Cliff Taylor: Sinn Féin isn’t in government, but it is setting the economic agenda

The playbook in response to the interlinked cost-of-living and housing crises is now predictable. Sinn Féin calls for something, the Government initially resists and then goes some way down the road on a similar policy plan. This gives Sinn Féin the chance to dismiss it as “not enough”, and on the cycle goes.

The main Opposition party is leveraging the benefit of being in opposition, which is that you can call for all kinds of things without worrying too much about the consequences. The Government parties, meanwhile, with an exchequer flush with cash, struggle to respond to the populist agenda which demands that people faced with extra bills should get a dig-out.

The cycle is being played out again on the mortgage relief issue. Interest rates have shot up, in some cases costing homeowners €5,000 or more in additional repayments annually. Spotting this trend early, Sinn Féin’s finance spokesman, Pearse Doherty, has been calling for “a targeted and temporary” return of mortgage interest relief, focused on those whose repayments have increased and for a specific period of time.

Having resisted this for months – arguing that it would be too expensive and, once introduced, impossible to row back on – the Government is now saying it will reintroduce a limited form of mortgage interest supplement through the welfare system.

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Sinn Féin is again seen to be in advance of the game on policy, and can still use the “not enough” tactic when the move is announced.

The same happened with the tax credit for renters, introduced in Budget 2023 but applied retrospectively to 2022. Sinn Féin had supported this as part of a rental package, but dismissed the credit as not being generous enough and not being in the required context of a rental freeze. Minister for Housing Darragh O’Brien this week signalled that he wanted the credit, currently at a maximum of €500, increased to €800, which would equal the average monthly rent in the State.

However, Sinn Féin housing spokesman Eoin Ó Broin got his retaliation in even before a budget announcement, saying that O’Brien’s plan – which the Minister still has to get past his Cabinet colleagues – is not enough and that Sinn Féin wants a credit that adds up to a month’s payment of the actual rent for each household, as well as measures to ensure the less well-off benefit fully.

And so Sinn Féin’s back-seat ministers keep shouting at those at the wheel to go faster. Without the cover of any kind of pressure on the State finances, those currently in the job feel obliged to respond to the voter demands that Sinn Féin are echoing.

Irish politics, unlike in many other countries, is being framed by a period of extraordinary plenty in the public finances. For now, this has removed the pressure to make difficult choices.

The key questions are: which demands should be answered; how do you direct help to those who need it; and what are the trade-offs or potential consequences.

In the case of mortgage interest relief, Central Bank research has shown that those on trackers have – not surprisingly – done better than average over many years and are only now moving in advance of the kind of repayment levels faced by others. But they have been hit with an unprecedented pace of increase.

Giving a general handout via a restoration of full mortgage interest relief at a time when the economy is at full capacity and many households can cope is not justified. Targeting relief at those who do really need it is complicated, though worth considering. In an environment where people feel the State should step in at every turn, it is politically tricky for the Coalition.

Heading for a general election, the Government parties need to decide what they stand for and what they will present to the electorate that marks them out as different from the rest. The flush public finances give them scope to make promises. But by removing – for now – many of the tough decisions, it makes it harder to carve out a unique policy position.

This seems particularly difficult for Fine Gael, struggling to balance its desire to cut income taxes with the upward trend in State spending. These two courses cannot be pursued indefinitely.

The general trend to spend more public money attacking problems such as housing again plays into the hands of Sinn Féin, a long-time supporter of more State involvement in the economy. The knotty issues here are how to tackle the State’s inability to make progress quickly – a problem in the public service, planning, the courts, regulation and so on.

For Sinn Féin, the question is how to marry its populism with the need to give people confidence that it can manage the economy and the public finances competently. It has trimmed its sails in recent years, moving to the political and economic centre and taking care to cost its budget plans.

But the mess in Italy this week, where the government had to pull back on a new windfall tax on banks, leading to big market fallout, shows populism can have unintended consequences. It seemed like a win-win for Giorgia Meloni’s government, hitting the unpopular banks and giving the money back to households. But when your banks rely on foreign investors, there are dangerous trade-offs, which led to a sharp reduction of the planned levy.

It is a warning signal for Sinn Féin, which must decide, heading up to the election, where the limits of its populism lie. It would be unlikely to be as careless as Meloni’s government, having put great effort into wooing the big multinationals and the wider business lobby, and realising the vital role of inward investment and market confidence.

But the party will know that the policies which the markets and the multinationals want are a world away from much of its rhetoric of supporting “ordinary working people” and putting big business in its place. How it walks the line between populism and responsibility in the months ahead will be fascinating to watch.