Where will the money come from? The cash being thrown at economies around the world will, in the first instance, be borrowed. Ultimately, taxes will have to rise. Suggested amounts run into trillions in the United States and the European Union. There are estimates of £100 billion in the UK and between €10 and €20 billion in Ireland. We play the children’s game that begins with doubling the number we first thought of.
That word “borrowed” is a slippery idea when the lender is yourself. When the lender is the central bank and the borrower the government, we are lending money to ourselves. That, in practical terms, is why the previously esoteric concept of helicopter money is now a feature of most front pages.
I have a modest suggestion for Ireland. A potential source of much needed money that doesn’t involve a helicopter. Not too long ago it would have been regarded as extreme, idiotic, and at the reckless end of policy proposals. It’s a sum that sits, happily but coincidentally, in the middle of those guesstimates for Ireland.
At a time when firmly held prior beliefs are discarded on a daily basis, any sacred cow is a candidate for slaughter. All radical ideas need to be examined and taken seriously.
A company called Apple recently handed over a large sum of back taxes to the Irish exchequer. Neither Apple nor Ireland wanted this to happen: it was mandated by the EU. With interest, I reckon that roughly €15 billion is sitting in an escrow account, quietly awaiting an appeal court verdict that could be a decade away. I’m not sure Tim Cook, Apple’s chief executive, would put up much of a fight if we decided to spend the money now.
All previous budgetary arithmetic is out of the window. If Ireland does need an extra €15 billion (or more), does it matter if it comes via borrowing or from disputed back taxes? While deficit scolds are a threatened species – governments have been able to borrow cheaply and with alacrity for a long time – their basic point still holds: too much debt can be a bad thing.
We’ve never been able to figure out what “how much” means, particularly for governments. But it’s usually a good rule-of-thumb to see what spare change is down the back of the sofa before heading off to the bank manager.
Ireland came into this crisis with a small budget surplus and a relatively large amount of debt. Additions to that debt pile are inevitable: it might be prudent to keep them to a minimum.
Perhaps more significantly, a move to spend the Apple taxes would signal a recognition that the world has changed. Speculating about the permanent consequences of the crisis is natural: an easy conclusion is that many things will be different, most of which are unforeseeable. But the old refrain from finance minsters, “there is no money”, is going to somewhat harder to sustain. If today’s “people’s bailout” is the flip-side to the bank bailouts of a decade ago, the lessons will be the same: the consequences will be very long lasting. A lot of the old ways of doing things are not going to return.
Even before the coronavirus crisis there was a growing sense that the game was up for multinational tax avoidance. While it might be stretch to think that corporate responsibility in the post-coronavirus world will include a greater willingness to contribute more by way taxes, stranger things have happened. In any event, they will be asked to be better behaved.
It might be that the terms of the escrow account limit the ability of the Government to change its mind. Or it might be deemed a radical policy step too far. But, in the spirit that everything should be on the table, it should be considered.
The mere fact that the authorities have thought about spending the money will be an important signal about new ways of doing things. Global corporations might be many things but they can read writing that is on the wall. I doubt that they will take fright by a new, somewhat more robust, Irish stance on taxation.
It’s worth repeating: much will be changed. The financial crisis contributed to the rise of Trump and Brexit. The sight of a Conservative UK chancellor this week launching policy measures that would once only have been found in the manifestoes of revolutionary socialist parties raises all sorts of profound questions.
The expansion of the role of the state in all aspects of personal and commercial life will, eventually, be reversed. How quickly and to what extent remains to be seen. In the aftermath of the second World War it fell to a UK Labour government to implement fiscal austerity after the Americans turned off the financial taps.
Looking forward, I suspect that there will be far less popular acceptance of the need for post-virus fiscal retrenchment. The politics of that one are already looking ugly.
At a time when the need to spend unlimited amounts of money is obvious, it is of secondary importance to wonder how best to find that money. But future finance ministers might be grateful if we pause to reflect on the unusual – unique – choices available to the current government.