Failed by Fianna

The Irish government rejected fiscal stimulus and slashed public spending instead. The result is eco

Celtic Tiger to Celtic Tories would seem an apt way of summing up the story of Ireland in recent times. From poster child of free-market globalisation everywhere from Hungary to Honduras, the UK's nearest neighbour is now enforcing the most savage cuts in public-sector pay, child benefits and social welfare payments of any EU government. Such is the level of misery being endured by the increasingly bewildered citizens of this little republic that even Brian Lenihan, the man principally responsible for inflicting it, has publicly acknowledged that fellow Europeans are "amazed at our capacity to take pain". The finance minister added, slightly boastfully: "In France there would be riots if you tried to do this."

Lenihan's last budget, delivered shortly before Christmas, was so draconian that the Daily Telegraph took to hailing him as a role model for the British Chancellor. Inevitably, this led to him being branded "Iron Brian" back home, though he will doubtless be spared Margaret Thatcher-style demonisation as he has since been diagnosed with pancreatic cancer.

Instead, the nickname will probably now be pinned on the premier, Brian Cowen, who has responded to the current crisis pretty much as David Cameron and George Osborne advocate. Alone among the leaders of advanced industrial nations, Ireland's two Iron Brians rejected the Keynesian case for a fiscal stimulus to keep the economy moving and set about inflicting a scale of pain from which even the new Tories might flinch momentarily.

Since the onset of the credit crunch in mid-2008, Dublin has delivered three slash-and-burn budgets estimated to have sucked about 5 per cent out of the nation's GDP. Exacerbating rather than alleviating the rapid meltdown in its private sector, such retrenchment could contribute to an astonishing 15 per cent shrinkage in the Irish economy overall - the sharpest contraction experienced by any advanced industrial nation in peacetime.

The British economist David Blanchflower warned that Ireland could be plunged into a 1930s-style depression if the public purse is cut: "Balancing the budget is not what you do in a recession. My advice is to wait until you're out." His warning was widely reported in the Irish press but totally ignored by government.

The unemployment rate now stands at 12.5 per cent and the number drawing the dole (including part-timers) has risen to well over 400,000, in a population of 4.5 million. It could easily hit the half-million mark before this slump is over and would be much higher if Ireland's more mobile citizens, along with many recent immigrants, weren't heading out of the country in search of work. Mass emigration is once again providing a safety valve for social unrest, as it has done throughout Irish history.

Spooked

Lenihan sought to offer some hope in his last budget by declaring that "the worst is over", although there would appear to be a stronger case for suggesting that the austerity has only just begun. The cuts announced in December aim to reduce state spending by €4bn this year, but the overall plan is to slash it by €15bn within four years. As total expenditure by the Dublin exchequer was just under €60bn last year, this means that the Irish state is set to shrink by a full quarter in less than half a decade.

At least two generations look destined to pay a painful price for the follies of the golden circles whose scams, swindles and con jobs have lumbered Ireland with zombie banks that make RBS and HBOS look relatively vibrant. Anglo Irish alone may swallow over €30bn of public cash, equivalent to the total revenues collected by the Irish exchequer in the whole of last year.

Morgan Kelly, a professor of economics at University College Dublin, forecasts that "mass mortgage defaults caused by unemployment and falling house prices are the next act of the Irish economic tragedy. As well as bankrupting our worthless banks all over again," he says, "the human cost of tens of thousands of families losing their homes will be enormous but, because the government has already exhausted the state's resources taking care of developers with Nama [the National Asset Management Agency], there is very little that can be done to help these people."

Meanwhile, the social partnership accords that ensured industrial harmony throughout the past two decades have in effect been ripped up and the public-sector unions are threatening to bring the entire country to a standstill before the winter is out. Even the republic's police force, the Garda Síochána, say they are prepared to go on strike, which could mean Ireland faces the sort of anarchy that Boston experienced in 1919 when its (largely Irish) rank-and-file officers protested against a ban on union membership.

Yet, Dublin's fragile coalition government seems far more spooked by the danger of international investors downgrading their country's credit rating (which would make the cost of borrowing substantially higher) and the spectre of the IMF seizing the financial reins. Dublin is determined to distinguish Ireland from Greece, whose continued profligacy threatens to destabilise the entire eurozone. The 20 per cent cutback in state expenditure that the Irish want to implement within the next four years is intended to comply with an important requirement for membership of the single currency that member states keep their expenditure deficits down to a maximum of 3 per cent of GDP.

