Pearse Doherty speech to MacGill Summer School
How long and how hard is the way to recovery?
Politics is an adversarial occupation. Political parties motivated by differing ideologies and electoral competition challenge and criticise the views and policies of their opponents.
Those of us in opposition also have an important role in holding the government of the day to account.
Opposition for opposition’s sake is unhealthy, it is never enough simply to oppose. If we are not satisfied with the policies or legislation proposed by Government then we have a responsibility to put real and credible alternatives on the table.
So today I am going to resist the temptation to criticise the Government. Instead I am going to outline, in the short time available to me, what alternative routes are available to the course currently being pursued by the Government.
To answer the question of how long and how hard is the route to recovery depends on the route one takes. There are no easy solutions. There are certainly no short cuts. However there are other routes available and policies that if adopted will make the journey less perilous.
For all policy makers the challenge is to deal with the three D’s; the Destination, the Deficit and the Debt.
Before be set out on the journey to recovery we need to be clear on the desired destination.
For Sinn Fein that destination is a return to the international borrowing market at appropriate rates, the regaining of our economic sovereignty, reducing the exchequer deficit, and bringing our national debt to a sustainable level.
These objectives we share with government parties and others. However reaching this destination is not an end in itself. It must be a means to produce real and sustainable economic and social development in a way that addresses the enormous inequalities that exist in every aspect of our society.
Recovery must be more than fiscal targets and debt sustainability models; it must go further that Debt to GDP ratios.
This State is not a loan loss spreadsheet. Our citizens are not mere statistics or pieces of data. Rather they are real people, hundreds of thousands of whom are suffering real hardship.
Real and sustainable economic and social development can only take place if there is real and sustainable job growth. There can be no recovery with out jobs.
Unfortunately the governments updated Stability Programme predicts an export-led but jobless recovery. Indeed at the completion of the EU IMF programme by the end of 2013 unemployment is projected to be a fraction under 13%.
A recovery without jobs? That is a contradiction in terms.
The current focus on reducing our exchequer deficit is on cutting expenditure to meet income. In my view the primary focus should be on growing our income to meet our expenditure. There are of course significant savings to be made by eliminating waste and excesses in public spending. However the key factor to growing our income must be getting people back to work
With 443,400 people on the live register today, recovery for them must include the possibility of gaining meaningful employment. That number may rise if future cuts and tax increases are focused on the wrong areas, as has been the case in the past. Contracting the local economy by reducing the spending power of low and middle income earners and depressing consumer confidence can only lead to further job losses in the domestic sector.
While a package of tools must be employed to get people back to work, central to this must be state investment in job creation.
We simply cannot afford to have almost half a million people on the dole, and we cannot afford the social consequences of attempting to make it affordable.
So the route I choose, the one favoured by Sinn Féin, is to invest to save and create jobs, to assist small and medium sized businesses, to help hard pressed families and boost consumer spending.
This route proposes a jobs stimulus in the order of €2.9 billion over the next 12 months, with further injections over the following 3 years.
This proposal would use funds from the National Pension Reserve fund to fast track labour intensive infrastructure projects. It would also injected additional spending power into the economy in the form of a family stimulus package which would reverse some of the heavy burden on working families and those on social welfare by previous cuts and the increasing cost of living.
Today there is €14.7 billion available from the NPRF. Sinn Fein’s proposal would see us using less than half of this to invest in economic and social stimulus.
However even if the €10 billion from the NPRF due to go into the banks latter this week as part of the EU/IMF deal was no longer available there is still €4.7 billion left for investment.
Getting people off the dole and back into work can only be achieved through investment in the public and private sectors. In the absence of private sector willingness, the state must intervene. The state can create jobs.
Using funds from the NPRF does not increase our deficit by a single cent. The effects of such a stimulus will see a significant reduction in the exchequer deficit by reducing the social welfare spending; increasing tax revenues and reducing the amount that the state needs to borrow.
Taxation & Spending Plans:
Clearly our current deficit is unsustainable. A jobs stimulus package alone will not make it sustainable. There is a clear need for increased revenue raising and reduced spending. The key question is where to cut and where to raise taxes.
Last year Sinn Féin outlined €1.5 billion worth of cuts across a range of expenditures. We will outline similar plans later this year. The key issue must be to protect those who have the least and to protect the services on which they rely.
