As Minister for Finance Jack Chambers was driven up Downing Street on Monday, its longest resident ambled ahead. Larry the Cat, who has lived on-site since 2011, soon scuttled away while Chambers continued on to meet one of Downing Street’s newest occupants: Rachel Reeves, the Labour government’s chancellor of the exchequer, is based in number 11.
Both politicians are still finding their feet in their new roles. Chambers (33) has been in the job barely 10 weeks, but that’s nine days longer than Reeves (45), the first woman to take over Britain’s national finances.
Both will also present their first budgets in October. But that’s where the similarity in their positions ends. While Reeves is in a fiscal straitjacket, Chambers has inherited baggier clobber.
Reeves is planning spending cuts and tax hikes to plug a £22 billion (€26 billion) “black hole” she said she discovered in the UK’s finances, while Chambers has flagged a pre-election budget bonanza of tax cuts and spending hikes worth at least €8.3 billion. She can only dream of being in such a position.
“It was a warm engagement,” said Chambers after their meeting, once he got back to the Irish Embassy in Belgravia. “I’ve invited her to Ireland and she said she’d like to come [soon].”
He said they discussed the potential for greater economic co-operation, especially on renewable energy. Reeves has promised to unclog Britain’s planning system to speed up new green infrastructure such as wind farms, as Labour rolls out state-owned GB Energy.
Chambers said they had “shared concerns” over delays to green infrastructure and the pair had “discussed at length how both economies can unblock the barriers.”
Britain also covets the Republic’s help smoothing post-Brexit trade rules with the European Union, such as loosening restrictions for British finance workers. Chambers said this was an EU competency and hinted the UK would have to give something in return.
But although he eschewed the specifics, he also left the door ajar: “Ireland wants to be a helpful partner [to] Britain in making sure [its] future is a closer one with the European Union.”
On domestic matters, Chambers’s in-tray is piled almost as high as his stash of cash.
On Monday morning it was announced the State had sold yet another 2.8 per cent tranche of AIB shares back to the bank for €500 million. He wouldn’t say if he might be tempted to sell the State’s remaining 22 per cent off more quickly, but hinted he was happy doing it in dribs and drabs.
“Our clear policy is to unwind the stake and we’ll decide future sales in our strategic interest. [But] the mechanism up to this point has been a helpful one,” he said.
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He was clearer, however, on how he plans to spend the proceeds: building thousands of new houses as well other infrastructure, such as water and energy facilities. He said he will bring forward a new plan “in coming weeks” on how to use the AIB money.
“Housing will be a central focus [and] how AIB share sales can supplement the existing allocation. Ensuring the State is a central player in the provision and supply of housing is key. The share sale gives us the option to do more and I’ll be bringing that to Government in coming weeks.”
The Land Development Agency is already due to get funding from AIB shares to develop houses, but Chambers hinted there are also “other levers of supply”. Could that mean funnelling cash through local authorities? “The options are being worked on,” he said.
He said there are also “other pressure points” in the State’s infrastructure, beyond housing, that he planned to address: “There is water and also energy. Particularly with water, that unlocks the wider delivery of more housing. The AIB share sale gives us additional leverage.”
Since he took on the role of Minister for Finance, Chambers has been clear that he plans to reduce the tax burden for workers in October’s budget: “Relieving some of that income tax burden has to be a priority.”
He also warned that economic “deglobalisation” was a threat to Ireland’s foreign direct investment model, although there may be other opportunities for the State to spur investment in areas such as artificial intelligence and digitisation in the “world of work”.
Chambers hinted that the State could also position itself as a hub for intra-European investment from bigger EU economies worried about global supply chains as international tensions rise. He said he would use the tax system to “unleash growth for the future”, with an eye on industrial policy.
What he seemed reluctant to do, however, was to agree to the hospitality industry’s demand that its VAT be cut to 9 per cent. He has “limited scope” for that, he said.
Chambers’ pre-election expansive spending plans have drawn criticism from the State’s financial watchdog, the Irish Fiscal Advisory Council, and he seemed keen to dampen long-term expectations.
“We have to be careful. We can progress current spending in future in areas of priority, but not at the run rate we’ve had,” he said.
Instead, he “sees a future” where the State’s focus reverts to capital investment.
“On all areas of policy, I’m not afraid to say ‘no’,” he said.
In pre-election politics, however, sometimes you have to say yes.
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