Monday, September 18, 2006

McDowell offers update of Fianna Fáil 1977 manifesto

Given the shambles at Dublin Airport where the chaos at peak times will not be alleviated with the opening of a second terminal for 3-4 more years, PD leader Michael McDowell has a brass neck in coming forward like his FF colleague Martin Cullen with a sweeping infrastructure plan. It's another port plan that's not even McDowell's own and it may take decades to achieve!

The principal part of the McDowell vision is a proposal to transfer Dublin Port to the north of the county. It has been lifted from a study that was done by Irish Academy of Engineering, which produced a vision for infrastructure, forward to 2050.

It took a public outcry about waste on IT projects and infrastructure projects to prompt Michael McDowell and his colleagues to propose new control measures in October 2005!

It hadn't occurred to him before then, that the existing system was simply a joke.

The infrastructure aspirations are just a prop to show that cutting some taxes, isn't the PDs only answer to future challenges. McDowell hasn't promised a reduction in total taxation, which highlights the political nature of his proposals.

McDowell's approach evokes the Fianna Fáil manifesto of 1977 when the slump he talks about was set in motion with the abolition of motor tax and council rates. What he is offering is another dodgy prospectus with his stamp duty wheeze.

Between 1977 and 1981, the combination of tax cuts with huge spending increases (in the single year 1979, the public service pay bill was increased by 34%), resulted in a trebling of the National Debt.

So here we are in our petro-like economy where venture capital investment in Irish business will be less than €200 million in 2006 - the Cosgrave property family invested €650 million in UK property just in the first 7 months of 2006 - and all that McDowell can offer is a trip on the property bandwagon to get him back to power.

If he is back in government, will he support tax rises?? Of course he will and he could have Charlie Haughey's first Finance Minister Gene Fitzgerald as his patron.

When Fitzgerald was challenged on Budget night 1981 for quadrupling the car "registration" fee from £5 to £20, he was accused of re-introducing motor taxation.

The then Minister replied with a straight face: "It's not a tax. It's a car registration fee!"

So we have another politician hungry for power who questions the State's need for stamp duty income but apparently agrees with his colleague Tom Parlon that a system which allows an individual make up to €500,000 on an acre of land, is equitable.

Is it the future be damned? McDowell doesn't know what the position of the Exchequer finnaces will be after a slowdown or slump in the property market and increase in unemployment.

If Enda Kenny had made the statement about the Govt not needing stamp duty money, do we have to imagine what McDowell's reaction would be.

Irish Income taxes are low but indirect taxes are among the highest in the developed world. The overall tax burden is as high as the UK's and that is not including private health insurance and GP fees that many people have to pay in order to secure a reasonable health service; new car prices are 28% above the eurozone average and the State takes an average of €100,000 from the cost of every housing unit built here.

Because of indirect taxes and the corrupt property system that make some people with land very wealthy in a country where there is no scarcity of land, people on the average industrial wage of €31,000 are screwed big-time. In addition, 900,000 workers out of 2 million have to fund their own pensions if they need an adequate income for their retirement.

There is no plan for what will happen when 100,000 currently in a construction sector of 262,000 - 17% of the private sector workforce - will need work elsewhere in the next 10 years and so much more - details here.

Ireland is not a low-taxed economy and McDowell is not promising an actual reduction in the burden of taxation. What he is promising is politics, which is an easier game than serious reform.