The European Central Bank (ECB) agreed to bend this rule when the extent of the global crash became clear, but it has set firm deadlines, between 2012 and 2015, for each state to recomply (Ireland's is 2014). Members of the cabinet have stated repeatedly in recent months that everything they have done to address the country's economic crisis is in accordance with ECB advice. No one in Dublin doubts Ireland would have been in the same mess as Iceland had it not signed up to the single currency, the main reason the Lisbon Treaty was passed by such a huge margin at the second time of asking.

Their continued euro enthusiasm is just one reason why Ireland's current rulers would bristle at the Celtic Tories gibe. When the leader of the Labour Party, Eamon Gilmore, coined that sobriquet, he was perhaps unaware that the term "Tory" originated in Ireland. It derives from the old Gaelic word tóraidhe, meaning outlaw or robber, and was initially a term of abuse for the isolated bands of guerrillas who resisted Cromwell's brutal campaign in the mid-17th century. Since these rebels were allied to royalists, the term became embraced by monarchists on the British mainland, and, in time, by the modern Conservative Party.

As Ireland's self-styled republican party, Fianna Fáil is obviously anything but monarchist. Nor has it become monetarist in an ideological sense; it is too simplistic to say the party is engaged in a zealous crusade to squeeze the country's money supply, re-engineer society according to a social Darwinist blueprint and neuter the trade unions.

Blythe spirit

Yet it is telling that Lenihan was denied the customary standing ovation in the Dáil chamber (parliamentary meeting place) at the conclusion of his last budget speech in the Dáil. Fianna Fáil backbenchers clapped politely and then returned nervously to their constituencies, where they have normally positioned themselves as defenders of social welfare and worked hard to preserve a working-class base.

Lenihan would have taken no delight in becoming the first Dublin finance minister to cut social welfare payments since the foundation of the Irish Free State in 1922. He certainly didn't enjoy being taunted by Róisín Shortall, the Labour Party spokeswoman on social and family affairs, who declared poetically in the Dáil: ''The social conscience of the Fianna Fáil party is dead and gone. It's with Ernest Blythe in the grave." (Blythe was the last Irish politician to engage in such brutalities in the 1920s.)

The Fianna Fáil strategists and stalwarts are smart enough to know that what is one of the most successful electoral forces in western Europe would be finished if it ever invoked the Thatcherite line that "there is no such thing as society". Even when forecasting to the Dublin Chamber of Commerce that living standards would have to fall by over 10 per cent, Cowen was careful to add that "we must stick together as a community".

The political system of independent Ireland has long been tribal, local and clientelist; it is closer to Tammany Hall (the 19th-century Democratic Party machine run by Irish Americans) than Tories versus Labour. What Fianna Fáil can be accused of is crass populism. During the country's prolonged economic boom, the dominant force in Irish politics wanted to remain all things to all Irishmen (and women).

The fat cats certainly got the cream during the Tiger years, but crony capitalism (a capitalist economy that depends on close relationships between government and business) was always combined with a vague republican commitment to equality. In his time as Taoi­seach, Bertie Ahern defended the way his party courted property developers, builders and bankers at some of the nation's social and sporting events. At the peak of the Tiger boom, he said: "If there are not the guys at the Galway races in the tent who are creating wealth, then I can't redistribute it."

The reality was that this "ordinary fella" was presiding over more of a fantasy island than even Brown's Britain. When serious concerns started to be raised about the republic's unsustainable property boom - which accounted for almost a fifth of the Irish exchequer's income before the crash - Ahern responded that "the boom times are getting even boomier". He took no serious steps to lower the state's reckless dependence on property and construction.

The one-time island of saints and scholars had become a land of spivs and speculators and a manufacturing outpost for American multinationals. Ireland's economic miracle was always somewhat hallucinatory, because these US firms, heavily concentrated in chemicals and pharmaceuticals as well as computer software, used it as an Atlantic tax haven and route to the EU marketplace. Ireland Inc was always far richer than the national workforce, three-quarters of whom earned less than €40,000 per annum, even in the good times.

During this period, popularity - and peace with the unions - was bought by slashing income tax and shovelling much of the proceeds of the nation's property boom into a bloated public sector as well as vastly increased social-welfare benefits. When Ahern took office in 1997, the average single person on €40,000 a year paid 40.6 per cent of their annual earnings in tax. By 2004, this had been cut to just 19.7 per cent. His government cultivated rather than cured a widespread phobia towards taxation of any sort. Even when the price of a three-bed semi in Dublin rose to €1m, there was no serious move to introduce a council tax (or any separate source of local government finance).

