Government pats itself on the back but is it deserved?

The Government has survived its first half-year in in office. Dan O’Brien assesses the administration’s progress report on itself, published on Thursday

‘TO make people’s lives better in every part of Ireland.” That is the “one simple objective” the Government has, according the minority administration’s 20-page progress report on its record over the past half year.

The report, which was published last Thursday, got almost no coverage in the media. That is perhaps understandable — journalists rightly tend to be sceptical when politicians hail their own achievements.

But as the administration is committed to doing half-yearly report cards on itself, it is worth considering what it has to say about the big issues and challenges it faces. These include managing the economy, addressing the housing crisis and containing industrial unrest in the public sector.

On the economy, the progress report claims credit for almost 50,000 additional jobs and 16 consecutive quarters of employment growth. While it is standard practice for governments to take more credit than is their due for economic successes, listing things that happened before last May seems more than a little curious in a progress report that covers the May-December period.

It also makes one wonder if the non-Fine Gael members of the Government had much input into the document.

That said, and given Fine Gael was also the senior partner in the previous government, and that the last government does deserve a good dollop of credit for the upturn since 2012, the over-egging in the report is hardly a cardinal sin.

As it happens, the latest GDP figures were published a day after the progress report. They cover the new administration’s first full quarter in office. Although not quite in “leprechaun economics” territory, the headline figures for the three months from July to September were very strong. GDP grew by 4pc in just three months. It was up almost 7pc on the same quarter in 2015. These are Tiger-ish rates of growth.

But as has been the case so often in recent decades (usually owing to the highly globalised nature of the Irish economy), Friday’s headline GDP figures flattered to deceive. While the figures were broadly reassuring, they show solid, not stratospheric growth.

To find the figures that say something meaningful about the state of the economy one has to drill through the headline numbers. Perhaps the most important undistorted component of the GDP figures is the amount consumers and households are spending on goods and services, which accounts for more than half of the domestic economy. Consumer spending grew by 0.7pc in the third quarter of the year compared to the second. That is much more similar to growth in other European countries than Ireland’s headline GDP growth rate, which was nearly six times stronger.

While growth in consumer spending in the third quarter of the year does point to a slowdown, it is not at all bad, and does not suggest that the economy is approaching stall speed, as quite a few other indicators have suggested in recent months.

Some other components of the GDP numbers which are also reliable gave additional reassurance. They include the economic sectors that are less subject to sudden, multinational-driven changes in activity, such as general services and transport and distribution. Both continue to grow solidly. Across the wider economy, the amount companies spent on machinery and equipment in their businesses hit a record high in the third quarter. All told, then, if the Government had waited 24 hours to publish its report card, it could have claimed additional credit — whether deserved or not — for the latest economic growth numbers.

On the housing crisis, there is much less in the way of good news. Because of this, last Thursday’s progress report has plenty of padding on the issue. Bizarrely, the report card lists, and therefore appears to take credit for, an Oireachtas committee study on housing and homelessness published in June. It is bizarre not only because a report by a committee of the legislature has nothing to do with the Government, but also because that study contained lots of populist nonsense about expanding rights for large groups of people with little consideration of the consequences.

The Government can and does claim credit for some populist nonsense entirely of the its own doing in its progress report. The hair-brained “Help to Buy” scheme not only adds to housing demand, which the building industry is already unable to supply, it gifts up to €20,000 of taxpayers’ money to individuals who acquire valuable assets. That makes the scheme iniquitous as well as counterproductive.

More positively, the Government set out quite a comprehensive action plan for the homeless and housing in July. It makes much of this as an achievement. Less positively, in the first quarterly assessment of that plan, published last month, nearly one in five of the actions scheduled for the first three-month period were either not completed or not progressed in line with commitments. That is not the best of starts.

All that said, it is early days. It will take quite some more time before anyone will be able to evaluate whether the housing action plan has been effective in bringing supply more into line with demand.

Another major challenge the minority administration has faced, and is likely to face for as long as it remains in office, is public sector pay. The progress report gives two sentences to the fulfilment of a commitment to establish a public pay commission.

This idea is a very good idea in theory. Setting public pay has traditionally been determined by political expediency. There has been little effort to assess what is appropriate, relative to the private sector, relative to other countries and by what is affordable.

Bringing evidence and rigorous analysis to the assessment of public pay levels is long overdue. A well-designed public pay commission could do exactly that, and perhaps the one that has been established by the current administration will be successful in achieving that. But the early signs are not good.

The manner in which the commission has been staffed does not give cause to believe that it will mark a sea change on past practice. That is because those who have been appointed as its members are, with one exception, people from business, trade union and industrial relations backgrounds, rather than people with research and analysis expertise, as is the case with, for example, the fiscal watchdog.

While the appointees are all upstanding people with fine achievements in their careers, their backgrounds suggest the commission is more of a social-partnership-type arrangement than an expert-led body capable of presenting the sort of hard evidence to assess adjustments to public sector pay rates. The minority Government has not been a disaster by any means, but it is far too early for anyone to be patting themselves on the back.

‘On the housing crisis, there is much less in the way of good news’