Cliff Taylor: Political will for hard choices is as real as 26 per cent growth

Welcome to Fantasy Ireland, where the “new politics” has been boosted by the announcement of a 26 per cent economic growth rate and the availability of endless resources, saving anyone in Government from having to make any difficult decisions. This is convenient because a central feature of the new politics is never making a decision on anything if it can possibly be avoided. If a decision absolutely has to be taken, then the only one allowed under the new arrangement is a referral to a committee, an expert group, or to “consultation with stakeholders”.

Back in the real world, nobody believes the 26 per cent growth figures, of course. But they will add to the narrative that the economy is pushing on and there is plenty of money for the Government to spend. Ministers are caught in the middle, simultaneously talking up the economy and playing down the amount of money available – while at the same time not dealing with the consequences of scarce resources.

The focus is on the Taoiseach, who is – sooner or later – on his way out. But the real story is that we are now in a netherworld of consultation, with the Government effectively hemmed in on all sides by the need to laboriously get agreement for everything from political opponents.

We know we only have a small amount of additional cash to spend, but none of the hard calls are being faced. Yet another report on third-level education fees sees no decision – interest groups have to be consulted. We are told that no emergency department services can be cut in any hospitals, despite a report saying that in some cases patients would be better served if this happened and resources concentrated elsewhere.

Meanwhile, any suggestion that people might have to pay for a service – a third-level education, water, and so on – is met with the inevitable response that “we are paying for that already” via general taxation. Trouble is, there is only so much cash to go around.

In a world of 26 per cent growth, it might all add up. But our GDP figures have been upended by a series of deals undertaken – probably – by just four or five companies. Apple appears to have moved part of its intellectual property to Ireland – a hugely valuable asset relating to all the design and development work on iphones, computers and the rest. An aircraft-leasing company has put an Irish "flag" to show where its planes are owned from. And a big merger in the medtech sector – between Covidien and Medtronic – appears to have meant that a significant amount of goods made in factories overseas are counted in our figures, as they are now made on behalf of a company with an Irish base.

Reflecting reality

As Fr Dougal might have said: “That’s mad, Ted.”And in the sense of reflecting the reality in the Irish economy, it is. When the movement of a licence for intellectual property and some planes to Ireland boosts the country’s stock of capital – the measure of assets we have that produces things – by more than 40 per cent, you know something odd is afoot. Or when goods being produced elsewhere in Europe on behalf of a company that has just moved its HQ to Ireland helps to boost exports by one-third in value, an increase that, in good times, might take half a decade to achieve.

The reality is more prosaic. The economy had a good year last year, and growth in the first half of this year looks healthy. You could argue about figures, but growth has probably been about 5 per cent. There are reasons to expect some slowdown this year. Exports figures out yesterday confirmed tougher times for goods exports and the British market may slow. Lower sterling will hit exports. Consumer spending remains strong, though Brexit might hit confidence. Growth should continue, but may be at a slower rate.

This is the real world. It gives the Government options and extra cash to spend, but not a huge amount, especially as we are bound by EU rules. There is a case for lobbying for these rules to change in terms of state investment spending, but not for day-to-day spending. And this is where the choices come.

Spending report

While all the attention during the week was on the GDP figures, the Government published its mid-year spending report. It was a model of calmness, albeit written in the kind of civil servant-speak that means you have to read between the lines. Priorities would have to be identified, it said. Some issues could only be addressed in the long term. The message to the Government was: you have to choose what to do, you can’t do it all at once. With day-to-day spending to rise by just 2.5 per cent each year, this needs to be understood.

And it made one telling point. The room for manoeuvre in budgets up to 2021 to increase spending and cut tax – the fiscal space – is €11 billion. Yet in total over that period we will spend €280 billion.

All the focus of the debate will be on the €11 billion and how to carve it up. Nobody will pay any attention to the €280 billion already committed, or how it might be better spent. This is the upshot of new politics, where no spending programme can be trimmed, and nothing can be charged for because we are “ paying for it already”. New politics might work in the fantasy world of 26 per cent growth, but not in the real world where choices have to be made.