Compared to many others, the Irish have a remarkably low percentage of their salaries deducted for income tax and social security. Indeed, for quite a prolonged period now, half of the entire national workforce has got away with paying no income tax. Even today, a single person earning €35,000 a year in Ireland is paying 18.7 per cent of their gross income on tax and social security, compared to 39 per cent in Germany, 29 per cent in the US or 23.5 per cent in the UK.

Welfare state

Yet the Irish have been able to fall back on considerably higher welfare benefits than the British. Dole claimants in Dublin and Donegal aren't exactly prosperous, but they are much more comfortably above the breadline than their counterparts in Derry or Doncaster. Until recently, the basic jobseeker's allowance in the republic stood at €200, compared to £60 in the UK. Such is the gap between Irish and British benefits that the Gardaí have had to mount checkpoints to try to stop unemployed people from Northern Ireland sneaking into the south to register a claim.

Lenihan's budget should certainly address the border problem in the case of the youngest claimants, who had their benefits halved in the December budget. But most welfare recipients probably won't be any worse off, as the slight fall in their benefits will be offset by the steep fall in prices that Ireland is now experiencing.

If there is a governing philosophy at work in Dublin these days, it seems to be this: just as the spoils of the Tiger times were spread around, so everyone must now take a share of the pain. The government attempted to put a progressive coating on the public-sector pay cuts by declaring that those earning less than €30,000 would have their pay cut by 5 per cent, compared to a 15 per cent clawback in the case of those with salaries above €200,000.

The big problem for the ruling party is that the catch-all approach that kept it in power throughout the boom has converted into unprecedented unpopularity since the bust. Fianna Fáil has been shaken to its foundations as its populism has become unpopulism. Stuck at below 25 per cent in the polls for more than a year now, its leader has become the most loathed Taoiseach in history. Meanwhile, concern mounts that Dublin's shock therapy risks a deflationary shock that could not just collapse public-service provision, but propel Ireland into a full-blown, Japanese-style depression.

This article first appeared in the 11 January 2010 issue of the New Statesman, Obama: the year of living dangerously

André Carrilho
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"Jeremy knows he can't do the job." What now for Labour and Britain's opposition?

Senior figures from all parties discuss the way forward: a new Labour leader, a new party or something else?

In the week beginning 13 March 2017, the Scottish National Party demanded a second referendum on indepen­dence, the Chancellor tore up his Budget and George Osborne was announced as the next editor of the London Evening Standard. One fact united these seemingly disparate events: the weakness of Her Majesty’s Opposition.

When Scotland’s First Minister, Nicola Sturgeon, addressed journalists at Bute House, her Edinburgh residence, she observed that Labour’s collapse entailed an extended period of Conservative rule. Such was the apparent truth of this statement that it went unchallenged.

Twenty minutes before Prime Minister’s Questions on 15 March, the Conservatives announced the abandonment of their planned rise in National Insurance for the self-employed. Their expectation that Jeremy Corbyn would be unable to profit was fulfilled. “Faced with an open goal, Jeremy picked up a tennis racket,” one Labour MP lamented of his leader’s performance. Rather than a threat, the government regards PMQs as an opportunity.

Two days later, Osborne was announced as the next editor of the Standard. “Frankly @George_Osborne will provide more effective opposition to the government than the current Labour Party,” the paper’s co-proprietor Evgeny Lebedev tweeted. His decision to hand the post to a Conservative MP was another mark of Labour’s marginalisation. In more politically competitive times, owners are warier of overt partisanship.

The Tories have a parliamentary majority of just 15 – the smallest of any single-party government since 1974 – but they enjoy a dominance out of all proportion to this figure. Nick Clegg, the Liberal Democrat former deputy prime minister, told me: “The fundamental pendulum swing of democracy, namely that the people in power are always worried that the other lot are going to hoof them out, has stopped.”

Labour is hardly a stranger to opposition: the party governed for just 20 years of the 20th century. But never in postwar history has it appeared so feeble. By-elections are usually relished by oppositions and feared by governments. But in Copeland in the north-west of England, a seat that had not returned a Conservative since 1931, the Tories triumphed over Labour. In recent polling the governing party has led by as much as 19 points and on one occasion it was leading in every age group, every social class and every region.

Corbyn’s MPs fear that were he to lead Labour into a general election, the attack dossier assembled by the Conservatives would push support as low as 20 per cent.

