So this is what politics looks like when there isn’t a surplus.
At the time of writing on Friday afternoon, it’s not yet clear if there will be a resolution to the fuel blockades that have brought parts of the country to a standstill this week. They got a meeting, but they were never going to get all their demands met. As gardaí prepare to clear essential sites, the fuel protesters will then have a choice to make.
But whatever happens this weekend, recent days have provided us with a window on to a possible future – how things look if you don’t have the benefit of €30 billion of corporation tax from US multinationals gushing into the exchequer every year. How things look if there is a sudden economic shock. How things might work if the Irish Government had to operate in conditions more like everyone else. How things would be if our luck runs out.
Every political problem faced by recent governments has been solved – to a greater or lesser extent – by finding money to throw at it. This has varied in scale – from the billions of euros in additional spending in recent budgets (including the famous three-in-a-row “once-offs” before the last election) to more limited, small-bore interventions like the extra €19 million announced earlier this year to solve a row over special needs assistants.
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But the understandable impulse of a Government constantly under pressure – from the Opposition, from the public, from most of the media – to spend more to help with social and economic problems has been, naturally, to spend more. Because the Government – this one, the last one, the one before that – has had the resources to do it.
It may well be that recent governments, with Paschal Donohoe in a pivotal position, were as careful and as prudent as our political system would allow any government to be in the circumstances. I am not quite sure I would go that far. What I am pretty sure of is that without the huge increases in spending – both temporary and permanent – they would not have been re-elected.
We have all become used to a set of economic and political conditions that are quite unusual. It would be foolish to think that they can never change. Especially when the world is so obviously and so quickly changing around us. And just as past political outcomes would have been different without a bulging exchequer, so the future will be different if the tax revenues begin to decline – or even just stop growing.
It would look something like this week. If the economy experiences a downturn and the Government sees a decline in revenues, people will react not to abstract debates of political economy but to their own circumstances.
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The genuine anger – bordering on despair in some cases – and the populist impulses evident on the protests this week are a sign of what would come if the Government found itself unable to solve problems with more spending. It doesn’t take long for words like “betrayal” to get thrown about; or for the democratic legitimacy of an elected government or the established channels for groups to air grievances to suddenly not seem to matter very much.
“What mandate do you have,” one of the protest leaders was asked on Prime Time. “The people of the country have asked us to do this,” he responded. Oh yeah?
Politics would become more acrimonious, personalised, bitter, accusatory, populist and volatile.
The Opposition scrambled to show how ready they were to roll over. It remains a feature of Irish politics that the only voices urging fiscal restraint and budgetary caution are those of economists – and sure what would they know? The Opposition seeks only to outdo each other in demands for more spending and tax concessions: give the protesters what they want, as soon as they want it.
Perhaps that is the way to convince middle ground voters the Opposition parties can govern. I have my doubts. But that’s another day’s work.
Look to the past for further lessons. Before Easter, Hugh Linehan and I recorded a special series for the Inside Politics podcast on the Labour Party’s time in government 2011-2016 – a period of brutal austerity necessitated by the bailout entered into by the previous Fianna Fáil-led government.
The experience haunts Labour still. It should also serve as a warning to everyone about what can become necessary when a state loses control of its public finances – and a warning to politicians of the consequences for themselves and their parties.
Of course, blessed with a thriving economy, a large surplus in the public finances and the cushion of the State’s savings funds, all that seems a very long way away. But our current experience is not the norm: it is the exception.
Right now, the warning signs in the global economy could hardly be more obvious. And anyone who remembers 2008-2009 knows how quickly things can turn for the worse.
We have been fortunate in being able to expand the State hugely on the back of the spectacular revenues of the last decade. That State – with more teachers, nurses, etc – has also become a lot more expensive. In 2016, when Labour left government, it cost about €70 billion to run the State for a year. This year it will cost nearly twice that. You do the math, as the Americans say.
We can’t know the future, but we can take precautions to deal with potential future scenarios. Currently the Department of Finance is working on forecasts for a number of different possibilities for the coming years – described to me as: reasonably positive, a bit gloomy and oh sh*t.
They will sketch out the possible economic and fiscal outlook in the different scenarios. What the events of this week tells us is more about how the politics might look not too far down the line. And it ain’t pretty.