There is also a need for an honest debate about our tax system. We have consistently had one of the lowest tax takes as a percentage of GDP in the EU 27. We share this dishonourable position with states like Romania and Bulgaria. At 29% it is nearly 8 points clear of the EU average and 6 points below the OEDC ceiling for low tax economies. This has to change. While income tax, vat and business tax takes compare favourably with EU averages we fail when it comes to tax breaks, taxes on assets and social insurance.
If people want Romanian and Bulgarian quality public services then there is no need to change. But I believe people deserve better and there is a need to change. To deliver that change requires a programme of tax reform that would bring tax revenues up to 35% of GDP within a single term of government. Such reform could be carried out in a way that is fair, transparent and conducive to economic growth and social development.
Crucially it also provides one of the key elements of our strategy for dealing with the issue of debt, to which I will now turn.
Alongside this alternative route for addressing the unemployment crisis and reducing the deficit would be an alternative strategy for dealing with the growing debt crisis.
The focus of this alternative strategy would be to actively reduce the level of debt. Side issues such as interest rates or longer maturities would not be out main focus. The key issues would be to implement a plan to reduce the national debt from a projected €200 billion in 2014.
It is worth remembering that a over €64 billion of this €200 billion is not sovereign debt but private banking debt underwritten by the state, by bank recapitalisations and the infamous Anglo Irish promissory note.
Reducing this debt burden must start with separating out the real sovereign debt from the private banking debt. To date €18.4 billion has been spent recapitalising the banks. €15.4 billion of which was injected during the lifetime of the previous government while over the next number of years it is proposed to inject a further €45.9 billion into them beginning with €18 billion latter this week.
Paying back this huge debt means investing less in public services and job creation. It means more pain for hundreds of thousands of ordinary people.
Our National debt is unsustainable. Repaying the interest on this debt is equivalent to half the total income tax take for every worker in the economy. This means that every cent of tax you pay working Monday, Tuesday and half day Wednesday is going to repay the interest on this debt.
Reducing this debt requires negotiating a loss sharing agreement with the ECB on the €30 billion Anglo / Nationwide promissory note the full cost of which will exceed €45 billion when the interest is included. The ECB must acknowledge its role in creating the Eurozone crisis, through its failure to adequately enforce its regulatory authority on inter-bank lending at the height of the boom. In doing so it must accept the need for it to shoulder part of the burden of resolving the crisis.
There is also the issue of the €60 billion of senior bonds held by the six banks. While €20 billion is currently covered by the blanket banking guarantee, the remaining €40 billion is not. Of this €20 billion is also unsecured. The tax payer should not pay these private sector debts.
Last week European leaders accepted burden sharing as part of the solution for Greece. It must be part of the solution for Ireland.
The Other Alternative:
Politics is about choices. Governments always have alternatives. The real question is whether they have the political will to make the necessary policy changes.
Sinn Féin wants to build an Ireland that is prosperous, supportive, sustainable and equal. We want a model of social and economic development that supports all individuals and all communities to live bigger and better lives. We favour equality of condition over equality of opportunity.
The policies of the last Fianna Fáil government not only bankrupted this state but also left a legacy of deep inequality. They fostered an economy that was greedy, ugly and unsustainable.
The policies that drove that government continue to frame Government policy today in the form of the Programme for National Recovery and the EU/IMF austerity programme.
These policies will prolong the recovery and place an unnecessary degree of hardship on the most vulnerable in our society.
The road map that I have outlined may have its own twists and turns that will require careful negotiation, however the prize the destination is much greater.
This is the route that our government should travel - all of us together - proudly wearing our green jerseys.
Some may dismiss this as unachievable just as they dismissed my calls for our EU partners to stop profiting on the loans that they are making available to us. Telling us that a 0.6% reduction was the best that we could achieve until the markets reaction to Spain and Italy forced an end to EU profiteering on these loans.
The sooner this Fine Gael and Labour government abandon its current route the better for us all. If and when they do they will have the support of Sinn Féin. If they do not we will continue to oppose and expose their broken promises, but most importantly of all, we will continue to promote credible and radical policy alternatives, in the hope of leading our country back on the road to equitable and sustainable social and economic recovery.