When David Miliband recently said that Labour was “further from power than at any stage in my lifetime”, he was being far too generous. After the forthcoming boundary changes, it could be left with as few as 150 seats: its worst performance since 1935.

The party’s plight was both predictable and predicted – the inevitable consequence of electing a leader who, by his own admission, lacked the requisite skills. “Now we made to make sure I don’t win,” Corbyn told supporters after he made the ballot in 2015. The lifelong backbencher stood with the intention of leading debate, not leading the party.

Neil Kinnock, Labour’s leader from 1983 to 1992, told me: “From the outset, I said that Jeremy [Corbyn] just can’t do the job . . . Now I think he knows that. He’s been a member of parliament for 34 years and will have a sense of self-examination. Both he and the people who work around him know that he just can’t do the job.”

Morale in the leader’s office has seldom been lower. “They’ve got the yips,” a Lab­our aide told me. Shortly after the Tories’ Budget U-turn, Corbyn’s director of strategy and communications, Seumas Milne, asked journalists whether there would be an early general election. He produced no evidence of any hope that Labour could win it.

Yet Corbyn’s leadership alone does not explain the crisis. In the early 1980s, when Labour was similarly enfeebled (but still strong in Scotland, unlike today), the creation of the Social Democratic Party provided hope. But the mere 23 seats won by the SDP-Liberal Alliance in 1983 (on 25.4 per cent of the vote, against Labour’s 209 seats from 27.6 per cent) acts as a permanent warning to those tempted to split.

With only nine MPs, the Liberal Democrats are too weak to function as an alternative opposition, despite their accelerating recovery. The third-largest party in the House of Commons – the SNP – is an exclusively Scottish force. The hegemony of the Nats, which cost Labour 40 seats in Scotland in 2015, has encouraged forecasts of perpetual Tory rule. “I don’t think there’s any way the Labour Party in this day and age can beat the Conservatives south of the border,” Clegg said.

To many eyes, the UK is being transformed into two one-party states: an SNP-led Scotland and a Conservative-led England. “The right-wing press have coalesced around Brexit and have transformed themselves from competitors into, in effect, a political cabal, which has such a paralysing effect on the political debate,” Clegg said. “You have a consistent and homogeneous drumbeat from the Telegraph, the Express, the Mail, the Sun, and so on.”

In this new era, the greatest influence on the government is being exercised from within the Conservative Party. “Where’s the aggravation? Where’s the heat coming from? Eighty hardline Brexiteers,” Anna Soubry, the pro-European former Conservative minister, told me. “They’re a party within a party and they are calling the shots. So where else is [May’s] heat? Fifteen Conservatives – people like me and the rest of them now. So who’s winning out there?”

Soubry added: “The right wing of the party flex their muscle against the only lead Remainer in the cabinet, Philip Hammond, for no other reason than to see him off. And that’s what they’ll do. They’ll pick them off one by one. These people are ruthless, this is their life’s work, and nobody and nothing is going to get in their way.”

Theresa May’s decision to pursue a “hard Brexit” – withdrawal from the EU single market and the customs union – is partly a policy choice; there is probably no other means by which the UK can secure significant control over European immigration. But the Prime Minister’s course is also a political choice. She recognised that the Conservatives’ formidable pro-Leave faction, whose trust she had to earn, as a Remainer, would accept nothing less.

***

The UK is entering the most complex negotiations it has undertaken since the end of the Second World War with the weakest opposition in living memory. Though some Tories relish an era of prolonged one-party rule, others are troubled by the democratic implications. Neil Carmichael MP, the chair of the Conservative Group for Europe, cited Disraeli’s warning: “No government can be long secure without a formidable opposition.” It was in Margaret Thatcher’s and Tony Blair’s pomp that calamitous decisions such as the poll tax and the invasion of Iraq were made. Governments that do not fear defeat frequently become their own worst enemy and, in turn, the public’s. The UK, with its unwritten constitution, its unelected upper chamber and its majoritarian voting system, is permanently vulnerable to elective dictatorships.

As they gasp at Labour’s self-destruction, politicians are assailed by Lenin’s question: “What is to be done?” Despite the baleful precedent of the SDP, some advocate a new split. In favour of following this path, they cite an increasingly promiscuous electorate, a pool of willing donors and “the 48 per cent” who voted Remain. Emmanuel Macron – the favourite to be elected president of France in May, who founded his own political movement, En Marche! – is another inspiration.

