Coalition parties will have good news to sell, but have lost ability to sell

Flannery – Fine Gael tended to do right thing by the country but forgot about the party

Irish Times columnist Noel Whelan and Frank Flannery   at the MacGill Summer School in Glenties.  Flanery warned that Fine Gael Ministers Ministers tend to be  captured by the civil service and become more and more detached from the public the longer they remain in office.  (North West Newspix)

Irish Times columnist Noel Whelan and Frank Flannery at the MacGill Summer School in Glenties. Flanery warned that Fine Gael Ministers Ministers tend to be captured by the civil service and become more and more detached from the public the longer they remain in office. (North West Newspix)

Mon, Jul 28, 2014, 11:46

The message emanating from the last Cabinet meeting before the summer break on Wednesday was clear: as far as the Coalition is concerned the era of “austerity” is over. Everything possible will be done to give something back to the voters in the next two budgets.

Whether the country’s economic position justifies this is another matter entirely, but after the mauling they got in the local and European elections there is huge political pressure on Fine Gael and Labour to ease back on tight budgetary policy.

Some senior Labour figures have been talking openly about how the rainbow government narrowly lost being re-elected in 1997 because it stuck to prudent budgetary policies when, in hindsight, it could have been a bit more expansionary.

“We handed over a healthy exchequer to Fianna Fail and the PDs who proceeded to spend with abandon. To make the same mistake again and hand over a healthy economy to Fianna Fáil or Sinn Féin who would inevitably wreck it in the long term would be crazy,” said one Labour TD.

Government TDs of both parties are weary of defending cuts. The scale of the reverse in the recent elections has convinced most of them that the public is not prepared to put up with more of the same.

The political pressure is now too strong for the Coalition to resist and the growing evidence of economic recovery certainly gives some room for manoeuvre. With tax revenues rising, and spending under tight control, the borrowing target of 3 per cent of gross domestic product for 2015 looks achievable with an adjustment of considerably less than the €2 billion set out in the bailout terms.

External shock

Comments from Michael Noonan and Brendan Howlin on their way into the Cabinet meeting on Wednesday indicate that it is only a question of how much lower than €2 billion the adjustment should be. A final decision on that will not be made until early October when more economic data is available. But it looks as if the final adjustment could be down to about half that originally planned.

This will please unions and employer bodies who have been united for some time in urging an end to tight budgetary policy. But it will go directly against the advice of the Fiscal Advisory Council which was established with the precise purpose of ensuring that the mistakes of the past are not repeated.

The danger is that some external shock like a trade war between the EU and Russia could throw the recovery into reverse. But barring accidents the political imperative to ease the pressure will prevail.

While the Coalition parties and the social partners may be agreed on the need to avoid an adjustment of €2 billion there will be significant differences on how the freed up resources should be spent. It will take some nimble political footwork to devise a formula acceptable to both parties but a way will be found.

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