Fran O'Sullivan on business
Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: Lessons to learn from Irish


It's a brave politician who traipses halfway round the world while her political opponents are calling for her head and her job could be up for grabs in an upcoming Cabinet reshuffle.

But Irish Cabinet Minister Mary Harney is no stranger to controversy. Harney has refused to cut short her 15-day trip to New Zealand - one of the 35 countries that are now being visited by senior members of the Irish Government as part of a strategy to commercially leverage St Patrick's Day - to front-up to a snowballing controversy back in Dublin.

Irish papers have labelled her visit to New Zealand a "five-star junket" and displayed photographs of their health minister basking in the Auckland sunshine while a scandal rages back home over the failure of radiologists at Tallaght hospital to read the x-rays for 53,000 people.

But Harney - who was celebrating her birthday when I caught up with her - was still intent on leveraging Ireland's links with New Zealand to help its smaller to medium sized companies get out of the economic mire. It's "up to the Prime Minister" if she continues as Health Minister.

The current trip is important to the Irish politician.

But frankly, I hope Harney does stay in New Zealand long enough to impress upon Prime Minister John Key and his colleagues a different message - that they should lead from the top if they want to make big cuts to public spending in the up-coming May 20 budget.

It's a long time now since our Treasury made its own studies of the Irish economic miracle and asked whether Ireland's successes could be replicated here. Harney has plenty of anecdotes over how the Irish property bubble has well and truly burst and how the Irish banks owe their life to Government intervention.

But what is striking about the Irish Government's response to the twin impacts of the global financial crisis and domestic recession is the markedly different strategy it is undertaking (compared with New Zealand) to get out of debt fast.

Everyone in the Government sector from the Prime Minister down has had swingeing pay cuts. The Irish PM took a 20 per cent salary chop, other Cabinet Ministers lost at least 10 per cent and civil servants from 10-20 per cent depending on salary levels.

Higher income earners have not had their top tax rate of 41 per cent cut. Instead they have had to pay an additional 6 per cent levy and the ultra-rich, who have managed to avoid the top rate by staying out of the country for six months each year, now stand to be hit up at the same rate as the rest of their countrymen. Harney says the Government increased taxation to "stabilise the finances and bring the cost base down as the country had got very expensive".

Public expenditure has been cut and the cost of public services reduced.

Harney might also explain to Key why the Irish Government has also decided that from 2014, no State pension will be paid until the age of 66.

This will rise to 67 in 2021 and 68 in 2028.

I can imagine she would be aghast that Key's Government lacks the bottle to tackle the crying need to get our own pension bills under control.

Harney will get her chance when she joins Key's table at tonight's St Patrick's Banquet which has become an annual occasion on Auckland's social calendar.

In the past the guests have been greeted with brimming glasses of "Black Velvet" - a fifty-fifty mix of Guinness and champagne - which was famously invented in 1861 at Brook's Club in London after Prince Albert died.

The story goes that with high society in mourning over the prince's demise, a club steward decided that it was best to put the champagne into mourning and mixed it with the black Guinness beer.

The champagne days are over (at least for now) in Ireland. But what's not over is the Irish Government's appetite for risk. Harney - who was previously Trade and Enterprise Minister - also championed the Irish Financial Services Centre, which Key intends to replicate here. She notes that the Irish Government got involved in a lot of innovation and took big risks to get Ireland growing.

While unemployment is high, the financial services centre is relatively intact.

The 12.5 per cent corporate tax rate is attracting new investment to Ireland.

Harney maintains that Ireland is coming out of the gloomy times as a much stronger society that is considerably less complacent about its success.

"We were becoming a bit too materialistic ... everyone had the new cars and the holiday home and the several holidays in Europe each year." She recalls queues of well-heeled women lining up outside Brown Thomas store in Dublin to get one of the new designer bags which were worth about €2000 ($3900).

"All that madness is gone and that's no harm."

New Zealand's boom times did not quite reach the Irish level of excess.

But it's arguable whether NZ should be cutting personal taxes while debt remains high.

There's no harm in questioning whether we are doing enough as a nation - and fast enough - to get out of the debt-scenario in which we are engulfed.

- NZ Herald

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