Cowen admits FF responsibility for economy. Sort of.

So somebody from Fianna Fail has finally admitted that its property tax breaks and shelters damaged the economy. Sort of. Brian Cowen is reported by yesterday’s Indo as saying that “governments should never again introduce tax breaks which would make a property bubble possible” and that “property tax incentives in place over the period from the mid-1990s should have been abolished many years prior to his decision to abolish them in December 2005”.

Notwithstanding the fact that Section 23s were still being built long after that date – you can still see the developers trying to flog some of them if you buy a Sunday paper – isn’t that a Damascus moment for Cowen? Or is it just the wriggling of a particularly slimy worm on the end of a hook? It’s the latter – as the next quotation in the piece implies:

“While government shares responsibility for its role in these mistakes, it is noteworthy that many of the strongest critics of the government were silent on these issues prior to the crisis and indeed were proposing measures such as the radical reduction or abolition of stamp duty which would have made the position much worse.”

“Some responsibility”? Bloody hell, should that not read “all”? They were the government after all, and they did introduce the tax measures in question. Fianna Fail also slashed capital gains tax, another move which guaranteed to inflate the property market. Cowen does, however,  have a point about the relative silence of the media and many opposition politicians while the bubble was crazily inflating.

Despite Cowen’s, and other government ministers’, assurances at the time that Ireland’s property market inflation was based on sound fundamentals, it was obvious to anyone with a brain in their heads that an economy could not be based on, and sustained on, ever increasing property prices. You didn’t need to go to economics school for that, just high-babies. The silence from the mainstream media (with notable exceptions such as David McWilliams, who was dismissed as a crank and a killjoy) was remarkable.

Now, I don't have a list of TDs' and councillors investment properties at my disposal (assuming it would be possible to collate a reliable list on the subject) but I would say such a list would be revealing. It would be similarly interesting to sift through the capital asset investments of media commentators. I know it sounds very cynical – not to mention analytically simplistic – but how come all these people, who are considered intelligent and are not usually slow about holding forth on all manner of other topics, were – for the most part - so quiet?

And on that very point, just a week or so before I went on holiday, some RTE property guru, from one of those programmes that encouraged gullible idiots to “buy! buy! buy!” was advising people selling property to “hold out” for their prices. I think the longer they hold out, the less they will get.

If anyone expects property prices to return to the levels of 2006 anytime soon, they can forget it. That money was never actually in the economy in the first place. That’s why we have had Nama imposed on the dopey, docile Irish public. That’s why the country is in the mess it is, and no amount of upbeat talk by Tom Parlon or Goodbodys is going to change that.

Another thing. When countries such as Poland, Latvia and Lithuania joined the EU, only three states opened up their doors to them with regard to their labour markets. Ireland, the UK, and Sweden. As far as I am aware, workers from these countries will be allowed to work in the rest of the EU states from 2011. That’s next year.

That will give such workers far more attractive options than Ireland, which could have interesting consequences for our buy-to-let investors and the Irish property market in general.

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