A More European Ireland Post-Brexit?

31 January 2020

Address by Labour Party Leader Brendan Howlin to the Institute of International and European Affairs on 31st January 2020.

For centuries there has been a two-way movement of people between Ireland and Britain, and there are many familial and economic links between the two islands.

That led to the Common Travel Area being established post-independence, which facilitated this free movement to continue and also ensured that Ireland and Britain largely share a unified labour market.

We had “free movement of people” long before the European single market.

I’m glad that the two governments signed a new Memorandum of Understanding in May last year to preserve the Common Travel Area post-Brexit, including all the rights of Irish and British citizens.

Ireland’s economic model remains closely aligned to the UK’s.

Access to the British labour market has been a safety valve for Irish unemployment for decades. And the tradition of “taking the boat” has perhaps given birth to the culture where young Irish people readily “take the plane” to Australia and elsewhere to work and to gain life experience.

For many years, workers were tempted to the British side of our shared labour market by higher wages. Only more recently has that trend reversed in favour of migrant workers coming to Ireland for jobs at all levels in the economy.

Not only wages, but also income tax and VAT have tended to be reasonably closely aligned between the UK and Ireland.

Cross-border trade is part of that equation.

But also, levels of personal taxation in Britain tends to be a benchmark used to determine whether Ireland’s tax system is “competitive”.

This has been unhelpful.

Not least, it leads to facile comparisons between headline tax rates, ignoring the effective rate of tax that people actually pay, and ignoring the many different tax credits and tax breaks that exist in each system.

This is just one example of many, showing how Irish public policy has been influenced by the UK.

But now the UK is leaving, and Ireland is remaining in the European Union.

In addition to all of the economic risks for Ireland, there is also an opportunity to imagine a new direction for Ireland that is less constrained by our close historical relationship with Britain.

Ireland now has two distinct goals.

Firstly, we want to retain a close relationship with the UK. But to facilitate this, we want the UK to have as close a relationship as possible with the European Union.

And secondly, we want Ireland to remain close to Europe and we want to seize the opportunity to develop our country in the way that other small, open, trading countries have done; countries like Denmark and Finland.

They enjoy a higher level of quality of life and social wellbeing, and they have built economic models and public services that maintain a high level of equality.

It may not be possible to achieve both of these goals, and a serious question for Ireland – even in this election – is which of these two goals is more important for our people?

From a Labour Party perspective, we will work to achieve both.

We will continue to insist on an open Irish border in any event.

We will work with our friends in the UK Labour Party and UK labour movement – with people such as the TUC general secretary Frances O’Grady – to push for a close UK-EU partnership, with no barriers to trade.

But the prospects for a close partnership between the UK and the EU are currently very uncertain.

Boris Johnson has made it clear that his government does not want to be closely aligned to European standards, including protections for workers and the environment.

If push comes to shove, Labour’s preference will be for a close relationship with the European Union over one with Britain.

It is not at all clear that this view is shared by Fine Gael or Fianna Fáil.

The Manifesto tax plans of Fine Gael would cut public spending by €8.6 billion over the next five years, and their income tax plans in particular would change income inequality in Ireland from EU average levels to being among the most unequal EU member states.

That would represent a significant change, which would undermine the tax-and-welfare system that has for many years softened the inequality between high and low market incomes.

However, it would bring Ireland into line with the UK in terms of inequality.

It would also lower government spending in Ireland to well below what is typical in Northern Europe or Western Europe.

Fianna Fáil’s plan to cut public spending by €5.2 billion is less severe but the direction of travel is the same. They too will drag us towards the lower tax, smaller government model favoured by British conservatives, and their cuts to capital gains tax will worsen wealth inequality. 

Both Fine Gael and Fianna Fáil have repeatedly compared Ireland’s income tax rates to the UK, rather than comparing our public services to those provided in Denmark or Finland.

That says a lot about their vision for Ireland’s future.

We may have arrived at the point at which the cross-party support for the government on Brexit will break down.

Labour will not support any government that seeks to distance Ireland from European norms in order to remain close to British economic policy.

This election marks the point where cross-party unity over Brexit policy has been contaminated by party political differences.

Fine Gael have mixed up the state’s European policy with their own partisan party politics. They have used meetings with European officials as part of the election campaign.

Ireland’s Commissioner, nominally non-partisan, has made clearly political interventions to favour Fine Gael by talking up the threat of a no deal Brexit at the end of 2020.

As a matter of fact, the threat of a hard Brexit shows the weakness of what Fine Gael ultimately achieved.

Far from ensuring a “bullet proof” or “cast iron” settlement of Ireland’s concerns, we are now vulnerable to the capricious and mendacious politics of Boris Johnson, who has legislated to rule out any extension to talks beyond the end of this year and who is hostile to any level playing field for rights and standards.

At best, we are likely to see a minimalist trade deal in goods, which will do serious harm to the Irish economy.

We may even see the UK engaging in attempts to undermine its neighbours by lowering its standards on work and environment.

And a hard Brexit is still a very real possibility.

This is a challenging vista, but there is no reason to believe that Fine Gael would be any more successful than any other party in pursuing Ireland’s interests.

Any future government would have our exemplary diplomatic corps to assist them, and support from across Europe for Ireland comes from the social democratic, liberal and conservative parties, and will remain robust regardless of which parties are in government.

Labour’s vision is clear.

We want Ireland to become more like the other small open trading economies of Europe, like Denmark and Finland.

We want a decisive shift in public policy away from the tax giveaways of Anglo-Saxon politics in the UK and USA, and towards the solidarity and collective investment in public services that is the hallmark of North European social democracy.

Labour wants to see the development of collective bargaining rights for all workers, and a restoration of national dialogue on major economic policies, including on climate change and the investment in infrastructure.

We want higher in-work training/education, higher productivity and higher wages.

We want the achievement of free-of-charge healthcare and education, good quality public transport and well-planned communities with affordable public housing.

We want strong ambition on climate and a vision for a clean economy. All of this is possible, alongside innovation and entrepreneurism.

Following the example of other countries, we can go a long way towards eliminating long-term homelessness and child poverty.

But the route to a more European Ireland in the aftermath of Brexit is blocked by the reckless and populist tax promises of Fine Gael and Fianna Fáil, as well as Sinn Féin’s utterly irresponsible and implausible proposals.

We are truly at a crossroads.

Britain under Boris Johnson has set its course to be a Trump-like, deregulated and socially unjust society.

Europe without Britain will evolve, I believe, in a much more social democratic direction, with stronger public services.

We have the choice of what do we want for Ireland’s future.

Labour’s vision is crystal clear.

We will wholeheartedly embrace the inclusive and socially just North European model.

We want a well-regulated economy that provides access to essential services and real opportunities for all.

Ireland’s perennial dilemma of keeping a leg in both the British economy and the continental European economy is no longer sustainable.

This election will set Ireland’s direction of travel.

The choice of closer to Brexit Britain or closer to an evolving Europe is not only important, but it will have long-lasting consequences.

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