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Sinn Féin pushing end to partition as an economic panacea
14 March 2010 By Pat Leahy, Political Editor
The Sinn Féin economic policy lauded by delegates at last weekend’s ard fheis rests on three pillars: end partition, increase taxes and borrowing, and then increase public spending.
These are the most closely held principles of Sinn Féin members. However, the first of all the Sinn Féin imperatives - to end partition - is by no means an undisputed economic advantage.
There’s little evidence that an all-Ireland economic entity would be more successful, in the short term at least.
Perhaps joining the stuttering economy in the Republic with the dysfunctional and state-subsidy dominated economy in the North would produce a dynamic new entity.
Perhaps joining the lower standards of income and living in the North with the higher standards in the south would somehow increase standards of living in both places.
But that’s a difficult proposition to defend.
It’s a very difficult one to sell to an electorate in the Republic smarting from recent reductions in its own income, an increased tax burden and falling living standards.
It might be the case that unification with a higher performing economy would b e beneficial for the North; wages and standards of living are higher south of the border. But it’s far from clear that the south would see similar benefits.
The comparison with German reunification is only partially useful, but it’s not completely irrelevant. Many people will believe there are strong political reasons for reunification; but the economic case is a long way from being proven.
The Sinn Féin document - Financing the Future, The AllIreland Approach - was lauded not just by the leadership last weekend but also by many delegates.
‘‘The biggest single idea for the regeneration of our economy is getting rid of the border," one delegate told the session on the economy on Saturday afternoon, to loud cheers.
But it might not be as simple as all that. According to a study of the North’s economy - the Independent Review of Economic Policy - commissioned by the Stormont government and published last year, the economy remains deeply damaged by the Troubles.
One of its authors summarised some of its findings:
‘‘In essence, the Northern Ireland economy has operated under wartime conditions for nearly four decades.
‘‘Public sector output amounts to around 60 per cent of gross value added (the regional equivalent of GDP) . . . living standards have not converged on the UK and have diverged markedly from the Republic of Ireland and other successful countries."
The second pillar of the Sinn Féin policy - raising taxes and borrowing - runs up against some difficult realities, too.
The party’s position on taxation is stated clearly in populist terms in the document: ‘‘The poor pay too much and the rich pay too little."
However, many economists doubt that raising tax at the marginal level - where rates are already in excess of 50 per cent - will actually generate all that much income.
Existing government policy, wary of further damaging a tax base which has become dangerously dependent on a relatively small number of high earners, is directed more at extending the tax net to include those on middle and lower incomes.
The party has said it would introduce an special levy on those earning more than €100,000 a year and on all non-farm assets worth more than €1 million.
At first, Gerry Adams appeared to suggest that the €1 million asset threshold included the family home, but later rowed back on that.
In any event, he claimed that Sinn Féin’s new taxes would raise an extra €3 billion a year. The basis for this figure is unclear.
It appears to be the sum of various Department of Financecosted tax increases.
The party also advocates more borrowing. ‘‘The myths that surround the 26-county state’s ability to borrow must be exposed . . . Borrowing has not become more difficult." Actually, this is partly true.
The Irish state can still borrow large amounts, but only for two reasons: one, because it pays high rates of interest on its bonds, and two, because the markets have judged that the country’s finances have stabilised (and therefore, they can get their money back).
So, like the economic benefits of ending partition, it’s not clear that the party’s tax-and borrow plans would actually provide the resources for the stimulus it talks about.
Adams suffered a bit of a monstering in a RTE radio interview with Richard Crowley about all this last Sunday, exposing once again his frailty on economic issues. When this happens to Enda Kenny, he gets crucified.
When Adams does it, it doesn’t affect him within the party. This is partly because economic policy was never as important as the national question, and partly because most voters don’t take Sinn Féin that seriously on economic policy.
That’s one of the reasons why the party hasn’t been able get beyond 10 per cent.
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