Two key legs in the stool of the next government are going to be Fianna Fáil and Fine Gael, but who will be the third?
The answer to this will affect the economic direction of the administration — Labour or the Social Democrats would pull it a bit to the left, while a deal with a group of Independents would be more likely to focus on local issues and specifics, such as fuel costs.
A deal between Fianna Fáil and Fine Gael on the economy and the public finances would be needed first and should not prove too difficult, though there are some differences in their manifestos. Fine Gael wants to allocate a bit more of the available resources to cut taxes but both parties agree that the vast bulk should go to higher spending, particularly State investment.
Election Daily: First counts trickle in and anti-immigration candidates falter
Any differences are dwarfed by the uncertainty over corporate tax revenue and the wider economic outlook, largely related to Donald Trump’s election as US president. A credible programme for government will need to prepare for this by setting aside resources and planning for how to react and prioritise if revenues decline.
Also, both parties will realise that they need to deliver much more effectively on housing and infrastructure or run social, economic — and thus political — risks in future. There are differences in detail in their manifestos here, but nothing that could not be worked out.
If Labour are pulled into the possible mix as the third leg to the stool, there will be more substantial differences to negotiate. Labour wants to automatically increase income tax bands and credits and welfare payments to keep pace with inflation and while the two big parties also have promises in these areas, they might resist formalising it in this way.
Labour’s programme is also based on new tax sources, including a new wealth tax and withdrawing the benefit of the main tax credit on incomes above €100,000 — neither of which are likely to find favour with the two bigger parties, while Labour would not favour promises to cut inheritance tax further.
Big gaps would have to be bridged in housing, with Labour wanting to phase out the Help-to-Buy scheme and the First Home scheme, in which the State takes an equity stake in a first home. It is hard to see a middle road here. A deal would also need a compromise between Labour’s detailed agenda on workers’ rights and collective bargaining and the promises by the two big parties to reduce costs for businesses.
Many of the same issues would feature in any talks with the Social Democrats. The party has a strong pro-spending agenda and its manifesto suggests it would prioritise investment spending over future contributions to the Future Ireland Fund, established by the outgoing Government to put away some of the windfall corporate tax receipts.
To help pay for this, the Social Democrats, like Labour, also favour looking for new sources of tax revenues, including a wealth tax, though with a modest revenue target of €150 million to €200 million per annum and withdrawing tax credits on the higher paid. And its manifesto, like Labour, also includes a detailed section on collective bargaining and workers’ rights. As with Labour, commitments on social and affordable housing would be hard-negotiated.
If the barriers to a deal with the centre-left parties are too high — and the numbers allow — an agreement with several Independents would be more straightforward and could probably be met by a mix of local commitment, measures for agriculture and adjustments to the National Development Programme, the State investment plan.
Were Fianna Fáil and Fine Gael to bring the deputies in the Independent Ireland party into the mix, they would have to contend with similar issues and manifesto promises which included an assessment of extending the light rail network to all 26 counties and a call, which could also feature with other rural Independents, to freeze carbon tax increases on fuel.
There would be a different feel to the economic policies depending on which route is chosen. But either direction will involve a string of commitments based on strong public finance forecasts. Allowing for the risk that these may disappoint may prove difficult to negotiate, but invaluable if trouble were to hit.
- Sign up for push alerts and have the best news, analysis and comment delivered directly to your phone
- Join The Irish Times on WhatsApp and stay up to date
- Listen to our Inside Politics podcast for the best political chat and analysis
- Sign up to our Inside Politics newsletter to get the behind-the-scenes take direct to your inbox
