Power will be hard to resist for Martin and FF – but they might be better served by remaining patient
THE Finance Minister, Paschal Donohoe, recently gave a briefing on the state of the economy to the negotiating teams of Fianna Fáil, Fine Gael and the Greens.
By all accounts, he didn’t pull any punches. He told them that instead of an expected surplus of about €2billion, we were now facing a deficit in the region of €30billion, because of the effects of the Covid-19 virus.
Indeed, readers might remember that, during the February general election campaign, it was generally accepted that, over the next five years, there would be in additional €11billion ‘to play around with’.
How times have changed, in just a few months!
The grim economic forecast would not have come as any surprise to most of the politicians around the negotiating table. And yet their respective leaders have, in recent times, been making commitments which are very much at variance with the economic outlook.
For instance, both Leo Varadkar and Micheál Martin, at the start of this process, promised that there would be no increases in income tax or USC over the lifetime of any potential coalition between the two parties.
Also, Mr Martin and Green Party leader Eamon Ryan seem adamant that the qualifying age for the State pension should remain at 66, at an estimated cost of €220million per year.
Borrowing
The leaders of the three parties, hoping to be in government together, have also indicated that they wish to re-boot the economy after the virus crisis, by borrowing substantially and investing in major capital infrastructure, particularly focusing on housing.
Given the scale of the financial hole created by the Covid crisis, one wouldn’t need to be an economic genius to realise that a lot of these promises are just not achievable. So, it is no harm that Mr Donohue tried to bring some of his colleagues back down to earth.
Indeed, last week, in an interview, the former secretary general of the Department of Finance, John Moran, gave his opinion that ‘all bets are off’ in relation to promises made by politicians – both during the election, and since then.
It struck me that, if the current thinking in his former department is anything like his, the Department of Finance mandarins will insist that extremely tough decisions, regarding tax rises and cuts in spending, need to be made in the coming months in order to get some control on the public finances.
Moran wasn’t the only one calling this out. New Labour leader Alan Kelly rejected overtures from Mr Varadkar and Mr Martin because he believed that it was ‘premature and unrealistic’ to say at this stage that there would no rise in taxes.
While the caretaker Government, aided by the health experts, has undoubtedly handled the crisis well, it has done so by throwing open the doors of the State coffers. Most politicians acknowledge that this cannot go on indefinitely. It would appear to me that the outgoing Government will come to its natural end, just at a time when tough decisions have to be made.
The initial agenda of any new government formed, as expected in mid-June, will be full of unpalatable decisions that need to be taken. For instance, Mr Varadkar and Mr Donohoe have both talked about the necessity to ‘scale back’ – a euphemism for cutting the temporary Pandemic Unemployment Payment, currently set at €350 per week.
It’s expected that this will happen in and around the middle of next month, most likely coinciding with when the new government takes up office.
FF, FG and Green Party backbenchers and members will need to be prepared to put up with much opprobrium from the opposition and the public.
The first year or so of any such new government will not be easy. Before they put pen to paper on any programme for government, they need to be aware that they are in for a very bumpy ride.
The party leaders have a lot of work to do to convince their troops to stick with it for a full five-year term, in order to politically gain any benefit from unpopular decisions. Which brings me to some of the tactics involved in the formation of a likely government between FF, FG and the Greens.
There has been much talk recently about how the concept of rotating taoisigh can be accommodated, even involving Eamon Ryan.
It will be interesting to see how this is worked out. The first two years, or so, of the next government will probably be its most difficult. FF sources, and indeed some of its backbenchers, have made it clear that their man, Micheál Martin, has to be installed as taoiseach in the first instance. They justify this on the basis that FF gained the most seats the February election.
I’m not sure if this is a good tactic, politically. I believe they should think twice about it.
Unpopular
Mr Martin himself may feel it is only right and proper – but it could be that his name will be forever associated with some of the most draconian and unpopular decisions ever made by an incumbent taoiseach.
Putting him in as taoiseach first will potentially coincide with the time when someone has to call a halt on runaway spending. And going by the polls, FF are already in the doldrums.
Would he not be better to let Mr Varadkar continue in position rather than have him and FG come back into office in a couple of years like the cavalry coming over the hill when, potentially, the economy and society are beginning to recover.
Also, it may not be good tactics from FF’s point of view to allow FG to hold the taoiseach’s position in the second half of the government as the latter will then be in the driving seat in the run-up to the next election.
Where Eamon Ryan fits into all of this remains to be seen.
Agreeing a programme for government may not be the only difficult political choice ahead for the faithful followers of the three parties currently involved.