists and over-crowded A&Es? Will people tolerate the reduction of Illness Benefit from €350 per week back to €203?

3) Nonetheless, the fiscal orthodoxy will want to use the pre-crisis levels of public spending as a baseline, even if demand-based expenditure (e.g. social protection, healthcare) cannot be easily reduced. And it is doubtful whether increasing taxation will form a significant part of an austerity/baseline strategy and with some good reason – increasing taxation while an economy is recovering would have the same negative impact it did in the last crisis; but, then, so would cutting public spending.

How should progressives respond? Some starting points to discuss:

First, the elevated expenditure on health care and income supports during the emergency – on public services and social protection – are not sustainable on the current tax base.

Second, in the election some progressive parties proposed substantial tax cuts. These proposals should be scrapped. There may be room for limited, forensic tax reductions where social equity and economic efficiency can be shown. But as a rule, tax cuts should be treated as guilty until proven innocent.

Third, strategies to make the ‘rich’ and ‘corporations’ pay for the crisis will disappoint. For instance, corporate tax receipts will decline in the medium term. This was on the cards prior to the crisis. After the emergency, countries will be even more desperate to find extra revenue.

This will accelerate (and rightly so) the clampdown on international corporate tax avoidance. Given that we are a beneficiary of such avoidance, this will hit Irish tax revenue.

And while there is nothing wrong with soaking the rich (or giving them a good splash), higher tax rates on high incomes, withdrawal of tax credits, etc. would make up about 1 percent of total Government revenue. A

nd a new wealth tax would have to take into account the fact that most wealth is tied up in people’s homes, business and farming assets. So, yes, increase progressive taxes but don’t think it will be sufficient to fund a new dispensation.

There are no easy solutions. A key part of progressives’ response should be to explore all the potential and ramifications of fiscal reform. In particular, we should develop a medium-term strategy based on deficit-spending that can still reduce the debt ratio.

But this could be hemmed in or curtailed by the return of the fiscal rules and their enforcement by conditional European Central Bank funding.

However, the response cannot be limited to fiscal measures. The fiscal is a consequence of the economic, and the economic is the totality of power relationships.We need to look at systemic reforms which can lay the foundation for a successful fiscal policy.

At the end of the day, getting a few hundred million Euros from the rich, or even a couple of billion, is not the key question (though, please, let’s have it). It is the system that privileges the rich – whether we understand that as individuals, corporate and financial institutions, or simply the logic of capital accumulation.

And if you think the latter is a bit esoteric, just track where the money being pumped in by governments and created by central banks eventually ends up.

If we want to ensure the new normal doesn’t end up looking like the old normal, this is the territory we must occupy.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


From top: Minister for Social Affairs Regina Doherty; Michael Taft

The Tánaiste, Simon Coveney, stated on RTÈ Radio One’s This Week:

“If people have sensible proposals that are costed and thought through, that they believe are necessary and will make a difference, we want to hear about them.”

ICTU and SIPTU have done just that, proposing a wage compensation scheme whereby the Government would take over 75 percent of employee wages in sectors and companies that are facing closure, with the employer providing the remaining 25 percent.

This is based on the Danish initiative and is being rolled out in a number of EU countries. Even the UK is putting together a wage compensation scheme.

SIPTU has also called for those who have been laid off to also receive 75 percent of their wage at the time they lost their job, with employers being allowed to top up.

The Government has stated it is working on such a scheme and the Minister for Employment Affairs and Social Protection Regina Doherty  has promised to unveil their own programme in a matter of days.

Good. A number of commentators have lined up behind such wage compensation proposals. It has within a few days become the common sense of the economic emergency we’re facing.

So what is the cost of the benefit this income support will bring? Because let’s be clear, protecting people’s income is a benefit that will pay democratic dividends when the emergency subsides. It will protect households from falling into deprivation and debt and, so, will hasten the recovery.

Let’s start with a baseline of 100,000 employees. Further, let’s assume the average weekly earnings of €688 in the private sector for 2018 and add another 4.5 percent to bring it up to spring of this year. That comes to €719 weekly.

For every 100,000 unemployed, it will cost the state €59 million. Minister Doherty has acknowledged that as many as 400,000 could lose their jobs as a result of the pandemic.

Let’s assume that 300,000 will remain in their jobs as a result of this scheme. That’s 700,000 – who have lost their job or whose employers are at risk of closure; hopefully, a worst case scenario.

This raises the weekly cost to €377 million per week, or €1.6 billion per month. If this emergency runs four months, this scheme could cost up to €6.5 billion. That would appear to be a significant amount. But it isn’t.

First, the hospitality sector took the initial hit and average weekly earnings are much lower (€347 per week) so the cost of wage compensation would be lower. Many of the high-income sectors are unlikely to be hit as hard – financial sector, ICT and big tech, professional services and modern manufacturing.

Second, under a wage compensation scheme, workers’ income would still be taxed (just as Jobseekers’ and Illness Benefit are). So the net cost would be lower.

