Ireland, the pandemic and the EU recovery plan

by Kevin Callinan

Costs associated with the current pandemic have led to anxiety, with some commentators sounding alarm bells. As in 2008, there’s only one question on their minds: Who’s going to pay for all this?

The attempts to spook taxpayers usually sidestep important distinctions with the onset of that financial crisis. The nature of this economic shock led governments to act quickly. Economist John Fitzgerald has added his voice to those advocating the convincing case for borrowing heavily (Irish Times, 15 May 2020). The argument is a sound one although we know from bitter experience that, ultimately, ordinary citizens can be left to deal with any negative consequences if things go wrong.

As the Covid-19 crisis descended, trade unions were to the fore in securing special income measures for those who had suddenly lost their work, and to maintain the employment relationship for others whose employers were under pressure. In Ireland this resulted in the Pandemic Unemployment Payment (PUP) and the Temporary Wage Subsidy Scheme (TWSS).

Two months later, we hear call from employer representatives, on a daily basis, for large-scale loans and grants to support various business sectors. Many of these have merit and are worthy of support. But shouldn’t we citizens insist on conditions and oversight to ensure that such measures really do support decently-paid and secure employment?

The importance of stimulating demand has been acknowledged by prominent experts. Former Central Bank Governor Patrick Honohan has alluded to the danger of a cut in demand when it would be most needed later in the year. Earlier in the same interview he had praised the European Central Bank (ECB) for not hesitating to act on this occasion (Newstalk, Vincent Hogan podcast, 7 May 2020). And the Chair of the Irish Fiscal Advisory Council (IFAC), Sebastian Barnes, when pressed on the question of commitments by politicians not to increase taxes, argued that any tax increases should be part of a five year strategy to avoid suppressing demand in the short term (RTE, Morning Ireland, 11 May 2020).

Honohan’s response to the affordability question was sanguine saying that “it depends how long it goes on” but pointing out that it is “using up leeway for structural changes”. All of which suggests an urgency to address these challenges in a planned way, and the need to avoid channelling substantial amounts of public money to the private sector without any indication of how such funding will contribute to the objectives of such a plan.

Moreover, there is no apparent connection between the current calls for financial aid to business and the aspiration to high quality jobs as enunciated by EU Commissioner Phil Hogan (Institute of International and European Affairs webinar, 6 May 2020).

It’ll be interesting to see whether the new EU Recovery Plan, which is linked to its Multiannual Financial Framework (MFF) 2021-27, offers any direction. However, we do know, from historical experience, that a combination of good jobs and low levels of unemployment can significantly reduce debt-to- GDP ratios over time.

In his address to the IIEA on 15 May 2020, the EU Commissioner for Jobs and Social Rights, Nicolas Schmit emphasised the importance of a strong social dimension for recovery and he promised an Action Plan on the Pillar of Social Rights at the beginning of next year. He talked about new jobs in the green economy and a digital transformation that would require social partners to engage on a skills agenda.

The trouble is that we have a lot of catching up to do to embrace social dialogue and the right of workers to bargain collectively as the norm. A ray of hope can be seen in the recent achievements relating to the PUP, the TWSS and the Return to Work Safely protocol. But if we don’t make up ground it looks like we will be out of step with the direction of the European Union. The EU continues to be valued by most citizens, as evidenced by the recent Red C survey for the European Movement (European Movement Ireland, ‘Ireland and the EU event’, 30 April 2020).

If, as suggested by current Central Bank Governor Gabriel Maklouf (RTE, Today with Sean O’Rourke, 7 May 2020), all countries are experiencing the same pressures as a result of the effects of the pandemic, we have an opportunity to make clear choices having observed, as Schmit himself did, the presence of features such as a good health system in the countries which proved most resilient to the virus.

The Commission is expected to propose that the EU borrow money on the capital markets to fund European programmes with the borrowing guaranteed by member states. The first steps to debt sharing, reflected in the announcement of a French-German initiative on the evening of 18 May 2018 and which appears to have the full support of the Commission, is a positive development.

Europe needs an economic and jobs recovery on the scale of the post-Second World War reconstruction. In the 1940s, Europe received assistance from across the Atlantic. Today, that US leadership is absent and the responsibility for rebuilding our economies rests squarely with the leaders of Europe and its nations.

There is a good degree of consensus – certainly compared to 2008 – that the focus must be on kick-starting our economies, creating jobs and maintaining living standards, rather than immediately prioritising the repayment of debt.

That will include supports to businesses. But the need for a business recovery must not mean neglect of our social protection systems and programmes to strengthen health and social care, and to invest in education, or support for housing and other local and state services.

A delay in successfully concluding talks on government formation could mean this country missing the opportunity to influence and to align with a new European sense of purpose. The public mood as expressed in the general election outcome, combined with lessons learned from the pandemic crisis, provide additional reasons for swift and decisive action.

If, as many are predicting, taxes will have to rise over the medium to long term, citizens will expect better services in return. A new social contract will be required to deliver on that ambition.

The virus, and the risk of recurrence, has demonstrated that it is necessary for the state, through coordinated action across its various arms, to provide the effective response. Indeed, the positive role of the civil and public service has been widely acknowledged.

Just as the public health system is the first and only port of call for those experiencing severe traumas, strokes or heart attacks, irrespective of their private health insurance status, there is now a much greater recognition that a pandemic can only be combatted effectively with a single system.

The continued provision of direct and indirect subsidies to private care, whether of the health, social, elder or child variety, is incompatible with this objective. Increasingly hard pressed taxpayers will no longer tolerate this inefficiency, apart altogether from the unacceptable nature of the inequality involved.

For example, the benefit accruing from the substantial investment of public expenditure in the education and training of health and social care professionals should not simply be gifted to the for-profit sector. On the contrary, public services should aspire to attract and retain students and staff by their ambition, by their commitment to the delivery of cutting edge services and by the provision of the best professional development opportunities.

From a wider economy perspective, increased investment in higher education and further education and training is no longer an option. High quality jobs are fully dependent on a focused and adequately resourced education system and associated research, development and innovation.

There will be many additional challenges as a result of the pandemic. Undiagnosed and untreated diseases, mental health issues, social problems, to name a few, will all place extra demands on services and require proactive strategies.

The European dialogue on a minimum income policy may act as a catalyst for a national discussion on universal basic income and the idea of a living wage.

The damage to retail, hospitality and tourism has hit local authorities hard. Other state agencies have also seen their revenues streams collapse. Yet these are the very organisations that will have a key role in the revitalisation of tourism and the businesses that depend on it. Just like many parts of the private sector they too will need support.

A new and better Ireland is possible but only if people can believe in the vision. For that we need a clear plan – with social dialogue, the creation of good jobs, high quality universal public services and equality and fairness at its heart.

Kevin Callinan is general secretary of the 80,000-strong Fórsa trade union. He is vice president of the Irish Congress of Trade Unions (ICTU) and a member of the executive of the European Federation of Public Service Unions (EPSU).