The debate on the Cabinet reshuffle that will follow the rotation of the office of the taoiseach this weekend is but a taster for what is to come in the months ahead and right up to the next general election.
In the blue corner we have the Coalition saying its plans are working and this is the team to continue managing the economy, which would be wrecked by a Sinn Féin-led government. In the red corner we have Sinn Féin and the rest of the Opposition saying how on earth can there be the necessary “change” with only a minimal shuffle of the same old Ministers.
This Punch and Judy show is normal – politicians are even worse than journalists in their boiling down of things into simplistic arguments. Sinn Féin would be unlikely to ruin the economy overnight, nor would its Ministers be able to reform the health service and the housing crisis in jig-time.
The debate is continuity versus change and the risk for the Government is that, right now, the polls show change is winning. If Leo Varadkar is to succeed as taoiseach, he has to find a way to persuade voters that the Coalition can make progress on the key health and housing issues, as well as managing the economy safely. Public money is not the only answer. But the gradual squeeze on resources as the economy slows from its extraordinary growth surge is going to challenge the Government. Because there is no doubt now that the economy has turned, even if what happens next remains subject to big uncertainties.
Talk of a new right-left divide opening up in Irish politics is nonsense
Letters to the Editor, December 14th: On the Green effect, grief and the humble Brussels sprout
If Fianna Fáil and Fine Gael continue business as usual, the next government will quickly be in trouble
Five things on the next minister for finance’s to do list
[ ‘The beauty and risk of Leo’: Pressure is on for Varadkar to deliver as taoiseachOpens in new window ]
The news of the massive €12 billion exchequer surplus in the first 11 months of the year and the record low in unemployment make talk of a slowdown seem incongruous. But the signs are there. A new Central Statistics Office series on employment shows the jobs market topping out in April/May and many sectors shedding some jobs since. The decline is not huge – about 30,000 jobs or 1.2 per cent of total employment – and in some cases may actually reflect difficulties hiring staff. But the change in direction in the figures and problems in the key tech sector suggests that the jobs market has peaked.
Meanwhile, the Economic and Social Research Institute (ESRI) has produced data showing that by October the domestic economy had been slowing for about four months.
The extraordinary momentum which has driven the economy forward is slowing, with consumers squeezed by higher prices, the tech sector facing challenges and a very uncertain international picture. And this week ECB president Christine Lagarde gave the strongest signal yet that interest rate increases are far from over, with the ECB deposit rate set to climb from 2 per cent now to 3 per cent by spring and most probably higher after that. This is going to hurt a bit, as the doctor might say.
This has big implications for Irish politics. The resources available to the Government are not set to shrink overnight and there is cash put aside. There will be enough to extend energy and business supports to consumers, if needed, next year. A lot of better-off households have built up savings during Covid, which should support sectors like home improvement and car sales.
Covid fuelled the feeling that the Government can “sort everyone out” no matter what the problem. But in future there will be less cash for the Government to respond
The massive investment of the tech and pharma sectors here has moved their activities to a whole new level and they will remain huge providers of tax resources. If the ESRI and most other forecasters are correct, the economy will skirt recession, even if the domestic bit – driven by consumer spending and investment – may come close to it. We may, whisper it gently, even have a soft landing.
But the period when the wind was behind us on all fronts is over. As Michael McGrath swaps seats with Paschal Donohoe, the constraint on spending due to limited resources will slowly but surely become more pressing. Choices will become sharper. Covid fuelled the feeling that the Government can “sort everyone out” no matter what the problem. But in future there will be less cash for the Government to respond. The Opposition will keep shouting – most recently Sinn Féin was looking for mortgage interest tax relief to temporarily help people with higher bills as interest rates rise, a policy which would give a lot of money to people who don’t need it, as well as to some who might.
The Government will claim, as the economy slows, that only it is equipped to see Ireland through these trickier waters. Sinn Féin will just keep hammering the “change” card, which is playing so well with dissatisfied younger people and increasingly more widely. It will all get frantic because the new taoiseach and his Cabinet will realise that time is running out to win back public trust on the hot-button housing and health issues.
Sinn Féin’s growing poll ratings has meant that it has not only led the debate, but also been a big influence on Government action. The direction of travel has been towards more and more State spending. A lot of political debates are now framed by the Government going so far to help people and Sinn Féin calling for more. The flood of available exchequer resources has allowed the Government to ramp up spending, assist households and direct massive additional cash to housing. And still to plan for a big budget surplus and put cash aside.
But the fantasy land created in large part by the massive expansion in tax resources from the multinational sector is slowly coming to an end. We can hope that these taxes will not fall sharply, but they simply cannot continue to grow at the same pace. It is all set up for even fiercer clashes between a “safe and steady” Government and an Opposition baying for “change” and more cash to be thrown at the problem of the day. Real politics is on the way back and it is not going to be pretty.