22 March 2007 Edition
Economy A Strong Economy for an Ireland of Equals
Exploding the myths about Sinn Féin’s economic policy
In the first of a two-part series, Sinn Féin’s National Director of Policy, Shannonbrooke Murphy, confronts establishment myths about the republican approach to managing the Irish economy
The economy is one of the most important fronts in the battle of ideas that will determine Ireland’s future. Opponents of republicanism, terrified that Sinn Féin's recent electoral success in the North will be replicated in South, are trying and paint our economic policy as our weak underbelly. Typical of the new ‘post-policing’ vitriol against Sinn Féin are charges made by a former Executive Director of the Anglo Irish Bank reported last week, accusing us variously of ‘economic terrorism’ and of posing an economic ‘threat to the state’.
Attacks on Sinn Féin economic policy will intensify as the general election approaches. However, we can have confidence because, unlike our opponents, we are not vulnerable on our economic policy, and accusations levelled against us are easily rebutted. As our Finance Spokesperson Caoimhghín Ó Caoláin TD has said: “It is time we all played our part in exposing the fallacies”.
Therefore, to help prepare us for the time ahead, I propose to puncture the top establishment myths about Sinn Féin economic policy.
Myth 1. Sinn Féin is economically illiterate.
This argument is really code for saying that republican economic policy does not respect certain conservative economic orthodoxies that have created an obscene overconcentration of wealth, the commodifcation of basic human rights including healthcare and even water, and whereby the working poor are subsidising the richest who pay the least in tax.
The key elements of Sinn Féin’s economic platform are now part of mainstream Irish economic discourse. We have won or are in the process of winning some of our major economic arguments. For example, we have won the argument about the negative economic consequences of Direct Rule. While we now need to get the delivery right, we have won the argument in principle on the need for a Peace Dividend. In the Six Counties, the right corporation tax rate remains disputed, but we have won the argument on the need for tax harmonisation. There is a growing consensus about the need to end the regional rate and repatriate tax powers to the Assembly, and to introduce borrowing powers for fiscal flexibility. We have largely won the argument on the need for an all-Ireland economy. As Economy Spokesperson Mitchel McLaughlin MLA has said: “Hardly a week passes without some industrialist, economist, politician or entrepreneur extolling the virtues of all-Ireland economics.’ Far from being guilty of economic illiteracy, key aspects of our economic policy are no longer controversial.”
On the contrary, it is our opponents who are guilty of basket-case economic thinking: that the dotcom bubble would never burst, that house price inflation can continue ad infinitum, that the Celtic Tiger economy will never slow, that a small island can sustain two separate economies.
Now we have only to complete the job of persuasion on the remaining elements of our economic programme. In future, we will win the arguments on the need to diversify Ireland’s competitive base, on the need to stabilise our economy by better supporting indigenous enterprise, on the need to retain and build profitable companies in public ownership, on the need to reform the tax system along progressive lines, on the need to take measures to manage the economy responsibly and more evenly distribute resources.
Like our positions on collusion and the inevitability of Irish reunification, time will show that republicans also have it right on the economy. Just as Sinn Féin fundamentally changed public thinking regarding the national question, we will confound our critics in the conservative parties and vested interests and lead a comparable seismic shift in economic and social priorities and policy.
Myth 2. Sinn Féin economic policy will wreck the Celtic Tiger economy.
Sinn Féin economic policy alone has the potential of transforming the current Irish economy into a ‘republican tiger’ – that is, a strong managed economy that is also significantly more equal, delivering for all the people rather than just for the elite. Our planned approach will protect our economy from boom and bust, and put it on a path to sustainable growth. Sinn Féin policy will help spread and grow prosperity.
Three aspects of our economic policy are crucial in this respect: our all-Ireland economic development strategy, our focus on indigenous business development, and our plan to diversify the basis of Irish competitiveness by investing in infrastructure, public services, a highly educated workforce and by intervening to bring down costs in key areas such as housing, energy and insurance.
It is the failure of other parties to do the same that puts the economy at risk. By tolerating an unsustainable dual-economy scenario, by failing to curb inflationary pressures, to control energy prices and insurance costs and the housing costs that inflate wage demands, and by failing to diversify and stabilise the base of Irish economic competitiveness, the Irish Government that has put the Celtic Tiger economy in jeopardy.
