THE economic divide between the two parts of Ireland is growing ever more pronounced. North of the border a cash-strapped British government is struggling to restore its reputation after a disastrous experiment with borrowing and tax cuts for the rich. In the south the Irish government has cash to spend, has chosen to help working people and cautiously invest.
Economic history provides little evidence ‘Trussonomics’ could ever work. Even a chancellor of the exchequer from Maggie Thatcher’s government, Ken Clarke, was deeply critical. He said, “If cutting taxes worked, we would have done away with them years ago.”
The reaction of international markets was swift and clear. The value of the pound fell to an all-time low and the International Monetary Fund, which seeks to foster stability in the global economy, warned the UK’s £45 billion proposal would increase social inequality. The view of the international markets was that this reckless government had gone too far.
Critics of the Irish government’s €11 billion plan say it does not go far enough to address the problems faced by low income families heading into a winter of high energy costs and fails to tackle structural problems particularly the shortage of affordable housing, which makes Dublin one of the most expensive cities in Europe. There are also problems in health, education and water.
Yet Ireland has done a remarkable job of restoring its finances. It is only 14 years since it had to go cap in hand to the European Central Bank and International Monetary Fund for a loan of €45 billion.
The British and Irish economies, once joined at the hip, have been drifting apart slowly for six years. Brexit put wind in the sails. The countries, however, remain important trading partners. In crude terms Britain buys much of its food stuffs from Ireland and Ireland buys much of its manufactured goods from Britain. The creation of the European Single Market in 1993 made trade much easier between the two islands and saw the two parts of Ireland move towards economic integration. The Good Friday Agreement provided political stability, fostered inward investment and greatly boosted cross-border trade.
Failure to resolve the dispute over the Northern Ireland Protocol will supercharge the growing problems created by Brexit and do considerable damage to both Britain and Ireland. However it will be a disaster for Northern Ireland. Stormont’s Finance Minister Conor Murphy has already warned that a £660 million overspend leaves finances in a critical position.
It will be shackled to a British economy which is heading into recession and a government which is blind to international signals about its strategy. The worst case scenario will see the return of customs posts along the Irish border and a trade war with the EU which will slow commerce to a trickle and poison Anglo-Irish relations for decades. Smuggling will return on a scale not seen in 50 years. The Irish government will lose revenue as the stream of people heading north to do the Christmas shopping turns into a stampede fuelled by the low value of sterling.
Both British and Irish governments have one eye on a coming general election and both nations must go to the polls before spring 2025. The opposition parties of the left have been doing well in opinion polls and performing with vigour in debate.
In Ireland the shaky coalition of historic enemies, Fine Gael and Fianna Fáil, is under severe pressure from Sinn Féin which has strong appeal to younger voters. Generational inequality is widely accepted as a major factor in the Republic’s politics. Opinion polls consistently suggest Mary Lou McDonald will be the next Taoiseach because younger people have lost faith in the parties endorsed by their parents and grandparents. Their economic orthodoxy is of little good when you can’t afford a roof over your head and much of your salary goes to the childminder.
In Britain the Conservative Party has rid itself of the runaway shopping trolley that was Boris Johnson but continues on a reckless and belligerent course with its European neighbours. Keir Starmer’s Labour Party is gaining ground and positioning itself as the party of fiscal prudence in the political centre. Soothing noises toward nationalists in Scotland and Wales are designed to seek support from fellow socialists on the Celtic fringes.
Labour’s promise to resolve the Protocol issue can be interpreted as a warning to Northern Ireland’s stubborn unionists, especially when coupled with a threat to put flesh on the bones of a Unity referendum. Paddy Power, the Irish bookmaker, gives odds of one-in ten-that a referendum vote will be held by 2026. Catholics now outnumber Protestants in the north and Sinn Féin is the largest party in the Assembly fuelling discussion about the prospect.
The coming elections will be a test of the British right-wing’s resolve to plough on regardless of the consequences for working people and of Britannia’s standing in the world. Jingoistic rhetoric counts for little when you can’t pay the gas bill and the monthly mortgage has doubled. In the Republic it will be a test of the centre-right’s sluggishness about tackling the growing problems in the housing market, hospitals and schools which are frustrating the Vótáil Sinn Féin generation.
A fundamental distinction between Britain and Ireland is their political systems. In Ireland proportional representation delivers coalition governments which are restrained from experimenting with radical economic and social theory and are compelled to seek consensus. In Britain the first-past-the-post system favours English conservatives and gives them the power to impose discredited ideas though they might be unpopular with large sections of the community. The present regime is dismissive of the devolved administrations in Scotland, Wales and Northern Ireland, anti-European and stands accused of arrogance.
With politics stalled in Northern Ireland, and no movement in sight before next April at the earliest, families and businesses have few options. They face a long, hard winter of discontent sandwiched between the cautious Keynesians in Dublin and mad monetarists in London.