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..."

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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.