Third, we have to estimate the cost of unemployment benefit in the absence of this wage compensation scheme. For the 400,000 that may become unemployed, the state would still have to pay Jobseekers’ Benefit.

If we assume the current full rate of €203 per week (not all would get this after the first six weeks, while others with adult and child dependents would get more), the cost would be €1.4 billion.

Taking all this into account, the total cost could be in the area of €5 billion, and could be less depending on the composition of the unemployed and protected workers under the scheme.

€5 billion – how would we pay for this?

We have cash balances of over €20 billion. We have a rainy day fund of €1.5 billion. We can borrow at nearly 0 percent. €5 billion represents only 2.5 percent of the national income (GNI*) that we generated last year.

National income is likely to fall, but even if it collapsed by 25 percent in nominal terms (the amount it fell during the bank recession), it would still only be a relatively small 3.3 percent. I don’t think I need to compare this cost with that of the bank creditors’ bail out.

Keeping businesses in business, supporting people’s incomes, avoiding debt and deprivation, putting the economy in a position to quickly recover after the pandemic emergency – the cost of a wage compensation scheme shouldn’t be seen as a cost. It is an investment, economically sound and socially equitable.

Let’s go for it. And start the conversation of how we put income protection on a permanent footing when the emergency passes.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


From top: Dublin city centre yesterday; Michael Taft

There is now a danger that the economy will suffer deep and long-lasting harm arising from the coronavirus.

Unfortunately (but inevitably), the virus has exposed major flaws in our income protection system, industrial institutions and public service capacity.

With an estimated 140,000 already laid off, this will quickly turn into a recession. Now is the time to design emergency policies based on key principles:

Maintain as many people in work as possible and keep as many businesses going – even at reduced capacity and hours

Where businesses are closed down due to Government instruction (pubs, restaurants, crèches), ensure they are in a position to recommence business once the emergency is over – and that workers have a place to go back to work

Maintain as much as possible people’s income during illness and unemployment

Negotiate emergency protocols across sectors, starting with those most vulnerable to a downturn, between representatives of employees, employers and the government

And, most of all, supply the cash that is needed – in economic terms this is first and foremost a liquidity crisis. If we don’t do this, we could quickly see this turning into an insolvency crisis with high levels of permanent business destruction.

Income Support

Our social protection system has been exposed as ill-equipped to deal with the crisis. This was conceded early on by the Government when it reformed the Illness Benefit system, eliminating the six-day waiting period and increasing payments by €102 per week.

While many employees will have the protection of occupational sick-pay schemes which provide high levels of income protection, these will be mostly found in higher-income sectors such as financial and professional services, big tech, modern manufacturing and the public sector.

However, well over 50 percent of private sector workers may have no such protection – meaning that up to one million employees are totally reliant on the state’s Illness Benefit.

There is no sense in getting into comparisons with sick pay on the continent. Suffice it to say that all employees are protected by a combination of employers and the state/social insurance funds providing up to 100 percent of pay in the first few weeks.

We should have that same universal income-related protection for all employees but we don’t, and designing such a system would take months. The government acted in the only way they could regarding Illness Benefit.

We should do the same thing for Jobseekers Benefit and immediately increase it by €100 per week. Again, on the continent, unemployment benefit is income-related, something we should have put in place during the recovery.

Such payments protect living standards and prevent households falling into poverty and debt. The increase of €100 – while still not adequate – will at least help protect the incomes of the low-paid.

In addition, the Government could consider bringing in instructions that, for the duration of the emergency, there will be no evictions, foreclosures, utility shut-offs or discontinued health insurance for those on Illness and Jobseekers’ Benefit. This will give some sense of security to households who will be struggling to cope.

Business Supports

At the start of the crisis the Government announced a series of business supports. However, some of these were already in place, while others were designed to deal with a much different Brexit-related crisis (e.g. Enterprise Ireland’s Rescue and Restructuring Scheme).

We need strategic policies designed for, in the first instance, the sectors impacted by Government closure orders.

(a) State Protection Regime

In the case of restaurants, public houses, crèches and other impacted sectors, zero percent loans or a range of repayable grants should be provided for firms to help continue paying fixed costs while closed: rates, rents, utilities, insurance, postponement of VAT, PRSI payments, minimal maintenance staff, the new Government measures to subsidise employment, etc.

With no revenue coming in (though larger establishments may have reserves or insurance policies that cater to these type of emergencies through business interruption insurance), we have to at least ensure they can survive the emergency period and be in a position to re-open when some normalcy returns. Workers need a place to go back to work.

These businesses could be put under a special state-sponsored protection regime. While there would be a high up-front cost, in theory these subsidies would be repayable over a number of years; though in many cases businesses will go under permanently.

(b) Dealing with Reduced Demand

In other sectors which are struggling with reduced demand (such as non-supermarket and other food retail outlets), a range of measures could be introduced such as subsidised short-timing, postponement of tax payments (VAT, etc.), subsidies for rates, rents, etc.

