POTENTIALLY EXPENSIVE ELECTORAL VICTORIES FOR ENGLISH AND SCOTTISH NATIONALISM

The  self declared Conservative and Unionist Party won the  General Election in England by harnessing English Nationalism, and the Scottish Nationalists did the same in Scotland by harnessing Scottish Nationalism. The two nations, by the rhetoric of their respective election campaigns, by have thus set themselves on a collision course. 

The Conservative Party scared English voters with the prospect of a Labour Government taking office with parliamentary support from the Scottish National Party. English voters were persuaded that a Labour Government, dependant on Scottish Nationalists, would somehow steal English money for the benefit of Scotland.  If there was deep pro Union sentiment in England, this appeal would not have worked, but it did work. 

The implication of the successful Conservative ploy, was  that Scottish Nationalist MPs, although freely elected to and sitting in the United Kingdom Parliament, would not be  fit to have influence on the fiscal policies of the government of the UK as a whole, simply because they are Scottish Nationalists. They are thus cast in the role of “second class” MPs.

The Conservative Party was saying that Scottish Nationalists are not welcome as full participants in the Union, at least as far as having a say in the fiscal policy of the Union is concerned. That was a very anti Unionist stance for a self declared” Unionist” party to take.

Meanwhile the Scottish National Party itself won support in Scotland on the false premise that a Scotland separated from England could avoid austerity, whereas the reality is that an independent Scotland would, on present policies, have a larger proportionate fiscal deficit, than the UK( including Scotland) now has. Arguably an independent Scotland would have to have more, not less, austerity.

That is not, of itself, a reason for Scotland to reject independence, but if it opts for independence, it should understand, and be willing to pay, the extra cost. This was not teased out because, unlike almost any other country in Europe, Scotland has no serious, centre right, fiscally conservative , party.

This is not the first time that the Conservative Party has adopted English Nationalism as an electoral tactic.

It did so in the 1911 to 1914 period, when it sought to de legitimate the minority, Asquith led, Liberal Government of that period, on the ground that the Liberals were dependent for their continuance in office on the Irish Party of John Redmond, and were pursuing a policy of Home Rule for Ireland within the UK.

The Conservatives even went so far, at that time, to advocate extra parliamentary methods to defeat the Home Rule policy of their duly elected UK Government.

At that time, the Irish Nationalists, unlike their Scottish brethren today, understood that an independent Irish Exchequer could not afford to introduce some of the fiscal measures then being introduced for the UK, as transpired when an Irish Government in 1924 had to take a shilling off the old age pensions Lloyd George had introduced in 1909. Scottish Nationalists could learn from that.

The difficulty for the Conservatives, in again adopting an overtly English Nationalist stance to win English electoral support, is its effect on Scottish opinion, over the next five years, while Scotland will being governed, as far UK matters are concerned, by a Conservative Party that  fought an election on the basis that  MPs the Scottish electorate have chosen ought not influence UK fiscal policy. 

Meanwhile the Conservatives are committed to a referendum on EU membership which could result in English votes taking both Scotland and England out of the EU, even though Scottish voters might, by majority in the referendum, vote to stay in the EU.

In a Union, where England’s population is so much greater than that of Scotland, Wales, and Northern Ireland, the use of a simple majority referendum to decide such existential questions as EU membership is unnecessarily crude and divisive.

It reduces subtle and difficult matters to a simple “yes/no” question, and takes no account of the fact that the four components of the UK are not only different in size and population, but also very different in political culture.  Imagine what would happen if there had to have been an EU wide referendum of the bailout packages for Ireland and Portugal!

Nationalistic passions are all too easy to stir up, as a means of winning elections, but once kindled they are not easily or quickly extinguished. 

Now that the election is over, David Cameron needs to break with Westminster’s confrontational traditions, and adopt a consensual approach towards all the opposition parties and enlist their help in finding a way of devolving more powers to Scotland without aggravating the rest of the UK, and of negotiating with the EU on basis that will not further deepen divisions within the UK itself.

