Success in politics, as in life, owes much to luck.
The biggest problem faced by Paschal Donohoe during his near 10-year reign as minister for finance – the one highlighted most frequently – was the concentration risk at the heart of the country’s tax base.
Essentially, he was collecting too much corporation tax from too few companies. Apple’s main Irish subsidiary paid €7.7 billion in tax in 2023, almost a third of the total collected.
It was a great problem to have. Take a look at the fiscal contortions going on in the UK and France. What those countries would give for a problem like Ireland’s. Yes, there’s an exposure risk but there’s also a stream of tax wealth that was entirely unimaginable even a few years ago.
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The surge in corporation tax will be north of €30 billion this year. It was €7 billion when Donohoe became minister for public expenditure in 2016 and €8 billion when he first became minister for finance in 2017.
Let’s just say, Donohoe has been allowed a less than ordinary path through the walled garden of finance.
He exits Irish politics for Washington DC and the World Bank after presiding over one of the most remarkable turnarounds in global financial history.
At the start of the last decade, Ireland was an economic basket case – heavily in debt and a ward of court to international creditors – having suffered the biggest banking and housing crash in the world (the peak-to-trough collapse in house prices was the largest recorded in any country).
But just five years after leaving the EU-IMF bailout and under Donohoe’s watch, Ireland had cancelled out the jump in unemployment triggered by the crash and was running a budget surplus.
Between 2016 and 2025, which spans his tenure in finance, the economy has created close to 700,000 jobs.
In the 1980s, a period blighted by the lack of opportunities for young people, that would have made you a hero.
But the country has moved on from the low-expectation 1980s and is now 2½ decades into a generation-defining housing crisis that our newfound tax wealth has done little to resolve.
The blame for this can’t be laid at Donohoe’s door but our housing dysfunction provides a dark counterpoint to champagne tax receipts and blockbuster GDP numbers that flow out of our economy.
Whether he deserves the moniker “Prudent Paschal” is a more vexed question. Government spending has surged in recent years: from €87 billion in 2019 to €136 billion this year, a 56 per cent (€49 billion) hike.
His crowning achievement was perhaps his handling of the Covid crisis. The speed at which he put together a plan to effectively nationalise part of the private-sector wage bill and insulate the economy from a wider meltdown was unprecedented
Budgets are drawn up and delivered every October only to be torpedoed by spending overruns and supplementary estimates the following year. The Irish Fiscal Advisory Council calls it “fiscal gimmickry”.
As Tuesday’s news cycle jammed with reports of Donohoe’s departure, the Government released supplementary spending estimates for 2025 showing an additional €2 billion would be needed to cauterise overruns in several departments.
Donohoe pushes back against the criticism, highlighting the increased draw on public services from a bigger population and the country’s dire need to upgrade ailing infrastructure while noting the record budget surpluses currently being run.
But he admits a gear change is needed.
Colleagues claim he has held the line against the so-called spending departments where others would have folded.
Ironically, one of the ministers thought to be pushing for greater spending behind the scenes is his successor Simon Harris, who championed the controversial VAT cut for hospitality, a move not favoured by finance officials.
But there’s no getting away from the fact that of the €30 billion in corporation tax flowing into this country, all but €6 billion seems to flowing out again, spent as quickly as it was accumulated. We may live to regret this.
Donohoe has built a reputation for competence, and coolness under pressure. His unflappable, always-on-message style is probably what kept him in the finance job so long.
Presiding over 10 budgets will be a hard record to beat. He was also a key asset for the Coalition, grease in the wheels between Fine Gael and Fianna Fáil.
His crowning achievement was perhaps his handling of the Covid crisis. The speed at which he put together a plan to effectively nationalise part of the private-sector wage bill and insulate the economy from a wider meltdown was unprecedented.
The current health of the economy – with employment at a record 2.82 million – owes much to that strategy.
His congenial style is not a show, he is a genuinely warm individual, extraordinarily well-liked and respected, even by his political opponents.
One senior colleague described him as being without “any airs or graces”. “Everyone really likes, respects and warms to him,” they said.
Despite the advance in spending, Donohoe represents a different type of finance minister than we have had, one that was incubated during a crisis and therefore places a higher value on stability, one that doesn’t apologise for incremental change but champions it.