These subsidies would be based on the particular sector’s capacity to absorb the damage incurred by the coronavirus-related downturn.

All this is dependent on whether the emergency is extended beyond the end of the month, but we should assume that it will be.

Industrial Relation Institutions

In Denmark, an agreement has been reached between representatives of employees, employers and the government whereby the state will pay employees in the private sector 75% of their salary if there is no guarantee they can work because of the coronavirus crisis, in exchange for employer commitment to keep employees in work and an employee exchange of working during some of their holiday leave.

This shows the power of collective and solidaristic bargaining, acting quickly, urgently and flexibly. For the most part we don’t have such institutions at the national or sector level. Therefore, the ability to address economic issues through stakeholder cooperation is limited.

We can’t rewrite industrial practice or create new industrial institutions in the short term. However, it is open to the Government to convene sectoral dialogue covering, in the first instance, the hardest-hit sectors.

This could mean sectoral dialogue in the restaurant, hotel, retail, and childcare sectors. And if any stakeholder doesn’t want to attend, then the dialogue and negotiated mandatory protocols will be conducted without them. No one should have the right to veto emergency action.

A Progressive Fiscal Framework

The coronavirus-related impact on the economy will trash all previous projections (I understand the Department of Finance was going to produce new projections this week; however, so fast is the emergency unfolding such projections will probably be out of date within a few days).

Let’s be clear about two things: first, this will be an expensive package upfront. However, much of this would be repaid to the state over a number of years when the economy recovers.

Further, if firms are permanently closed, if employees fall into poverty and debt, the recovery will take longer and will be even more expensive. This is not a stimulus programme. This is a defensive one.

Second, we have the resources. Prior to this emergency, the Government anticipated an accumulated surplus of €20 billion to €25 billion over the next five years. This will be reduced due to the economic downturn and the need to support health services.

However, the Government is working off a different, fiscally-healthier baseline than it did prior to the 2008 recession. In addition, it has €20 billion in cash balances and it can borrow at near 0 percent, meaning it can access free money.

As investors flee the stock exchanges for safe investments, these interest rates could fall well into negative numbers (which means that investors are paying us to buy our debt).

At the EU level, the Government should campaign to ensure that increased expenditure and reduced revenue owing to the coronavirus should be exempt from the fiscal rules; in particular, the force majeure clauses (disasters which government can’t control). The EU Commission has already provided increased flexibility and exemptions for Italy.

How much can we afford? As much as it takes. A package of €10 billion to deal with the crisis (not including the additional resources for the health services) would be a reasonable amount.

As stated above, much of this would be recouped from businesses when the economy recovers, and would save money if it helps a faster recovery.

* * * *

Such a programme would pre-figure important post-emergency reforms: a national sick-pay scheme underpinned by an enhanced social protection system. This could lead to further reforms with pay-related benefits for a number of contingencies (unemployment, invalidity, parental leave) as applies on the continent.

We could also see new industrial relation institutions such as firm-level and sectoral collective bargaining to ensure greater participation and protection for all stakeholders.

Most of all, this could represent, as Bue Rübner Hansen puts it, ‘a step towards a new post-neoliberal economic paradigm’. This crisis shows that its resolution lies in the combined forces of a cooperative civil society and a public sector that privileges people’s health over profit.

These can be powerful forces in the transformation of economic and social relationships and can become the driving forces in overcoming climate chaos, blurring the distinction between the public and private (e.g. business supports are just forms of socialisation and a realisation of the limits of the market), reducing inequality of living standards through enhanced social protection supports and public services, and reducing inequality in the workplace through collective bargaining.

But that lies in the future. Today we face the challenges of defeating the virus, saving lives and protecting the economy. These are challenges that will require resources and solidarity.

Fortunately, we have both in healthy abundance.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


From top: IBEC Ceo Danny McCoy; Michael Taft

According to Danny McCoy, director general of employers’ lobby group, Ibec:

‘The public sector is too small for the size of the private sector, and that is really something for Ibec to say. The lack of doctors, the lack of guards etc. You can feel it.

We agree there needs to be an allocation of resources towards issues that affect people’s everyday lives, like housing.’

He went on to say the Government must deliver a surging demand for public infrastructure and public services with more investment in public sector jobs and subsidised child care. Yes, that’s something coming from employers.

But common-sensical, too. High costs – whether measured in childcare fees, private rents, A&E over-crowding and health waiting lists – degrade the productive economy and put costs on both households and businesses.

So it makes good ‘business sense’ to call for investment in public services.

And this social investment will require higher levels of public sector employment. You can’t consume a service that hasn’t been produced by women and men.

The problem is that over the long-term, the proportion of public sector jobs has declined relative to total employment.

In the early 1980s nearly one-in-five worked in the public sector. This has fallen to less than 15 percent. If we were to return to 1980 levels, we would have to employ 100,000 more in the public sector.

Ireland’s level of public sector employment is quite low compared to our peer group in the EU.

