Buy an election and be damned!

By Dr. Richard Martin, columnist with The Connaught Telegraph

The Pharaoh of Egypt once dreamt of seven lean cows which devoured seven fat cows; and of seven withered ears of grain which devoured seven fat ears.

When the Pharaoh’s advisers failed to interpret these dreams, Joseph was then summoned. He interpreted the dream as seven years of abundance followed by seven years of famine and advised the Pharaoh to store surplus grain. What goes up must come down.

Following the prediction, Joseph became Vizier. The vizier was the highest official in ancient Egypt to serve the pharaoh (king) during the Old, Middle and New Kingdoms. The slave now called the shots.

During the seven years of abundance, Joseph ensured that the storehouses were full and that grain was saved for the rainy day. When the famine came, it was so severe that people from all the surrounding nations, including his family, came to Egypt to buy bread.

What does this story have to do with modern-day Ireland?

It is pertinent because firstly, our global tax revenues have more than doubled in the last ten years. Our tax revenue in 2014 was €35 billion. This year it’s €85 billion. That is an extraordinary increase by any stretch of the imagination.

This rate of increase is unsustainable. When something is too good to be true, it is generally too good to be true.

We may have had our seven years of abundance but the years ahead may not be so fertile.

Our government and legislators need to be prudent as to what our next steps are as a nation. Perhaps we can learn from Joseph by practising the virtues of thrift and prudence and save for the rainy day.

Why are we facing potentially stormy water?

We are hugely dependent on Foreign Direct Investment on this island, which is largely American business. At present, Ireland is home to over 1,600 overseas company operations that directly employ over 250,000 people. Our corporation tax receipts have increased from 11 per cent in 2014 to 27 per cent in 2023, thereby making up over one-quarter of total Exchequer receipts.

They were approximately €5 billion in 2014, now they stand at €26 billion in 2024. Corporation and income tax receipts are deeply enmeshed and intertwined.

After all, Allergan and all the other major multinationals are incentivised to come to Ireland to benefit from the 15 per cent tax rate but the employees all pay income tax to the State. Quid pro quo. One hand washes the other.

Figures published earlier this month showed the number of investments supported by IDA Ireland fell to 131 between January and June, down from 139 in the same period last year and 155 a year previously. That’s worrying.

How do we remain competitive in attracting FDI?

Michael Lohan, the IDA Ireland chief executive, was interviewed recently and stated that there are three main challenges Ireland faces in winning investment. Subsidies, infrastructure and geopolitical tensions.

The deepening subsidy race between larger countries is a race Ireland can’t win, larger nations would “always have the ability to go further” in their financial support of large multinationals.

Infrastructurally, our current lack of affordable housing is a huge deterrent to international business. How can a company reside in Ireland if its employees have nowhere to reside?

Michael O’Leary, the head of Ryanair, recently called for the appointment of a Minister for Infrastructure. He’s right. In a baseline scenario, the population is expected to increase by 922k between 2022 and 2040, resulting in a total population of over 6.106 million people by the end of the period.

In 2023 the housing output was just under 33,000 units, which is the highest level since the onset of the financial crisis in 2007. This is positive news, however, that’s way short of the projected 50,000 units a year needed to resolve this crisis.

Currently, supply is being overwhelmed by demand and with the projected increase in population it will ultimately result in a housing catastrophe.

If we don’t resolve the housing crisis it will directly affect our ability to attract major international investment going forward, as well as create major societal tensions and issues.

Geopolitical tensions are something that as a nation is completely out of our control. The Russian War, the escalating tensions between Taiwan and China, the Trade War between China and the USA, the Houthi blockade of the Red Sea and the US Presidential election are all global events that we can’t influence - but they affect us directly and indirectly.

The US electorate will decide the next President. Trump would be a disaster for Ireland. His previous administration passed the Tax Cuts and Jobs Act 2017 which cut the US corporation tax rate from 35 per cent to 21 per cent.

Recently, the former US president said he would further reduce his country’s corporation tax rate from 21 per cent to 15 per cent. This is not good news for Ireland. Our competitive advantage in attracting major American multinationals would be obliterated.

Phil Hogan (former EU Trade Commissioner), in a recent interview, also warned of a likely trade war between China and the US if Trump is re-elected.

He said: “There is likely to be a full-blown trade war in the event of a Trump administration. We will be collateral damage in the European Union between the US and China. Ireland, in the context of a trade war, where tariffs will be imposed on certain products – of course, that will have an impact on foreign direct investment in Ireland. Particularly in the farmers’ sector.”

We can only hope and pray he is not re-elected.

However, the Biden Administration pursued by and large the same protectionist economic and tax policies as his predecessor. The Inflation Reduction Act which was passed in 2022 was an example of such. Even if Kamala Harris is elected she will likely continue with America’s protectionist policies.

As a nation, we need to be ready for the storm ahead. Our major ally and friend has become somewhat distant and cold.

So what is in our control?

The upcoming budget later this year. Last week, I was somewhat bemused to read that the government is going to go on a big spending splurge ahead of the GE later this year. They are saying the Budget 2025 package will be €8.3 billion.

But, it’s not. They’re planning a €13 billion giveaway before the GE. There is a discrepancy of €4.5 billion between the actual and declared figures. This is not the time to be flaithiúlach with the grain in the storehouses.

Like Lynch in 1977, they intend to buy the election. It’s economic treason.

How are they pulling this magic trick?

Firstly, they are breaking their own spending rules.

The Budget 2025 package will be €8.3 billion, which consists of €6.9 billion in spending increases and €1.4 billion in tax cuts. The €6.9 billion expenditure package will increase spending by 6.9 per cent, which breaks the 5 per cent rule.

The additional €4.5 billion in “temporary” spending for 2025 would’ve meant an actual projected spending increase of 12 per cent for 2025 if the five per cent rule was adhered to correctly.

What is the five per cent rule?

The motivation behind this rule is simple. Historically, successive Irish governments kept overspending for short-term gain. This was a characteristic feature of governance in the Bertie era. Introducing the five per cent rule put a ceiling on expenditure and is an attempt to keep medium-term expenditure under control. The broad assumption is that the growth rate trend of the economy is roughly five per cent so public expenditure should increase by five per cent in tandem and parallel.

Secondly, they are using clever accountancy tricks to deceive the electorate.

A cost of living package worth hundreds of millions will be paid out this year to avoid being included in the Budget 2025 accounts. Bravo. Well done.

Jack Chambers and Pascal Donohue are like two men who’ve sworn a solemn oath to stay off the drink for November and when November finally comes around they land in Mick Byrne’s Pub and head straight to the bar and take a few crisp 50s from the back pocket and order two double Jamesons. No junk.

Clean meat never fattened a pig. Start like you mean to finish. The oath is for another year.

If a rule has been put in place to protect the economy and the country it’s disingenuous at the very least to break it.

It’s the oldest political trick going. Buy the electorate. Buy power. The ongoing immigration crisis is splitting the working-class vote asunder. It is tempting to try and buy elections, and they have fallen to it.

The proposed budget is cowardly, weak and selfish. In the short and medium term, the world is in a state of turbulence. A prudent budget should be delivered which is cognisant of the realities of the world we live in right now.

Let’s heed the wisdom of Joseph and keep the grain for the rainy day.