Four tough decisions for the new government

You won’t hear many politicians spelling out what exactly these hard calls are

Finance minister Paschal Donohoe recently spoke of “tapering” the special €350 a week Covid-19 unemployment payment. Photograph: Leon Farrell/Photocall Ireland/PA Wire

Finance minister Paschal Donohoe recently spoke of “tapering” the special €350 a week Covid-19 unemployment payment. Photograph: Leon Farrell/Photocall Ireland/PA Wire

 

To channel Flann O’Brien momentarily: what will the next government have to do? Make decisions. And what will be the nature of those decisions? Difficult.

Everyone seems to be agreed that a dose of the DDs will be needed before long once the new government takes office. Some people around government circles are making the argument that some of the DDs should be made by the outgoing administration, to smooth the path for the next one, so it wouldn’t have to make the DDs the first item on the agenda for the new government. Others caution the current caretaker government does not have the political authority (whatever about the legal entitlement) to make them. But I expect the main reason they won’t make them is because they are . . . difficult.

But one thing you won’t hear much of is politicians spelling out what exactly these decisions are, why exactly it is that they will be so difficult.

An exhaustive list would be exhausting, but here is four of the most difficult decisions that will face the next government in its early months:

1 Ending the special Covid-19 unemployment payment

The €350 a week figure was arrived at, according to be person familiar with the episode, “because it seemed like a decent amount”. Most people agree it was necessary and wise; but nobody within government believes it can be maintained indefinitely. It is, after all, vastly more than the weekly unemployment benefit of €200 a week, and there is certainly voluminous anecdotal evidence of some part-time and low-paid workers being better-off on the payment than they were when working. Finance minister Paschal Donohoe recently spoke of “tapering” the payment; a suggestion that was immediately seized on by Sinn Féin and others who promised to oppose the measure. Tapering will also be opposed rather vehemently, we can expect, by those people who have to rely on it.

2 Ending other special pandemic arrangements

As the threat from the pandemic (hopefully) recedes, and the economy is brought back to life, a series of other special arrangements will also have to be gradually brought to an end. The takeover of the private hospitals was almost certainly the right thing to do at the time; in hindsight, it proved mostly unnecessary. A goodly chunk of our health system operates in the private sector (remember half the population have health insurance) and it needs to get back to work to treat patients, or the public system will be overloaded. If the two-tier health system is to be brought to an end – as many people argue it should – that will take time and planning, not just the overnight emergency measures of the pandemic. The special supports for businesses will also need to brought gradually to a close – one of the most difficult things that the next government will have to do is figure out how its agencies will decide which businesses can be saved, and which cannot.

3 Fixing the public finances

The two parties likely to form the bulk of the next government have insisted there will be no return to austerity to help correct the public finances. I guarantee you this is exactly what they will be accused of. However, growth (assuming it returns) will only do so much; there will be hard choices about where the spending of public money – which will, once again, be finite – should be prioritised. While there is a general consensus on the need to drastically increase borrowing in the short-term to finance the costs of the pandemic, longer-term borrowing will only be possible if the public finances are on a sustainable trajectory. This is, after all, a lesson we have learned before, and it will mean controlling public expenditure. We can’t be at the mercy of the bond markets, says Roisin Shortall, correctly. The corollary of that is that the deficit will need to be reduced. She didn’t say that, though.

It’s not just the central government’s budget: a series of state bodies, universities, local authorities and semi-state companies (the situation is especially bad in CIE, for obvious reasons) will require bailouts and then a period of severe budgetary restraint. In this environment, it is hard to see how the next government could pay the general two per cent pay increase for public sector workers due under the national wage agreement in October. But nixing it is going to cause a desperate stink.

4 The climate stuff

The Greens participation in the next government hangs in the balance this weekend. But assume they’re in (and even if they’re not, the next government will have to take some action on climate because of international obligations); climate measures will be difficult and many of them will be unpopular. Increasing the carbon tax. Cancelling road projects. Changing the way farming is done. Pushing people out of their cars and into public transport. And so on. There is a view in the Greens that the measures will be accepted because they are necessary to avert the catastrophe of climate change. That is unlikely to extend much beyond people who already think that way.

As the last government to face a comparable crisis – the 2011-16 Fine Gael-Labour coalition – faced up to the DDs it would have to take, it formed an inner core made up of the senior ministers, officials and advisers, known as the Economic Management Council (the EMC).

One recalled how, after several months in office, a glimmer of good news arrived at one meeting. Later, at dinner, he observed: “Do you know, that’s the first meeting when I haven’t felt like leaving through the window.”

The next government’s experience will be rather similar.

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