If Irish levels reached the average of our EU peer group, we’d have to employ another 150,000. To reach Swedish and Danish levels, we’d have to nearly double the number of public sector workers (i.e. another 300,000 employees). Note: Germany and the Netherlands are excluded as employment data doesn’t include public health employees.

Some might wince at these levels of public sector employment though they are pretty mainstream on the continent. But public sector employment there has a radically different structure.

Countries with high levels of public sector employment are also countries with a high level of decentralisation; where local government plays a more substantial role.

It is difficult to make these comparisons across Europe as many countries have a federal structure, where there are local and regional tiers.

But in those countries with an Irish-style central/local tier structure, local government accounts for the greater part of public sector employment.

To drive Irish public sector employment we should look to empowering local government to take over more functions that are currently reserved for central government. This, of course, is a long-term reform given the highly-centralised nature of Irish government and the complexities involved in decentralisation.

This process could involve a regional structure with a local tier. For instance, a Greater Dublin Council could be created, amalgamating the four local authorities with provision for smaller councils (e.g. Tallaght, Donnybrook, Inner City, Blanchardstown, Clondalkin, etc.).

This would build scale and localise at the same time.

There would also be benefit to the political culture from this process. Eurobarometer shows a higher level of trust regarding local authorities:

61 percent tend to trust local authorities (as opposed to 34 percent who don’t)

Only 42 percent tend to trust the national government (as opposed to 51 percent who don’t)

Moving from a ‘too small’ public sector (as IBEC puts it) to a European-style balance between public and private sectors will be a truly radical reform. This is one of many issues that didn’t arise during the election. But it will be an issue facing the incoming government, regardless of ideological hue.

Satisfying the demand for enhanced public services could well determine the popularity of any new government. And employing more people will be necessary in meeting that demand.

Radically decentralising government may be the best way to achieve all that.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


From top:, Leader of the Green Party Eamon Ryan (centre), speaking to the media at the party’s last press conference before the vote in General Election 2020; Michael Taft

Just because climate chaos didn’t feature much in in the campaign doesn’t mean that it shouldn’t feature prominently in a Programme for Government. A Green New Deal is absolutely essential. And it will cost.

How much?

The National Development Plan (NDP) committed an additional €750 million per year over a 10-year period from the Exchequer. This was before the crisis became a major political topic – before the Interdepartmental Panel on Climate Change’s warning we have 15 years to turn things around and the international school strikes.

Indeed, the Climate Action Plan made a virtue of not committing resources:

“While the plan sets out a major programme of change, this cannot be approached as a call for a new programme of spending for the Exchequer to meet.”

Instead it relies on the funding envelope contained in the NDP. We will need considerably more than what is allocated to ‘turn things around’.

So without getting into the specific content, let’s look at how we can finance a transformative Green New Deal. And let’s estimate the expenditure at €10 billion over a five-year period (the amount and the period is not the key point of this post – merely where we can access the funding).

In showing how we can finance a special investment programme we need to consider the following.

First, any Green New Deal must be additional to what the Government has already proposed to spend in the ten-year NDP. Any attempt to ‘repackage’ or double-count spending will hopefully be exposed as a manipulative PR exercise.

Second, is the spending a once-off or does it commit the Government to continuous spending. Example: is the €200 million earmarked for a once-off public transport project (once built it doesn’t need to be built again)?

Or is it an ongoing expenditure such as subsidies to public transport to reduce fares? Ideally, a Green New Deal should be earmarked for capital projects but this needn’t be an iron law.

Third, is the expenditure a commercial investment and, therefore, not a charge on the Exchequer? For instance, Bord na Mona management once had an expansionary vision of a transition to sustainable business activity such as resources recovery, wind energy, biomass, environmental products, district heating and eco-tourism, encapsulated in its New Contract with Nature.

As these would have been commercial ventures, state investment would be ‘off-the-books’ (recently, however, Bord na Mona management has adopted a downsizing strategy wherein redundancies are described as investment in decarbonisation).

Another example of commercial activity would be a public stake in a consortium to build large-scale offshore wind farms. Being a commercial activity, the investment would not be a charge on the Exchequer. Commercial investments would be part of a Green New Deal but would not be a cost.

Fourth, all expenditure creates new revenue streams – either tax revenue or national income. For instance, providing free retrofit for households would be a significant upfront cost to the state.

However, the state would recoup the expenditure through a number of sources: repayments based on income or energy savings, the construction activity (income tax, etc.), household savings spent in other non-energy areas, reduction in fossil-fuel imports, reduced EU fines, etc.

Identifying revenue streams is important to costing a Green New Deal because there is a tendency to assume that €10 billion investment means that our national debt would rise by €10 billion. It doesn’t.

The impact on the national debt would be much less and, in the long term, would save money compared to the scenario where there was no investment.

Taking all this into account, where could we find €10 billion in a fiscally-efficient way.
First, the government is planning an accumulated surplus of €24 billion out to 2025.

