Pat Leahy: For the Coalition, it’s a case of more money, more problems

Real fiscal decisions will be made a world away from next week’s public talking shop: the National Economic Dialogue

In public and in private, the vast armada of organisations seeking to lay claim to the Government’s bulging treasure chest has been chivvying Ministers and civil servants in recent weeks as the decision-making process for the budget ticks on.

From the FAI to TG4 — to name just two from this week’s papers — they have been coming forth to explain how part of the surplus should be given to them. And if you think the FAI’s request for half a billion euros was cheeky — it is hard to think of a major organisation that has been more idiotically run in recent decades — you’d want to see some of the others, officials joke.

An important part of the public phase, the National Economic Dialogue, begins on Monday in Dublin Castle. Anyone who wants to see a public show of unity that masks deep differences in private, a pretty important facility in politics, should make their way down there for the first session where the two budget Ministers Michael McGrath and Paschal Donohoe will pretend to be completely at one with Taoiseach Leo Varadkar.

Who speaks for 'middle Ireland'?

Listen | 46:48

The opinion editorial (oped) piece in the Irish Independent by Fine Gael junior Ministers calling for tax cuts for “middle Ireland” — ably amplified by Varadkar in his Irish Times interview — is seen by his partners in Government as a statement of political strategy, if necessary to be implemented at their expense, by the Taoiseach. That is not something with which they or the two budget Ministers, the Coalition’s strongest cross-party axis, are very comfortable.


Nor has Varadkar’s departure been welcomed by mandarinate — one of whose number described the oped to me as “that infamous article” — which worries that it heralds a willingness to flirt with fiscal danger in the cause of political advantage. There was a fair bit of “well said sir!” around Merrion Street at the intervention by the Irish Fiscal Advisory Council this week when it warned that promises of tax-cutting now constitute a menace to the public finances. As one former official put it this week, quoting that noted scholar of economics and politics the Notorious B.I.G.: Mo money, mo problems.

Though as the politicians never tire of reminding you, neither the mandarins nor pointy-headed intellectuals on the fiscal council have to run for election.

McGrath and Donohoe are politicians and realise the realities of politics. They are not averse to bending or breaking budgetary rules when necessary. The golden fiscal rule that spending growth would not exceed the rate of trend growth in the economy was instituted with much fanfare in 2021, and duly ignored in 2022. It will be ignored again this year.

The differences with Varadkar that lurk just beneath the surface are differences of degree, not principle. But that does not mean they are any the less substantial. So the contributions by the Taoiseach and by Donohoe and McGrath at the Dublin Castle wind-bagging sessions — as well as the body language between them and other entirely unreliable indicators — will be closely scrutinised.

But the truth is that the real decisions will be made a world away from there; if you have to go to the National Economic Dialogue to have your voice heard, I’m afraid your voice isn’t going to be heard. Or at least not in a way that is decisive. The big players who can influence budgetary policy — employers’ groups, public sector unions, multinationals, powerful lobbies like the hospital consultants and builders — get their meetings in private. That is how Ireland works.

And if that is a system that prioritises the insiders and the connected, its promoters can fairly say that it has helped make Ireland stable and prosperous. What they rarely acknowledge is that by prioritising the point of view of powerful interests, the system is protective of them. So the system remains resistant to change, even when there are manifest blockages and inefficiencies — from housing to healthcare, from climate to creches. That’s one of the chief reasons why translating economic health into public wealth has proved so difficult.

Wrestling with the political consequences of that failure, and rather than seeking to push through these blockages, Varadkar returns to a favourite old stomping ground and eyes tax cuts for the people who get up early in the morning.

There are three things one might say about this. The first is that Varadkar has been talking about this for rather a long time. He began his career as a conservative committed to low taxes. He ran for the leadership of Fine Gael promising to give the hard-working citizens of middle Ireland a break. This is not a cause to which he has recently been converted.

The second is that while Varadkar may espy a point of political distinctiveness for Fine Gael here, there is not much published evidence that the public is demanding tax cuts as a priority. If he really wants this to work, he will have to push hard for significant tax cuts and target them at Fine Gael’s better-off voters. That might be a viable strategy for 25 per cent of the electorate, but I have my doubts the Government would survive its promulgation.

The third thing to say is that Irish budget-making, especially in a Coalition, does not lend itself to Liz Truss-type lurches. The system is tediously collaborative and consensual. That’s one of the reasons our budgets are not distinctively ideological. They seek to spread the pain, or the jam, widely and thinly. If this is right, we will get a version of last year’s budget, a maximalist giveaway one, with a heavy emphasis in its public branding (at least as far as Fine Gael is concerned) on tax cuts.

That is probably where we end up. But there will be a lot of trouble before we get there.