The government's consultation with the opposition parties on austerity should expose the Labour Party's lack of specific austerity plans. Given its "permanent,pensionable" public sector constituency,Labour will find it impossible to bite the austerity bullet which will require further large cuts in public sector pay or employee numbers or both. Instead,it probably will bite the marshmallow by proposing further tax increases on high incomes,restoration of rates and water charges and a frenzy of stealth taxes.
Such taxes are unrealistic. Further taxes on high incomes would prove a major deterrent to work as well as to multinational investment by making it difficult to retain and recruit international managers and executives. Applying the other taxes in a depression is the economic equivalent of kicking a man when he is down and might well reduce the tax take by tipping the economy into a double dip depression. As for the argument that Irish taxes are low by the standards of EU advanced welfare states,should we pay Scandinavian taxes for the shoddy Irish welfare state with its poor provision of day care,public transport,social housing and lack of free doctor medical care etc?
By far the major challenge that has to be faced is cutting public sector wages,which are still way out of line with the Irish economy's depressionary drop back to levels of output prevailing around 2001.