This surplus is not required under the fiscal rules. In fact, those rules would allow us a deficit in each of these years though that is probably not advisable. However, a slightly lower accumulated surplus to fund a green investment programme is.

Second, we will have considerable cash balances (i.e. savings) out to 2023 and in all likelihood beyond. These are cash and assets available to the Government. In the years 2021 to 2023, cash balances will average €24 billion annually. It is doubtful that a small reduction in our ‘savings’ will have any negative impact on a finances which are firmly in the black.

Third, we could borrow money through Green bonds. With interest rates at rock-bottom (so rock-bottom that many of the bonds are selling at negative yield), the market is essentially paying us to borrow. So we can start racking up the finance now at almost no cost over the next 10 years.

Fourth, reduce the tax cuts proposed in manifestos. Fianna Fail proposed approximately €2 billion in tax cuts; Sinn Fein proposed €2.4 billion while Fine Gael proposed €3 billion.
From these four sources (and this doesn’t include rainy day funds), we have the ability to finance a Green New Deal.

Indeed, the financing is probably the easy part. The hard part would be finding the capacity to implement the programme. It is already questionable whether we have the labour to launch a major housing construction programme. A major retro-fit programme might run into severe bottle-necks for the simple reason that we don’t have the labour.

However, if any new Government wants to be taken seriously it will have to substantially increase the investment into climate justice over its lifetime – whether they call it a Green New Deal or something else.

If it’s not there in the big or fine print of a new programme then we will know that status quo succeeded and references to ‘change’ are just so much green-washing.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


From top: Sinn Fein President Mary Lou McDonald voting last Saturday; Michael Taft

It was a three-way race after all. As of the time of writing there are still a number of seats to be filled but we have the popular vote.

Not only has there been a substantial increase in support for progressive parties; this bloc is far ahead of the individual conservative parties. Even when we combine the Fianna Fail and Fine Gael vote, the contest is pretty even.

If the progressive vote has increased substantially, it is largely due to Sinn Fein’s performance. They are now the dominant party in the progressive bloc.

In 2016, Sinn Fein took less than 50 percent of the total progressive vote. Today, they have nearly 60 percent. Social democracy has seen its influence diminished, while the radical parties are also falling back. The Greens are now challenging for second place.

Many of the seats of the non-Sinn Fein progressive parties are potentially on loan. Having adopted an understandably cautious candidate policy, in any subsequent election Sinn Fein will field two candidates if their support holds up in the polls.

It won’t be just the high-profile transfer-beneficiary TDs who will be at risk (e.g. Dublin South West, Dublin South Central); thousands of Sinn Fein surplus votes in other constituencies helped progressive candidates. Sinn Fein could soon have a firmer grasp on the progressive vote.

The Sinn Fein vote has been described as a ‘surge’. Could we be seeing a ‘what-goes-up-must-come-down’ once-off phenomenon? We have seen party surges in the past.

In 1948, Clann na Poblachta took 13 percent of the vote two years after being formed. They fell to 4 percent in the next election and limped along until the 1965 election – the last time they elected a TD.

In similar fashion, the Progressive Democrats took 12 percent in their first outing in 1987 but fell back to 5 percent in the next election and lasted until its dissolution in late 2008 (a little historical note: that ol’ immigrant-basher, Noel Grealish, was the PDs’ last leader).

Labour experienced two surges – the 1992 ‘Spring Tide’ and the 2011 ‘Gilmore Gale’. These surges didn’t last. In 1997, Labour lost half its votes and seats. In 2016, the party went into meltdown. Both occurred after being in coalition.

Is this Sinn Fein’s fate? Doubtful.

Unlike the examples above, where the surge came off a first election, or after a period of stagnation, Sinn Fein grew steadily – from 7 percent in 2007, to 10 percent in 2011, to 14 percent in 2016 and now: 24 percent. While continuous growth is not guaranteed, they have built a decent foundation.

It is more difficult to predict the evolution of Irish politics. This is the third disruptive election in a row. Some will refer to 2020 as a seismic political shift, but it is just the latest twist in a volatile political landscape that started back in 2008/09.

First disruption:

During the banking crisis Fianna Fail undid its historical broad-class alliance by siding with finance capital against its working class base. This resulted in their collapse in 2011 and the rise of the Labour Party. However, instead of becoming the main opposition for the first time since the 1920s, Labour made the fateful decision to enter government and continue implementing Fianna Fail’s austerity programme.

Second disruption:

In 2016 we saw Labour’s meltdown and the fragmentation of the progressive vote. But most important was the first formal governmental arrangement between a revived Fianna Fail and a chastened Fine Gael.

Third disruption:

Now we have the rise of Sinn Fein, aided by an unpopular confidence and supply government where the historically distinct brands of the conservative parties dissolved to the point that people couldn’t detect any difference between the two.

So will this volatility continue or will we settle into a lengthy period of three party electoral competition? Much may depend on what happens next.

