Notes on the Front

If you see Charlie McCreevey walking down the street, dining in a fashionable café, or panhandling outside Government Buildings – arrest him. You have the power – the common law citizen’s arrest. The charge? Crimes against the economy. Is that an offence? Yes, it dates back to Saxon times, judicated on by courts that looked after the orphans, the foolish and the dead (which pretty much sums up our current state). But be warned: he may be armed. His weapon of choice is the slash-hook with which he mutilated the economy. And once you have apprehended him, detain him until the economic yeomanry arrive.

The Government’s balance sheet took another hammering with yesterday’s release of the Exchequer figures. It is now reckoned tax revenue will come up €4 billion short. I understand at that Department of Finance they are war-gaming an eventual €6 billion undershoot – which would put the budget into meltdown. Whatever it turns out to be, we’ll be returning to 2006 levels of tax revenue, attempting to finance 2008 needs. Few economies could manage that without a hint of panic.

Most people focus on the collapse of property-related taxes and related spending-taxes as the prime cause. But this is to skate the surface of the problem. To get at the root, we must go back a little further – to the halcyon days of the Celtic Tiger before the outlaw McCreevey first rode into office.

The economy was taking off, due in large part to the IDA’s policy of picking winners – wooing foreign capital in key growth sectors. As export growth rocketed, other sectors took off – some linked to multi-nationals as suppliers, others spinning off the new wealth generated. Ireland still had enormous problems – a sub-standard social and physical infrastructure, a weak indigenous enterprise base, etc. But with wealth starting to flood in, we were getting for the first time ever the investment resources we needed to bring Ireland into a modern Europe.

But then the outlaw McCreevey appeared at the edge of town. With his slash-hook he razed our ability to finance current needs and future investment. There was almost no tax he didn’t shred: income tax, capital gains, inheritances, gift tax. There was no vested interest – in particular his fellow rustlers in the building sectors – he didn’t give a tax break to. When it came to piling demand on a heated economy – he piled and heaped. And by giving speculators a free hand – he turned the property sector into an economic Wild West.

But it’s the little things we’ll remember and laugh about. Like that little reform that passed unnoticed buried in the text of a Finance Bill – the one that changed the calculation of tax on pensions for inheritance purposes. Reward work? This enriched the lazy and indolent – the children of the wealthy who sit around all day in their underwear, strumming guitars and watching Star Trek and Friends reruns on a repeating video loop.

High priced land, cheap credit, tax-cuts-til-you-drop – and now the Exchequer is coming apart. What did you expect? Did a country ever get rich selling property to itself? And as for declining tax revenue – it doesn’t take a professional economist to tell you that if you maul Taxes A, B and C, and base your finances on unsustainable Taxes D, E and F, you’ll get a right shock.

To give you the scale: if tax rates had remained the same as in 1996 and allowances/credits were only inflation indexed, we’d have nearly €10 billion extra today. That’s not counting all the other tax cuts (capital gains, stamp duties, inheritances and gifts) or all the throw-away money in tax expenditure (property, private pensions, etc.). Nor does this count all the years before that. We are talking billions and billions, enough to keep a calculator working until its battery gives out.

This is not to suugest we should have maintained the high tax rates of the 1990s. But they weren’t a bar to the economy lifting off. All the tax cuts came after the boom started. What happened was akin to a company which had soldiered on for years, suddenly receiving a windfall. It could reinvest that money into skill and plant upgrading, innovation, product development and modern marketing and export strategies – to create further growth and transform the place with higher wages, higher profits and a nice canteen for everyone to enjoy.

Or it could just blow it all on Jacuzzi suites and weekend parties in the Caribbean for the executives and hangers-on. The outlaw McCreevey took the economy to Bermuda (though most of us weren’t allowed on the beach). And now we’re all stuck in the Triangle.

So, arrest the outlaw. He may claim a mandate from a higher authority (i.e. the people) but I don’t recall the masses begging, ‘Please Mr. McCreevey, blow our wealth until we bleed recession.’ He may claim immunity, but the Court of Economic Justice knows no exceptions, no statute of limitations and no pardon. Drag him before the appropriate Star Chamber, try him and sentence him to a lifetime queuing at the post office for Minister Hanafin’s new fraud-proof assistance payments.

And then elect a new Sheriff. One who will tell the good citizens the difficult truths – about where we are, how we got here and what we have to do to clean up this town.