The Irish verdict George Osborne would like to forget

The case of Ireland is a cautionary tale, not an instruction manual.

RIP Ireland's economic miracle. A combination of tax cuts and increased public spending -- coupled with the credit crunch -- has left Ireland with a budget deficit of 32 per cent of its GDP this year. The credit-inflated bubble has now well and truly popped, the draconian austerity measures have failed -- as many predicted they would -- and the Irish government appears close to being bailed out by the EU.

Along with Greece, the Irish experience from the nineties into the noughties seems to be a perfect example of how not to do things. But in 2006 -- at the very apex of the Irish bubble -- one economic sage decided that Ireland was actually a fine example of how to run an econmy. His name?

George Osborne.

Writing in the Times (pre-paywall, folks), the then shadow chancellor declared:

Ireland stands as a shining example of the art of the possible in long-term economic policymaking.

Long-term, eh, George?

There was little "long-term" about the artificial housing and banking boom that Ireland underwent in the late 1990s and early 2000s.

Despite Osborne's claims, Ireland did not surge ahead because of its highly regarded education system or increased research and development at universities.

Ireland boomed instead on a toxic mix of cheap credit, lax banking regulation and by becoming a borderline tax haven.

Slashing corporation tax -- a move continually hailed by Osborne as the way forward -- simply weakened Ireland's tax base even further, making the recovery that bit more difficult.

We should learn from Ireland's mistakes. Unfortunately, however, Osborne wants to copy them -- at least judging by Osborne's cuts to universities, the 3.4 per cent reduction in the education budget and his continued obsession with reducing corporation tax -- to the point where companies could end up paying less tax than their cleaners.

The case of Ireland is a cautionary tale, not an instruction manual.

UPDATE: Alphaville over at the FT points out another cautionary tale from the Irish experiment.

"Sovereign bailouts involve a certain quid pro quo.

For a start, there's been talk that Germany is pushing for the country's low, low 12.5 per cent corporate tax rate to be hiked.

...

Awkward. And perhaps not least for a certain tax-avoiding search engine."

Which tax-avoiding search engine could that be? Why, the one that George Osborne bragged about speaking to in his Times op-ed: "I will be asking Google executives today why they set up in Dublin, not London." Alphaville explains exactly why Google set up in Dublin:

"Google Ireland sends the earnings on a tax-lite journey to the Netherlands, whence a shell subsidiary passes it on practically untouched to a Bermudan holding, basically. They call it a 'Double Irish'.

Jammy stuff. Until your tax haven files for a bailout from some very angry Germans, that is. And 26 per cent of your earnings is a lot to put at risk..."

Photo: Martin Whitfield
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Labour MP for East Lothian Martin Whitfield: "I started an argument and ended up winning an election"

The former primary school teacher still misses home. 

Two months ago, Martin Whitfield was a primary school teacher in Prestonpans, a small town along the coast from Edinburgh. Then he got into an argument. It was a Saturday morning shortly after the snap election had been called, and he and other members of the local Labour party began discussing a rumour that the candidate would be an outsider.

“I started an argument that this was ridiculous, we couldn’t have a candidate helicoptered in,” he recalls. He pointed out that one of the main issues with the Scottish National Party incumbent, the economist and journalist George Kerevan, was that he was seen as an outsider.

“I kept arguing for an hour and a half and people started gently moving away,” he jokes. “About two days later I was still going on, and I thought enough’s enough.” 

He called Iain Gray, the Scottish Labour veteran, who interrupted him. “He said, 'Right Martin, are you going to put up or shut up?’ So I filled in the forms.

"Then I had to have a very interesting conversation with my wife.”

One successful election campaign later, he is sitting in the airy, glass-roofed atrium of Westminster’s Portcullis House. Whitfield has silver hair, glasses, and wears a Labour-red tie with his shirt. He looks every bit the approachable primary school teacher, and sometimes he forgets he isn’t anymore. 

I ask how the school reacted to his election bid, and he begins “I have”, and then corrects himself: “There is a primary four class I had the pleasure to teach.” The children wanted to know everything from where parliament was, to his views on education and independence. He took unpaid leave to campaign. 

“Actually not teaching the children was the hardest thing,” he recalls. “During the campaign I kept bumping into them when I was door-knocking.”

Whitfield was born in Newcastle, in 1965, to Labour-supporting parents. “My entire youth was spent with people who were socialists.”

His father was involved in the Theatre Workshop, founded by the left-wing director Joan Littlewood. “We were part of a community which supported each other and found value in that support in art and in theatre,” he says. “That is hugely important to me.” 

He trained as a lawyer, but grew disillusioned with the profession and retrained as a teacher instead. He and his wife eventually settled in Prestonpans, where they started a family and he “fought like mad” to work at the local school. She works as the marketing manager for the local theatre.

He believes he won his seat – one of the first to be touted as a possible Labour win – thanks to a combination of his local profile, the party’s position on independence and its manifesto, which “played brilliantly everywhere we discussed it”. 

It offered hope, he says: “As far as my doorstep discussion in East Lothian went, some people were for and against Jeremy Corbyn, some people were for and against Kezia Dugdale, but I didn’t find anyone who was against the manifesto.”

Whitfield’s new job will mean long commutes on the East Coast line, but he considers representing the constituency a “massive, massive honour”. When I ask him about East Lothian, he can’t stop talking.

“MPs do tend to say ‘my constituency’s a microcosm’, but it really is Scotland in miniature. We have a fishing industry, crabs and lobsters, the agricultural areas – the agricultural soil is second to none.” The area was also historically home to heavy industry. 

After his first week in Westminster, Whitfield caught the train back to Scotland. “That bit when I got back into East Lothian was lovely moment,” he says. “I was home.”

Julia Rampen is the digital news editor of the New Statesman (previously editor of The Staggers, The New Statesman's online rolling politics blog). She has also been deputy editor at Mirror Money Online and has worked as a financial journalist for several trade magazines. 

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