Coalition Tango

It was in the early 'sixties that Professor Paddy Lynch and the late George O'Brien first started to talk about Garret FitzGerald being Taoiseach some day - he hadn't even entered politics then. For almost twenty years many people have regarded it as an inevitability that Garret would one day. lead-this country and it was a prospect that was much desired by his many friends who admired his intellect, his integrity, his energy, his dedication .and his innate "goodness" . By Vincent Browne
There was, of course, a huge element ofluck in his being elected Taoiseacheventually - he was fortunate that Tom O'Higgins and Declan Costello were out of the way when Liam Cosgrave came to resign from the leadership of Fine Gael and he was fortunate that Fianna Fail made such a mess of government as to squander its huge majority of 1977.

But since he attained his own and his friends' ambition for him on June 30 last he has encountered a series of crises that must have raised in his own and his former admirers' minds questions as to whether the wait was all worthwhile. And his difficulties have been at least partly of his own making.

In the first place he handled the delicate matter of the appointment of his Government most maladroitly and in the process needlessly humiliated and alienated a large section of his own party. The fact is that there is now for the first time a strong element within Fine Gael who would be quite pleased to be rid of Garret and this factor will have telling significance when the tougher times ahead come about. If, for instance, Garret were to lose an early election there almost certainly would be a move to unseat him as party leader.

Then he landed the Government into a very serious political crisis in the decision to impose punitive indirect taxation to deal with the problem of the budget deficit. The problem arose from the refusal of Fine Gael to face the issue prior to the election.

Repeatedly throughout the campaign Dr FitzGerald was asked how precisely Fine Gael proposed reducing the deficit from its estimate of £800m. to zero in four years. The party's programme stated (a) that nothing positive would be done about it until the budget of 1983; this in itself made nonsense of the claim that the problem was acute, and (b) that in the meantime it would be reduced through "buoyancy of revenue".

Dr FitzGerald repeatedly sought to dodge the issue of what .precisely was going to be done and at one stage became exasperated with a reporter who persisted in purrsuing the question. What was not stated and what was exxplicitly denied was that there would be a supplementary budget either in the summer or the autumn.

On assuming power the new Government claimed to have been alarmed by the extent of the deficit and more so by the extent of the projected deficit for next year. It was this alarm that became the justification for the supplemenntary budget. But the deficit was no greater than Fine Gael themselves had been saying it would be and the projected deficit for next year was also no greater than was obvious Pwhen it was put to Garret FitzGerald at his party's first press conference of the election campaign that next year's deficit would be well over the £1 ,000m. mark he merely laughed it off. However, John Bruton and Fine Gael economic adviser at the time, Brendan Dowling, both agreed later that same day that the deficit would be very much greater next year than the projected £800m. for this year if nothing were done in the meantime.

In other words, Fine Gael knew full well the extent of the problem prior to the election but sought to side-step it, because the political problem of facing up to it would have been devastating - they would either have had to say that they would ignore it as Fianna Fail was doing or tell the electorate that there would have to be crippling taxation to reduce it over the stated period. But the difficulty that Fine Gael created for itself was not just in not facing up to the problem during the election but in commiting itself to a structural shift in the taxation system from direct to indirect.

This meant that action to reduce the deficit would be undertaken only through the imposition of indirect taxaation, on top of the increases in indirect taxes required by the reduction in income tax.

It was the commitment to shift from direct to indirect taxation therefore that has given rise to the Governnment's major economic crisis - a crisis which has only partly emerged as yet. Come next January's budget, there will have to be quite a dramatic increase in indirect taxes to

permit the reduction in the basic income tax rate ffrom 35% to 25% and the £9.60 per week for the housewives. Then there will have to be even further increases in indirect taxation to take another bite from the budget deficit.

In a society which is obsessional about price increases and in which Governments fall on that issue alone, to have committed the party to this strategy was an act of gross folly. It just isn't politically possible to convince trade unions that their members should not be compensated for increases in indirect taxation, especially when it is so heavy. The consequence of this inevitably will be a spiralling inflaation rate, possibly up to 30% next year and a further loss of competitiveness on international markets, which means higher unemployment.

All this was predictable and was predicted (by Magill among others) before the election. It was a reckless and foolish policy option at a time of grave crisis in our public finances and in the economy generally. Garret FitzGerald himself must take the blame. The full extent of this crisis will become obvious only in the early months of next year when the new massive tax hikes take place. It is doubtful if the direct tax cuts and the £9.60 for the housewives which
will come into play only in April will do much to quell the tide of reaction which will ensue.

The rows over the closure of the Tuam factory and on Knock airport are small fry in comparison with all this but they served to undermine whatever goodwill there is towards the Government generally and particularly in the west. So too with the instances of friction within the Government. The haggling between Michael O'Leary and John Kelly over the carve up of th-e old Department of Industry and Commerce has been unedifying. The volte face by O'Leary on the issue of the income tax cuts sugggested a Government in shambles.

Other indications of deep confusion on what the Government thinks it is doing has been the hot and cold obsession with the H-Block hunger strike and the outburst over a crusade to make the Republic a suitable place for loyalists - if Garret FitzGerald entered politics to engage in a crusade to end sectarianism in the south, the question arises: what has he been doing over the last sixteen years, why did he continue to support a Government whose Taoiiseach voted against the 1976 Contraception Bill and why did his party prior to the election refuse to take any stand on a constitutional referendum on divorce and on the enactment of new contraceptive legislation?

The regrettable fact is that the crusade outburst was entirely unplanned and was more a reaction to the grilling which RTE interviewer, Gerry Barry, was giving the Taoiiseach over the economy than to any strategy the Governnment has for reform in the south.

The Cavan-Monaghan by-election will concentrate the Government's mind wonderfully on the issue of survival but it is hard to see how it can veer away from the preciipice of economic chaos towards which its taxation prooposals have propelled it. The only real hope is that Fianna Fail will rescue them from themselves and in that there is some real consolation. •