Sinn Fein has rightly begun with an attempt to construct a progressive-led government. Even if it is going through the motions (there are probably not enough seats to achieve this – yet), the mere exercise shows that progressive politics has arrived and points to future probabilities. Before a political force comes to power it must act like it has power.

After that, it gets hazy. Will Fianna Fail open up to a Sinn Fein coalition? What compromises will have to be made on both sides – and will such compromises be acceptable to the respective parties’ bases?

Or will the two conservative parties patch up another governmental arrangement? If none of this works, are we looking into a summer election? And what would happen then? Speculation time.

But other progressive parties face their own challenges. The Greens’ highly successful election shouldn’t blind us to the fact that climate chaos did not play a significant role in the campaign.

They may enter government, but without popular demands for climate justice policies they may struggle to convince their coalition partners of the need for significant policy departures, thus undermining their rationale for being in government.

With Labour and Social Democrats on the same number of seats, there will be calls for the two to merge. However, this avoids the more fundamental question: what can social democracy offer that Sinn Fein can’t?

For all the talk of ‘radical’ policies from housing, health, education and pensions, to workers’ right and more – Sinn Fein’s manifesto is not a whole lot different from what a robust centre-left party would offer, with the possible exception of tax-base-eroding proposals.

Without addressing that question, you can merge parties, change their names and logos, but the fundamental problem will remain.

The radical parties may be relieved to have escaped a seat-drubbing, especially after poor elections last year. However, they, too, have challenges.

Yes, people want change – but not necessarily socio-economic regime change. At 2.6 percent of the vote and, in many constituencies, reliant on Sinn Fein surpluses, how can these parties keep their ideological edge while making themselves relevant to a larger section of the electorate?

And the biggest question of all is whether the parties that make up the progressive bloc will commit to cooperation and a new alignment which can eventually replace the weakening hold that the conservative parties have over government.

It may well be that answering this question in the affirmative will help the individual parties to meet their individual challenges.

And lead to the fourth disruption.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


From top: Minister for Children and Youth Affairs Katherine Zappone and  Taoiseach Leo Varadkar launching the National Childcare Scheme in the Department of Children and Youth Affairs last December; Michael Taft.

Tomorrow (Wednesday, February 5) there will be an unprecedented protest by childcare professionals in Dublin, organised by the Early Years Alliance.

With crèches closing down, workers from around the country will descend on the capital to protest not only their working conditions but the very system of childcare that exists today – a system that penalises workers, parents, providers and children.

Childcare in Ireland is a fragmented, exploited sector made up almost entirely of women. When other European countries were developing childcare and early years’ provision as a public service in order to promote women’s participation in the labour force, childcare was an afterthought among Irish policy-makers.

Employees were subjected to low pay and poor working conditions – precarious contracts, lack of in-work benefits, etc. They still are.

Over the last decade greater official attention has been paid to childcare and the Early Years Sector. Free early years education was established; programmes to professionalise the sector were rolled out; means-testing provided greater access for low-income households while subsidies to providers were increased.

However, these measures did not address the fundamental flaws in the childcare model. This has resulted in the highest childcare fees in the EU and some of the worst-paid employees in the economy.

Simply put, the current model of childcare is broken.

Broken and unsustainable: staff turnover rates in full-time childcare are over 40 percent. In a SIPTU/Big Start survey of early years’ professionals, two-thirds of employees stated they would not be working in the sector in five years’ time if things don’t change, while over 40 percent are actively seeking other work.

The providers’ organisation – Early Childhood Ireland – reports that over a third of providers are unable to recruit employees, with half unable to retain staff. If these trends persist, there will be severe labour shortages leading to fewer providers.

These problems are due to treating childcare as a ‘market’.

This model means that providers must raise at least as much revenue as they spend (like any other business). This places an impossible burden on providers. If they want to improve wages and working conditions (and, so, attract and retain staff), they will have to raise fees, making childcare even more unaffordable.

If, however, they want to reduce fees they will have to reduce expenditure and, since labour makes up over 70 percent of providers’ expenditure, this means squeezing labour. This would only exacerbate low pay and poor working conditions.

It is against this backdrop that the protest is taking place – a protest being driven by the childcare professionals themselves.

They have joined the SIPTU trade union in their thousands; they have collectively begun to put forward their own analysis. The key to unlocking the potential of the sector, to transforming it into a modern public service, is the workers themselves.

When the protest was first announced, some elements in the media and officialdom attempted to turn the story into how protesting employees were burdening parents by closing down childcare provision for a day.

However, even the most cursory review of what was happing on the ground showed substantial support for the one-day action from across the community.

The workers have made alliances with many providers – both in the community and private sectors.

And the parents themselves know there is a major problem; they are aware of workers’ poor working conditions, and are asking themselves why fees are so high. The interests of the childcare professionals, the providers and the parents coincide.

The workers, therefore, are protesting not only their own conditions; they are also mounting a fundamental challenge to the childcare system itself on behalf of all stakeholders.