Recent job losses demonstrate that a low corporation tax rate is not a sufficient solution – and is becoming increasingly less relevant for retaining foreign direct investment (FDI). Our argument for modernising and diversifying the basis of our economic competitiveness beyond exclusive reliance on low corporation tax is a position you will now find within the pages of Business and Finance, which recently raised this issue in the context of impending US and UK legislation closing tax deferral loopholes. Many predict this legislation may cause capital flight from Ireland and economic downturn in the near future. Such an outcome will have nothing whatsoever to do with Sinn Féin economic policy, but everything to do with the current Government’s failure to strategise to protect the economy against the effects of relocation of operations and/or repatriation of profits.
The UN Conference on Trade and Development already identified a reduction of €18 billion in FDI investment in Ireland in 2005 on the back of US legislative initiatives to repatriate corporate profits. This process is already underway, and it calls for a robust proactive strategy to reverse the tide.
Our position that a race to the bottom on wages, taxes and public service provision does not directly correlate with competitiveness is corroborated by the World Economic Forum Global Competitiveness Ranking. Our position on a sustainable corporation tax rate is also corroborated by the ESRI, CORI and ICTU. In fact, ICTU economist Paul Sweeney goes much further than we do, proposing to harmonise corporation tax upwards over 30% to meet the top northern rate. Our proposal regarding the need to use universal provision of broadband technology to increase competitiveness has even been repeated by Sinn Féin opponents such as Jim Power of Friends First.
Moreover, recognition is increasing for Sinn Féin’s position of stabilising the economy by reducing overdependence on FDI, and providing increased support for indigenous small and medium enterprises, which provide the bulk of employment and greater stability as they do not pose the same threat of relocation as FDI and big businesses. Failure to do so is irresponsible as it leaves the Irish economy vulnerable to external forces or developments, such as the impending foreign legislation mentioned above,
There is nothing ‘anti-growth’ or ‘anti-development’ about Sinn Féin economic policy, as recently claimed by the Michael McDowell. However, we emphasise more responsible strategies for sustainable growth and sustainable development. We want to work with business to build a better society, but will do so on republican terms.
Myth 3. Sinn Féin is a high tax party.
Sinn Féin is not a high tax party. However – as even journalist Vincent Browne has publicly noted in our favour – nor are we by definition and at all social costs a low tax party.
Social need will dictate public finances under a Sinn Féin Government and we are committed to keep all taxation as low as possible given these demands.
What drives Sinn Féin economic policy is the commitment to generate good full employment and provide world class public services.
We are pro-wealth, and plan to manage an economy in which the public sector, private enterprise and social economy enterprises each have their part to play in generating employment and wealth. However, unlike the conservative parties, we are also clearly and firmly anti-poverty. We are not willing to tolerate unjust distribution of wealth generated, nor unequal access to necessities such as food, water, housing, fuel, healthcare and education.
We plan to reduce tax for many.
It has been misreported that we propose to raise corporation tax rate to 35% and advocate EU tax harmonisation. Neither accusation is true. We have proposed interim rates for the purpose of harmonising corporation tax on the island, involving a small decrease in the Six Counties rate for SMEs from 19% to 17.5% and a sustainable increase (according to the ESRI, CORI and ICTU economists) in the 26 Counties from 12.5% to 17.5%, This proposed rate is still significantly less than the lowest personal income tax band in the 26 Counties.
Our position will keep the corporation tax rate in the 26 Counties at approximately half the EU average, and at half the average of the top 10 most competitive economies according to the World Economic Forum Global Competitiveness Ranking for 2006-2007. The 26 County state does not even make it into the top 20 most competitive economies in this list. The three European economies with lower rates of corporation tax fare even worse.
Sinn Féin proposals on personal income tax aim to keep these rates as low as practical, but to also distribute the taxation burden more fairly on a progressive basis. For example, we have committed to keep all those on the minimum wage out of the tax net – a longstanding demand the Irish Government finally acceded to with the result that currently more than 40% of earners remain outside the tax net. However, as we also propose to raise the minimum wage, this means we would take more people out of the tax net altogether. Thus, we are committed to take more people out of the personal tax net than any other party on the island.