AUSTRALIA

I visited Australia this week on behalf of the IFSC. I t was my first ever visit to a country, in which so many Irish people have come to make a new life over the last 200 years.

IRISH CONNECTIONS

In fact, among the first Europeans to settle in the Sydney area, were 160 convicts transported there from Cork. 

I visited the impressive Parliament building of the state of Victoria to learn that in the 19th Century, two of the Parliament’s speakers were

+  Peter Fintan Lalor, brother of James Fintan Lalor, the Young Ireland revolutionary, and

+  Sir Charles Gavan Duffy, who had also taken part in the Young Ireland movement before going to Australia. Gavan Duffy’s son George, became a politician and a judge back in Ireland in the early years of the State.

THE ABORIGINAL PEOPLE

Although Irish people were among the first European settlers, Australia was already inhabited, for thousands of years, by an aboriginal people with their own strong traditions and values. 

Initially, these aboriginal people were badly treated, driven from their traditional hunting lands and marginalised in society. Their educational performance and participation in society has lagged, and their life expectancy is still 10 years below that of the average Australian.

In this sense their position is similar to that of the Travelling Community in Ireland, and for many of the same reasons .

At public events, including at the Mass I attended in St Patricks church in Sydney, the aboriginal peoples, who originally inhabited the site in question, are formally acknowledged by name, which is good and fair thing. It may not undo the damage done, but it causes people to pause and reflect.

AUSTRALIA IS VERY DEPENDANT ON MINERALS

Income per capita in Australia is very high, $10000 per head higher than the United States, and about $15000 per head higher than Germany.

Public debt is low, about 30% of GDP.

Australia has experienced almost 22 years of continuous growth and is expected to grow by 1.6% this year. Unemployment is only 6.25%.

But the prosperity is vulnerable because it is so dependent on non renewable sources.

Minerals have been, and remain, an essential contributor to the Australian economy.

But mineral prices are volatile, and this expose Australia to booms and busts.

Extracting minerals consumes a lot of energy and, as a result, greenhouse emissions per capita are higher in Australia than in any other OECD country.

Iron ore represents 22.6% of all Australian exports, coal, 12%, natural gas 5%, gold 4%, and crude oil 3%. 

So 46% of all Australian exports are of raw materials that are non renewable, and subject to volatile price movements. Iron ore prices are down now, because of reduced demand in China, and this will slow the Australian.

Since European settlement began, Australia has enjoyed three eras of long and sustained economic growth,

    from the start of the Gold Rush in 1851 up to the early 1890’s,

    from the end of World War Two up to the  early 1970s, and 

    from 1992 to the present.

Despite its large land area and low population density, agriculture plays a relatively small part in the Australian economy. Wheat and beef are less than 4% of Australian exports. Water shortage is the key problem.  Finding a way to boost agricultural production, by using solar energy to desalinate sea water, and thereby improve Australia’s food production, is a priority. The centre of Australia is largely uninhabited because of water shortage.

Services are the big components in the Australian economy, Finance (10%), Construction (9%), professional services (7.5%) and Health (7.5%) are the biggest contributors follows by public administration, transport and education. Manufacturing contributes only 7.5% of Australian GNP. 

The service economy is sustained by minerals exports.

Up to the 1980’s, Australia pursued protectionist policies. The minerals boom has enabled it to abandon these without too much pain.

Nowadays, 32% of all Chinese exports go to China, 15% to Japan, and 7% to Korea. Only 5% go to the US, and only 2.4% to Britain (its traditional market). A downturn in Asia would hit Australia very hard. This is unlikely, but private debt in China has reached 200% of GDP, and Chinese residential construction has slowed down. This could dampen demand for Australian exports.

RENEWING OLD ACQUAINTANCES

During my visit, I met two Australian politicians, who were my contemporaries in politics and who I had got to know well over the years.

One was John Dawkins from Freemantle, who was a Labour politician and Treasurer (Finance Minister).