Political parties have picked up on this and, for the most part, have made significant resource commitments to the sector. That is good. But the modernisation of the sector rests on three principles:

1) The state – through whatever mechanism – will have to subsidise the overwhelming proportion of the operating costs of providers.

2) This will have to be accompanied by a fees cap – once the subsidies, investment and provider sustainability are put in place

3) Wages will have to rise significantly, accompanied by an improvement in working conditions (e.g. permanent contracts, in-work benefits, etc.). Currently, over 60 percent of childcare professionals are paid below the Living Wage

Starting from where we are now, it is a matter of supporting private and not-for-profit providers as deliverers of this public service. Even in countries where there is a large public sector component to childcare provision, the state still supports private and not-for-profit providers.

That childcare is now becoming a major issue in this election is due to one development – the entry of childcare professionals themselves into the public debate.

Quite simply, workers have found their voice and now, speaking out on behalf of a new model of childcare, they are helping us to find our own voice. We can use that voice, in our hundreds of thousands, when we go to vote next Saturday.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


Protest Details: Wednesday, February 5, Parnell Square, Dublin at 11.30am.

From top: Merrion Street, Dublin 2: Michael Taft

Is there any justification, any rationalisation in maintaining that election 2020 is a two-way race between Fianna Fail and Fine Gael?

In the Irish Times/MRBI poll – the first poll whose fieldwork came after the election was called – the Progressive bloc garners 38 percent of the vote, with Fianna Fail trailing at 25 percent and Fine Gael falling further behind at 23 percent.

The two conservative blocs total less than half the vote.

Earlier this month I suggested this contest could be seen as a three-way contest. The first two polls (the Sunday Times B&A poll having come out on Sunday) seem to confirm that.

But we shouldn’t be too surprised. The growth in support for progressive parties has been growing since the early 1980s. During much of this time, this growth was taking place below the radar as we were still captured by the idea that Irish elections are a contest between Fianna Fail and Fine Gael.

Now, however, that growth gas burst into and throughout the radar. Indeed, support for Progressive parties is now beginning to challenge the combined strength of the two conservative blocs.

Of course, there are the usual caveats: this is just one poll; it is ‘early days’, etc. Parties can grow or fall back over the course of the campaign.

A real problem is that, not being cohesive, there may be a problem in maximising seats between progressive parties (though, as pointed out previously, voters are increasingly transferring within the progressive bloc). These and other questions will fuel speculation in the days ahead.

However, this speculation should be rooted in the fact that the first two polls show that Progressives are contenders, not also rans, not just mere fillers for a conservative-led coalition.

The challenge is to build on these results. In an earlier post I suggested a modest strategy for progressives – to boost the votes of all progressive parties (the party of your choice) and to urge progressives to transfer within the bloc to maximise seats.

Most of all, progressive parties – activists, spokespersons – should now start acting and talking like poll leaders.

We need to convince more people that progressive policies will make a real and positive impact on their day-to-day lives.

To do that requires people having confidence in the candidates and parties they vote for. We should start acting like the leaders that the polls show that we are.

Now is the time for trade unionists to make these arguments, either individually or collectively.

Now is the time for civil society activists who might not be associated with any particularly party to urge support and transfers for progressives.

And it is time that party activists to make their voices heard within their own party. Support for progressives has never been higher in an election poll. Let’s not throw away the opportunities this presents.

It might be a stretch to say that the old order is collapsing while the new order is trying to emerge. History rarely vindicates poetic aspiration.

But we can confidently say that there is a lot of people trying to tell us something, trying to tell us that they are not satisfied with either conservative bloc, trying to say they are willing to support a progressive party and, potentially, a progressive alternative.

The question is – are we listening?

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.


From top: voting in Drumcondra, Dublin during the 2007 Generel Election; Michael Taft

This post follows on from last week’s post which suggested we don’t have to see Irish politics as defined by a two-way contest between Fianna Fail and Fine Gael.

There is a potential for a three-way contest that includes the combined progressive parties.

Now that the election has effectively been called we can reasonably assume there will be no pre-election alliance among the progressive parties. However, this should not be fatal to the progressive project.

Let’s look at Portugal.

In 2015, after four years of austerity policies implemented by the centre-right PSD government, the Portuguese went to the polls. The result was a minority Socialist government supported by the Left Bloc and Communist Party.

In the run-up to and during the campaign such a formation was not considered nor did it appear on the agenda of any of the progressive parties – in large part because Portugal never had such a government.

The race was seen as between the PSD and the Socialists. When the result was in, both parties fell well short of a majority. However, even on election night the Socialist leader Antonio Costa seemed to reject a progressive coalition.

Nonetheless, a progressive government eventually emerged after protracted negotiations, a failed attempt by the PSD to form a government, and a hostile President.

Though progressive politics in Portugal and Ireland are not comparable (Portugal has a strong Left tradition with a European left/right divide), there are some potentially interesting parallels:

* Such a governmental arrangement was not contemplated during the campaign; not by the public nor any of the political parties.