As Gerry Adams reminded us in his Presidential address, the wealthy must pay their fair share but presently do not. Taxation justice demands closing the remaining loopholes through which the wealthiest escape. This was at the centre of our 2002 manifesto demands on tax policy, and some progress has since been made. Having pushed this for years, Sinn Féin can take some credit. But we also plan to finish the job.
Our position of a proposed 50% tax on individual earnings over €100,000, adopted as policy in 2001, has been misreported in some quarters as a 50% tax on all income applying to households collectively earning in excess of €100,000 per year.
This rate would only apply to earnings in excess of €100,000, and only to individuals with incomes more than three times the average industrial wage and more than four times the minimum wage. Under the current system, when your income doubles (from approximately €17,000 to €34,000) your rate of tax doubles (from 20% to 41%). Sinn Féin’s proposal represents a less than 10% increment on the current highest rate band. It would introduce additional progressivity, in contrast with the present system that taxes such high earners at the same rate as those earning significantly less – just over one third that amount.
We do not propose income tax increases for any average workers or middle income earners.
We are committed to eliminating indirect double taxation – the payment of service charges and user fees for essential public services, for which we ostensibly already pay.
We are also committed to significantly reducing consumption tax, particularly for essentials. Consumption tax hits lowest income people hardest in that they pay a significantly larger proportion of their overall incomes. However, we recognise that this will be challenging to achieve. The structure of the current taxation system is heavily overdependent on consumption tax, and the Irish Government has also allowed the EU to take control over the setting of VAT. Since Ireland no longer exercises legal sovereignty over consumption tax, the need to first challenge EU constraints on tax sovereignty means this will be a longer-term project. In addition, we will need to establish alternative sources of revenue to offset reduced VAT receipts. For this purpose, we are looking to build profitable publicly-owned companies in strategic sectors as our first choice.
We will honour our longstanding commitment to comprehensively review and reform the Irish tax system and redraw it to make the system progressive, fair, and consistent with taxation justice by eliminating tax avoidance and evasion schemes. It is precisely because we plan to reduce the tax burden on the lowest paid that the wealthiest must pay their fair share, in return for which they will get equal access to presently unavailable world class universal public services.
Bring It On
Sinn Féin is capable of significantly more competent management of the economy as it stands. We could responsibly steward the status quo, but this would not satisfy us. We want fundamental policy shifts. We need to change the terms of reference. Our economic ideas are about creating a just society, a ‘good society’ as renowned Harvard economist John Kenneth Galbraith would have it. Therefore, we are gearing up for another long war for hearts and minds, the end result of which will be positive economic and social change.
We are undoubtedly in a period of refining all our economic and social policies and clarifying the practical public policy implications of our Equality Agenda. The reality is there is no country – and none in history – that has got the economy exactly right. Sinn Féin is part of a global movement to establish a new, more just economics on a progressive footing – to establish economic democracy. We intend that a future United Ireland of Equals will show leadership in this regard.
Next week marks the 200th anniversary of the abolition of the transatlantic slave trade – an event that proves the rule that changing the economy is all about political will.
As we approach Easter Week it is fitting that we remember to let no one tell us that the changes we seek are impossible dreams. Indeed, Sinn Féin is all about delivering on aspirational thinking.
Gerry Adams has said that we are nation builders. Part of this foundational project involves building a strong economy for an Ireland of equals – a republican tiger economy for all the people. With the Irish economy – as with all aspects of Irish society – Sinn Féin will continue to act as an agent of positive change.
The most recent attacks by our opponents are a reflection of our strength and their fear of our potential to make another major political breakthrough. We cannot allow the establishment parties and media to make this election a tax rate auction where the prize goes to the lowest bidder. As Gerry Adams has emphasised, we must ensure that it is about service delivery and what should be done with the taxes collected to date.
The election is really about how there is no excuse not to end poverty and deliver universal healthcare, housing, and childcare. It is about planning for our economic future. Let the Battle of Ideas begin. Republicans are ready. Bring it on.
In Part Two Shannonbrooke Murphy sets out the Top 10 Reasons Why Sinn Féin is Good for the Irish Economy, this will be carried in An Phoblacht, 5 April 2007.