Government will be fearful about recovery spending levels, says Harney

Former tánaiste Mary Harney has said the Government will be "afraid, extremely cautious and worried" about how to approach economic recovery from Covid-19.

Addressing a number of issues related to a post-pandemic world, Ms Harney dismissed the notion that substantial amounts of people will remain working from home.

The one-time minister for health also predicted that the sizeable increase in spending in that area, brought about by the current crisis, would not be reduced.

Overall public spending rose by 20.5 per cent in 2020, the second highest of any euro-area state, according to the Central Bank, equating to just over 12 per cent of the economy.

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On Thursday, as US President Joe Biden was reported to be seeking $6 trillion in spending next year, Ms Harney was asked at an online conference whether she believed Ireland would take a similar approach or revert to financial-crisis era austerity.

"I think the Government will be worried, they'll be afraid, they'll be extremely cautious and they'll be worried about when interest rates change and the implications of that," she said during the Ingenium panel discussion entitled When the Dust Settles.

"But for now I think the European Central Bank have been supportive of adopting what I call the spending approach rather than the austerity approach."

Such a prediction will be welcome to many of those who recoil at memories of Ireland's post collapse spending cuts, but the former Progressive Democrats leader also warned that a gradual unwinding of pandemic supports, as signalled by Tánaiste Leo Varadkar, would have to be done sensitively to the needs of over 330,000 workers.

“I think the Government will be extremely cautious in how they approach the opening up of the economy and in particular I think the increased spending that we have seen in health will continue,” she said. “I don’t believe that will be pared back after we move from Covid.”

Thursday’s virtual discussion, which also featured contributions from economist David McWilliams and Dr Hugh O’Donnell, attempted to tackle myriad issues arising from the global crisis.

While much discussion has arisen around if and how people’s domestically based working habits might change, Ms Harney, also a previous minister for enterprise, dismissed any notion of a sea change in traditional company practice.

“I think some people will work from home part of the time but I think the majority of people will be back to an office environment,” she said, commenting on the shortfalls of the kind of digital platforms on which Thursday’s conference was hosted.

“Certainly if you are a young person and you are focused on your career in an organisation you need to be in sight in my opinion. And you need to be learning from those who have more experience than you.”

She said while it is currently “very fashionable” to say more people will work from home, she does not believe the current pandemic heralds “the end of the office”.

On housing, probably the greatest political crisis facing the Government outside of health, Ms Harney said there needed to be a shift from Dublin-centric planning which, under current strategy, would see a 25 per cent population rise by 2040.