* It only became a prospect after the election, especially with the strong performance of the Left Bloc which did not come at the expense of the either the Socialists or Communists.

* The parties – especially the Socialists and Communists – overcame their historical conflicts to cooperate in the new arrangement.

* It was a unique arrangement, never having been tried before, except briefly in the aftermath of the 1974 revolution.

The individual progressive parties worked separately prior to the election and, without planning, ended up together. Could that happen here?

Grassroots Action

The reality is that a progressive consensus can only be forged in a post-election scenario – and even here this will depend on political will and the relative and combined strengths of the parties. Therefore, what we do and say during the election should help lay the ground for what could happen afterwards.

We shouldn’t expect the parties themselves to take the lead. They will, as organisations, be understandably concerned with their own agendas, manifestos and constituency campaigns.

But this doesn’t mean the grassroots can’t act – party members and activists, trade union and civil society activists. Two small things that can be done:

Propagate a progressive analysis: quite simply, put forward the idea of a three-way contest wherever they can – in the media, social media, in meetings and engagements of every kind.

This would help put greater public (including media) focus on the individual progressive parties without precipitating any decision a party might make after the election.

Keep the votes in the progressive house: to help drive up the number of seats and create progressive cohesion – call for transfers to other progressive parties. As shown in the last blog post, without any guidance, voters for progressive parties are increasingly transferring within the progressive bloc.

One doesn’t have to name names; a simple call to ‘vote for the progressive party of your choice and transfer to other progressive parties’ would help.

We don’t have to rely on, or wait for, party leaderships and executives to act. Any supporter of progressive politics can take these steps in whatever small (or big) way they can.

A Modest Strategy

This still leaves open the question of what happens after the election. However, as the 2015 Portuguese election showed, a positive result is not predicated on pre-election agreements.

We can make this work to our advantage. If progressive parties won’t rule out a post-election accommodation with either of the conservative parties (and most won’t) then consistency would at least mean they don’t rule out acting cohesively, as a bloc. This can help insinuate the logic of a three-bloc contest into the debate.

Maximising gains across the progressive spectrum is more likely to increase options. A poor result would make it easier for the conservative parties to co-opt one or two progressive parties.

A strong result, however, would require the conservative parties to deal with almost the entire range of progressive parties. This sets up the potential for those parties to construct a common purpose based on their own policy similarities.

And a very strong performance could even open the possibility of a progressive-led government. Or force the two larger parties closer together, opening up the possibility of a progressive realignment in the medium term.

Irish politics teaches us to be wary about predicting post-election scenarios.

* In 1989 Fine Gael and the Progressive Democrats entered into a pre-election alliance, but following the election the PDs entered into a coalition with Fianna Fail. This was notable for being the first time Fianna Fail entered a coalition, in a deal between two long-time enemies: Charlie Haughey and Des O’Malley.

* In 1992 Albert Reynolds and Dick Spring tore strips off one another prior to the election but entered into a historic coalition afterwards – the first time Fianna Fail and Labour coalesced.

* At the same time John Bruton declared he would never enter into coalition with Democratic Left, accusing them of still having links with paramilitaries. Two years later they were coalition partners.

* In 2016, Fianna Fail formally supported a minority Fine Gael government, a first for these parties.

Things can change dramatically and unexpectedly following an inconclusive election. And this includes a cohesive progressive intervention.

This is a modest strategy. This is not about generals moving pieces on an electoral chessboard that doesn’t reflect political conditions

. The point in any progressive struggle is to root strategy in reality, to identify what is possible, to make a credible assessment of the actors’ capacity in any particular conjuncture.

The priority is to rule-in the possibility of a third bloc in the public debate. This requires maximising cooperation, respecting the legitimacy of other parties’ positions or strategies (even if we don’t agree with them) and ending sectarianism.

In some corners of the progressive landscape, sectarian attacks are still made. This undermines progressive cooperation and reinforces the rule of the conservative parties. Fortunately, the propagators of such attacks are becoming less influential.

The post-election scenario could be a lengthy affair. In 2016 it took over two months to reach a post-election conclusion. Election 2020 could see an even longer period, depending on the result and the number of parties involved in negotiations. Therefore, there will be considerable time to make arguments and interventions.

Some will be concerned that such an open-ended strategy would allow some parties to take the gains and subsequently reject any post-election cooperation, choosing to go it alone.

That is, of course, a risk. Is it worth taking? Is it worth participating in a broad, if messy, church where there is always the danger people will do things that we oppose?

If we don’t think the risk is worth taking, we can always retreat into our small contented chapels. But we know where that leads.

So let’s go out and support our respective parties and candidates, talk up a three-way contest, ask supporters to keep their transfers within the progressive house, refrain from sectarianism and do everything possible to push up the progressive vote so we can maximise opportunities following the election.

And on the day after the results, let’s start the debate about how progressives, if they act together, can achieve a lot more than if they act separately.

Michael Taft is a researcher for SIPTU and author of the political economy blog, Notes on the Front. His column appears here every Tuesday.