The other was Phillip Ruddock, a Liberal MP, who is still in Parliament, and was Immigration Minister, and until very recently Government Chief Whip.

While in Australia, I read an excellent book by another political contemporary.

Former Australian Prime Minister and Finance Minister, John Howard. Our times in both of those offices in our respective countries overlapped. John’s book  is entitled “The Menzies Years”, and covers Australian political history from 1949 to 1972. It is a remarkably fair minded book, and an excellent background for understanding Australia today.

THE CONSTANT SEARCH FOR NOVELTY IN ANNUAL BUDGETS LED TO THE 2008 CRISIS, AND IS NOT THE WAY FORWARD NOW... EXPENTITURE CEILINGS SHOULD BE REALISTIC AND MEANINGFUL

The Spring Economic statement by the Irish Government  has come in for criticism, mainly that it contains “nothing new”.

This sort of criticism is understandable from the point of view of a media ,for whom novelty is what gets attention. 

But  a search for novelty  is what got Ireland got into difficulty in the first place.

The persistent search for novelty and “new initiatives” in annual budgets, every year from 2000 to 2007,was one of the reasons Ireland overspent, and got itself into a crash. Novelties in annual budgets eviscerated the tax base, and led to unsustainable spending commitments. 

At that time, if the budget had not contained some sort of big new announcement every year , the Minister would have been open to the criticism that he lacked “vision” or “imagination”. 

Now the same chorus is beginning to be heard again. Memories are indeed short.

The Spring Statement does not contain any such novelties,  but from the point of view of the public, if not the media,  that is a very good thing. It restores an important sense of perspective.

The important perspectives  in the Spring Statement are that 

• Growth in Ireland was 4.8% last year and will probably be 4% this year. This is the highest growth rate in Europe
• 95000 new jobs have been added since 2012, and the IDA plans to attract a further 900 new investments by 2019, adding 80000 new jobs
• net emigration is likely to cease next year, on present trends
• The government deficit of spending over revenue was 15 billion euros, and it is now 4.5 billion euros

In his contribution o the Spring Statement, the Minister for Public Expenditure said again that the government is “now planning expenditures on a multiyear basis”, and  that Departments are operating under “multi annual expenditure ceilings”.

He also drew attention to the fact that the ageing of Irish society will add 200 million euros per year to health costs, and that the high birth rate will necessitate the appointment of 3500 extra teachers by 2021.

In fact, next year, the natural growth in demand for existing services public spending will on its own increase spending by 300 million euros, without ANY change in policy

This natural upward pressure on spending will mean that the setting of expenditure ceilings  for each Department will be a difficult task, requiring honesty and courage. 

This natural increase in spending, without policy change, needs to be spelled out for each Department, and separated completely from any increase that is due to a policy change.

In recent years, the expenditure ceilings for one or two major services have been repeatedly breached. A ceiling that can be too easily breached will not keep out the rain!  It certainly imposes no discipline on local management.

This sort of breach in an expenditure ceiling can, of course, be easily explained, if there has, for example,  been an unexpected increase in unemployment. It is less understandable if the demand for, or the cost of, normal health services has been underestimated .

It should be possible to predict the level of demand for, and the cost of, health services a few years ahead, on the basis of known facts about the age structure of the population, and to separate that from increases in spending that arise from unexpected one off factors. 

The budget system should incentivise local managements, who know their services best, to make the necessary savings and reallocations in time.  That job cannot be done as easily by Merrion Street.

If a Department exceeds its agreed annual expenditure ceiling, there ought to be a special procedure whereby both the Minister, and the Secretary General, of a Department, provides an early special statement to the Dail. This could be provided for in Standing Orders .

The Minister would account for, and quantify any policy changes, unexpected events, or recalculations that account for an excess, and the Secretary Genera would account for any lapses in expenditure management.

That procedure would ensure that future expenditure allocations would  be “evidence based”,  which is one of the  goals of the Minister for Public Expenditure and Reform.  It would add to the seriousness of the Estimates process and impose better accountability.