In fits and starts, but without any plan to speak of, we have exploded the size of the State. In 2015 Ireland spent €54 billion. This year it will be €90 billion plus. Allowing for inflation, an ageing population, Covid, Ukraine and any other cause, the figures still don’t add up. The heavy lifting on climate change and ageing to name two issues hasn’t even begun. Last week’s €1.4 billion cost-of-living package landed amid a public conversation where almost no voice and certainly no political party was prepared to call out the squandering of public money.
I challenge anyone to explain how public services and infrastructure have improved in tandem with the rise in public spending. What stands out is the incrementalism of it all. Nobody in advance of the 2016 election set out a plan to grow the State in real terms by well over a third. We have never had a conversation on that scale. Yet somehow, slyly, silently it happened.
There is no sense, in people’s lived experience, of the enhancement you would expect from such largesse. If you or I increased our personal spending to that extent over eight years we would expect to be living high on the hog.
There is a vortex in a weak political system with voracious interest groups into which falls the public interest. Some vested interests are blindingly obvious. NGOs are cuckoos in the nest. They successfully replace the public interest with special pleading.
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Spending is affordable now only in the sense that we have the money. Climate and ageing will exert inexorable upward pressure. If we get climate change right Ireland has a brighter future. But in the short term – a decade if not two – it is a scenario of deep investment before benefits flow in-scale. Ageing, smaller families and proportionately fewer workers to carry the burden is something we have barely begun to experience as an economic costs. The only offsets are foreign migrants and native babies.
This is what is known. What is yet to be ascertained is how much of our corporation tax if not other revenue streams are at risk. One issue is the profitability of the multinationals we are dependent on. Another is where their profits are ultimately taxed and what our future share of that pot will be.
Soon our 12.5 per cent corporation tax will become 15 per cent. It is not a deal-breaker and delivers certainty. In any event we have agreed to it with the Organisation for Economic Co-operation and Development (OECD). What is at issue – and is our real exposure – is where multinational profits are taxed in the future. Will it be in Ireland where the intellectual property of many of our biggest multinational taxpayers is held, or will it be abroad where overwhelmingly the resulting transactions take place? The status quo is the sweetest spot for Ireland. We depend on international inertia to stay there.
Dependency on benign neglect for a living is foolhardy. Worse is the connivance of government and opposition in a game of poker for our future. On the issue of approaches to public spending there are only bad choices across the political spectrum. The recently rearrived at budgetary surpluses and the belated re-establishment of a rainy-day fund allows for virtuous sounds bites without having to make any real choices.
Fine Gael in government has presided over ballooning public spending. It is a fake right party mouthing platitudes but refusing to practise the virtues. Fianna Fáil has joined it and there is no discernible policy difference. Economically Ireland has no right-of-centre politics.
The centre hasn’t been held. It moved left in a game of chicken. Sinn Féin in some respects has moved towards the centre, but not on public spending. It doesn’t have to because there is no conviction in government about controlling spending. What both sides want us to believe is that a chasm in policy is, in truth, just the difference between Tweedledee and Tweedledum.
The consequences of this have in part already manifested themselves. Bereft of strategy or systemic purpose we are running to stand still. No structural change is considered. Relative to the extra resources provided, there is relatively little improvement to be seen. When it was here the Troika focused on fiscal change. There were chapters in the bailout agreement about reform, but they were never a priority. Reform wasn’t needed for economic growth; it was needed for value for money. It is also ultimately required for public confidence too, a point that was politically lost.
Ireland wasted the crisis post-2011. Unable or unwilling to reorder the State, all that remains is for government is to pour greater resources into tried and failed receptacles for delivery and reap the resulting ingratitude.
In that time frame, and with those resources, there could have been a transformative agenda pursued in any one of housing, health or childcare. Instead money was wasted on people who will not be bought with their own money. The strategy doesn’t work even at a base level. Entitlement is now a new orthodoxy. What passes for politics venally appeases it or fears to confront it. The biggest losers are always the poorest. I need only mention housing, health and childcare.