Rainy Day Blues

It's been a very strange six months in Irish history. It began in October when the finance minister failed to top up the Rainy Day Fund he had set up the previous year. At a time when the economy was very strong, this seemed like a reckless move and so it has has proven to be in light of recent events. Unfortunately, government ideas of merit are not followed through with the same enthusiasm as the bad ones are.

After this, an early election was called in January 2020, which led to an historic result, but one that was still very much in favor of the status quo.

Then, a month later, as government formation talks continued to drag out, the coronavirus pandemic landed on Ireland's shores. This event has shaken the global order at its very core. The consequences of open borders and free trade are now very real for everyone. Critical thinkers of the global based economic system, who were branded outdated and backward as recently as January during the election debates, are now being proven correct weeks later. It was the governments allegiance to this system that prevented them from acting early,  closing the airports, and putting travelers from Italy in quarantine as the Icelandic government did right from the start. A contact from Iceland wrote to me :

Iceland put everyone in quarantine coming from Italy very early on and a few days later everybody coming from a ski resort in Austria. Now there are more than 6,800 people in quarantine at home. Last week everybody living in Iceland (not tourists) coming home from abroad had to go into quarantine. Authorities also put a big effort into contact tracing. A team of policemen and health workers (at least 60 people) trace every single case. Everyday 50% of new confirmed cases are amongst those in quarantine.

Back in Ireland, a match with Italy on the 7th March was cancelled but thousands of Italians were still allowed to wander the capital Dublin that weekend. In the week before the scheduled match cases in Italy had jumped by 5000. There is some talk about China not releasing information quick enough. I disagree, the authorities in Europe had plenty of notice, they just failed to act decisively. Iceland have managed to slow the virus, comparatively speaking. Since the 11th March, cases in Iceland  have increased by about 12 times, whilst in Ireland cases have increased by about 50 times. The cases are most likely understated in Ireland, because Iceland have tested 3% of their population, including people who do not have symptoms.

Now that we are in lockdown, climate change is well and truly off the agenda. Which reminds me, if we are in the middle of a climate crisis with the ice melting as the schoolchildren (sorry, teachers) are so fond of reminding us, why were schoolchildren flying fossil fueled airplanes to Italy to ski in the snow in February on their holidays ?

Tax hikes on petrol on the way ?

But that's good news for us, the consumers who benefit from cheaper oil, so bring it on - David McWillams, Irish Economist, February 2016 [Sunday Business Post].

When the Socialist Portuguese government submitted their budget to the EU last week, they were told they had breached EU rules. They then put new measures together including tax hikes on petrol products which were accepted by the EU. The hike was justified "to counteract the environmental impact of low oil prices resulting from increased consumption".

One can see a mainstream Irish government lapping this one up - what a lovely way to raise taxes by telling people higher taxes will be good for them. Of course, most economists know that petrol and diesel are relatively inelastic products - consumption will not be affected much by changes in price. Instead, during times of low oil prices, consumers find they have more in their pocket to spend on other goods and so it should be. People deserve a break and it's good for local economies. But this will end once the watchful eye of the Government focuses on such "easy pickings". 

This could well be the hidden General Election issue here in Ireland - none of the Parties nor the media are mentioning it, but after water charges and property taxes, one can easily see an Irish government paying for auction type politics (with cuts in income tax and USC being promised by most of the parties) by putting more taxes on low petrol prices. Fiscal space means more green taxes. It's easier than confronting Apple and Google.

It's also worth noting that petrol is an allowable vouched expense for politicians so they won't be impacted by tax hikes on petrol. 

So now you know what to ask candidates when they arrive at your door.