Sinn Fein and the fantasy economics that don't add up
Political Editor Liam Clarke unravels the dodgy narratives behind the financial policies Gerry Adams' party wants to implement north and south
Sinn Fein's budget proposals would "close down the country". That was Enda Kenny, the Taoiseach, speaking in Dail Eireann yesterday.
He sounded remarkably like Peter Robinson, the First Minister, writing in the Belfast Telegraph.
Sinn Fein is pursuing the same policy in both states, but both Kenny and Robinson aren't just concerned about the party's economic obduracy – they are even more worried by its political strength.
Mr Kenny was railing against a party which had just drawn level with his own while pursuing policies he regards as "not credible" and "not real".
Mr Robinson also saw Sinn Fein running neck and neck with the DUP in both the European election and the last poll.
Parties often make unrealistic promises in opposition, but then cut their cloth in government. We have seen it with the Irish Labour party and we have seen it with the Lib Dems in Britain. Government brings its own disciplines.
What is special about Sinn Fein is that it is in government and opposition all at once. If it is promising to end austerity in one state, it can't very well be seen to be making tough decisions in the other. It is trying to live up to the promises it makes in opposition in the Republic through its behaviour in government in the north.
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This week it is fighting a by-election in Dublin South West, which it looks like winning. Water charges are the number one issue and Sinn Fein is majoring on its record in the north. It is claiming that its minister, Conor Murphy, blocked water charges here when they are only deferred till 2016. Besides, it was the DUP who refused to implement devolution unless water charges could be foregone and Gordon Brown who stumped up £500m which was then used to defer them.
Sinn Fein has other dodgy narratives. For some time after the last UK general election, we were told that the Tories had defaulted on an £18bn pledge which Labour made. That was to be the answer to all our economic woes. Then, in June of last year, Sinn Fein and the DUP signed an agreement with the British government entitled 'Building a Prosperous and United Community', which stated that "we are on course to deliver the commitment to £18bn of capital funding over the period 2005-2017".
The welfare reform row could be the biggest example yet of Sinn Fein drifting away from economic reality as it attempts to force government decisions into line with opposition pledges.
The underlying reality is that if we don't keep in line with UK welfare spending, we must make up the shortfall ourselves and we have no real leverage in negotiations. Westminster subsidises us so heavily that it can simply deduct any excess spending from our block grant – the £10bn or so it hands over every year to keep Northern Ireland running.
Sinn Fein says this is unfair because it creates pressures that we didn't know about when drawing up the Programme for Government. That doesn't really matter – things change constantly in the business of government – but last month a paper presented to ministers showed that we actually received more money than was anticipated when we drew up our budgets. Nobody disputed that finding.
Sinn Fein maintains that if we controlled more "fiscal levers" – in other words, if we had more powers over taxation – then we could pay for everything we need. The party demands that the Treasury give us an accurate account of what is raised in tax here and what is spent, the suggestion being that the two could somehow be made to balance.
It is true that there are no definitive figures for this, but there are independent estimates which tend to concur.
The Institute of Fiscal Studies found that, per head, tax raised here is around 23% less than the UK average. In Wales the figure is 26% below the average. The institute commented: "Wales and Northern Ireland have less income and wealth than the rest of the UK and correspondingly raise less revenue per person from all the main taxes on earnings, savings and profits. Income tax, National Insurance contributions, corporation tax, capital gains tax, inheritance tax and stamp duties all yield at least 25% less revenue per person in both Wales and Northern Ireland than in the UK as a whole."
Since public spending is higher here, the obvious conclusion is that we would have to raise taxes by over a quarter if we wanted to even stand still in terms of maintaining services.
Sinn Fein says we could save by not contributing to the British armed forces, but the World Bank reports that military spending was only 2.3% of GDP in the UK in 2013, and there have been cuts. Clawing back our share of that relatively small proportion of the national budget is not going to make a significant difference.
Our own Department of Finance also produces detailed balance sheets, the most recent of which concluded that in 2011-12, Northern Ireland was running at a deficit of £9.6bn.
Making up that shortfall from local taxation would ruin us and result in mass emigration.
In the Republic, Sinn Fein proposes more modest tax rises for the rich (48% income tax), as well as increases in the levies on betting, on sugary sweets, on alcohol and on mineral prospecting, which would, they say, bring in £1.33bn out of a population more than twice our size. There is no way this Sinn Fein tax strategy could raise the £9.6bn or so we are currently subsidised by in Northern Ireland, never mind finance increases in spending
Our rights to borrow are very limited, but if they were extended we could conceivably make up the deficits by raising bonds against future tax revenue and public assets. In the Republic, Sinn Fein's reaction to the last debt crisis was to say that it simply shouldn't be paid back because the country couldn't afford it.
Sinn Fein is scoring 24% support in the latest polls in the south and 24.9% in the north. If these numbers hold good until the Irish election in 2016, and if Stormont survives that long, they could put Sinn Fein into coalition on both sides of the border on the centenary of the Easter Rising.
That could be presented as a concrete step toward Irish unity, allowing republicans to run cross-border bodies from both sides and to deal with the British government on a state to state basis. That is the great prize towards which Sinn Fein is straining and it would be a crowning glory of Gerry Adams' leadership of the party.
But is it luring Sinn Fein into fantasy economics? Is the party writing cheques which are destined to bounce if the electorate ever attempts to cash them?