A week after the EU referendum, the Liberal Democrat leader, Tim Farron, was taken by surprise when a close ally of George Osborne approached him and suggested the creation of a new centrist party called “the Democrats” (the then chancellor had already pitched the idea to Labour MPs). “I’m all ears and I’m very positive about working with people in other parties,” Farron told me. But he said that the “most effective thing” he could do was to rebuild the Liberal Democrats.

When we spoke, Nick Clegg emphasised that “you’ve got to start with the ideas” but, strikingly, he did not dismiss the possibility of a new party. “You can have all sorts of endless, as I say, political parlour game discussions about whether you have different constellations or otherwise.”

Anna Soubry was still more positive about a new party, arguing: “If it could somehow be the voice of a moderate, sensible, forward-thinking, visionary middle way, with open minds – actually things which I’ve believed in all my life – better get on with it.”

However, Labour MPs have no desire to accept that the left’s supremacy is irreversible. But neither do they wish to challenge Corbyn. An MP distilled the new approach: “There is a strategy to give Jeremy [Corbyn] enough rope to hang himself. So it has not been about popping up in the media and criticising him in the way that colleagues did a year or so ago.” By giving him the space to fail on his own terms, rather than triggering another leadership contest, MPs hope that members will ultimately accept a change of direction.

Corbyn’s opponents acknowledge the risks of this approach.

“People are incredibly mindful of the fact that our brand is toxifying,” one told me. “As each day goes by, our plight worsens. Our position in the polls gets worse and the road back gets longer.”

Shadow cabinet ministers believe that Corbyn’s allies will never permit his departure until there is a viable successor. An increasingly influential figure is Karie Murphy, the director of the leader’s office and a close friend of Unite’s general secretary, Len McCluskey. “She’s holding Jeremy in place,” I was told.

Leadership candidates require nominations from 15 per cent of Labour MPs and MEPs, a threshold that the left aims to reduce to just 5 per cent through the “McDonnell amendment” (named after the shadow chancellor, who failed to make ballot when he stood in 2007 and 2010).

Should the rule change pass at this year’s party conference – an unlikely result – the next leadership contest could feature as many as 19 candidates. Labour has no shortage of aspirant leaders: Yvette Cooper, Dan Jarvis, Clive Lewis, Lisa Nandy, Keir Starmer, Emily Thornberry, Chuka Umunna. (Rebecca Long-Bailey, the shadow business secretary and Corbynite choice, is said to believe she is “not ready” for the job.)

All are clear-sighted enough to recognise that Labour’s problems would not end with Corbyn’s departure (nor did they begin with his election as leader). The party must restore its economic credibility, recover in Scotland, or perform far better in England, and bridge the divide between liberal Remainers and conservative Leavers.

Lisa Nandy, one of those who has thought most deeply about Labour’s predicament, told me: “I do think that, for many people, not being able to have time with their families and feel secure about where the next wage packet is coming from, and hope that life is going to get better for their kids, is really pressing as a political priority now. They will vote for the political party that offers real solutions to those things.

“That’s why power is such an important unifying agenda for the Labour Party – not just through redistribution of wealth, which I think we all agree about, but actually the redistribution of power as well: giving people the tools that they need to exert control over the things that matter in their own lives,” she says.

But some Labour MPs suggest even more drastic remedial action is required. “In order to convince the public that you’ve moved on, you have to have a Clause Four-type moment,” one member told me. “Which would probably involve kicking John McDonnell out of the Labour Party or something like that.

“You have a purge. Ken Livingstone gone, maybe even Jeremy [Corbyn] gone. That’s the only way that you can persuade the public that you’re not like that.”

Political commentators often mistake cyclical developments for structural changes. After Labour’s 1992 election defeat it was sometimes said that the party would never govern again. It went on to win three successive terms for the first time in its history. In March 2005 Geoffrey Wheatcroft published his book The Strange Death of Tory England. Less than nine months later, the Conservatives elected David Cameron as leader and returned to winning ways. As the US political journalist Sean Trende has archly observed, if even the Democrats recovered “rather quickly from losing the Civil War” few defeats are unsurvivable.

From despair may spring opportunity. “It is amazing how this Brexit-Trump phase has really mobilised interest in politics,” Nick Clegg said. “It’s galvanised a lot of people . . . That will lead somewhere. If in a democracy there is a lot of energy about, it will find an outlet.”

Editor’s Note, 30 March 2017: Len McCluskey of Unite wishes to point out that Karie Murphy is his close friend not his partner as the piece originally said. The text has been amended accordingly.

George Eaton is political editor of the New Statesman.

This article first appeared in the 30 March 2017 issue of the New Statesman, Wanted: an opposition