As Ireland enters what looks likely to be a whirlwind general election campaign ahead of the February 8th poll, it can at times seem that politics has never been so upside-down. Left-wing parties such as Sinn Féin and People Before Profit oppose the property tax even though it's widely regarded as the most efficient way of redistributing wealth from the property "rich" to the working "poor".
At the same time, the State’s main business lobby, Ibec, prioritises public spending over tax cuts while highlighting the “proliferation of private wealth” that runs alongside capacity-constrained public services.
Ibec’s director of policy and public affairs, Fergal O’Brien, says the number one issue for business right now is how they can attract and retain the right people. And this, he says, relates directly to issues of infrastructure, environment and quality of life.
“Businesses are talking about the problem in terms of housing, in terms of congestion pressures, in terms of childcare pressures,” O’Brien says. “So ‘quality of life’ is the issue of the day for business in a way it’s never been before in a general election.”
Since 2014, the Irish economy has grown by over 50 per cent, largely as a result of a spike in investment and employment, almost exclusively in the private sector. More than 400,000 jobs have been created.
“The private sector is surging and the public sector right now is struggling to keep up with this hyper-globalised economy,” O’Brien says, noting that for every one job created in the public sector, 25 have been created in the private sector. This has created infrastructural bottlenecks across the economy, from housing and health to water and broadband.
If you strip out GDP, and just look at disposable household income, it's 50 per cent higher than in the UK
As a result, businesses are increasingly faced with challenges outside of their control, O’Brien says, “challenges related to how their staff get to work, where their staff can live, where their staff can access childcare”.
“The prosperity is evident all around us and the social challenges that we have are, to a large degree, a consequence of public services struggling to keep up rather than not having sufficient income or sufficient prosperity,” he says.
“If you strip out GDP, and just look at disposable household income, it’s 50 per cent higher than in the UK,” he says.
Pre-election manifesto
Ibec will next week launch its pre-election manifesto, prioritising a call for more investment in public services. A long-standing complaint has been that the EU’s fiscal rules are keeping Government spending and therefore public services in check when the resources are available.
Even the Government's top spending official, Robert Watt, has questioned the appropriateness of the current rules for small countries at this stage of the economic cycle.
If the current resources are not spent to relieve capacity constraints, we’ll end up with another wage/price spiral, O’Brien says. That will undermine the competitiveness of the economy in much the same way as happened at the height of the boom last time around.
He says there is currently almost €1 billion of a reserve sitting in the National Training Fund, paid for by a levy on employers, “and we’re unable to spend that money to resolve the under-funding in higher education or on some of the upskilling challenges facing the economy, partly because of the fiscal rules.”
Education and training are highlighted as major challenges facing any incoming government by Cathriona Hallahan, managing director of Microsoft Ireland, which employs 2,000 people at its new campus in Sandyford, Dublin.
“With the economy at full employment and growth continuing apace, there is a need to look at how we address demand for skills both in the short and longer term,” she says.
Hallahan says the adoption of AI (artificial intelligence), AR (augmented reality) and the move to the cloud present exciting “scale-up opportunities” for businesses, but these innovations are also changing the profile of skills needed in the marketplace.
These new technologies are powerful tools that can help improve public service and drive economic growth
“This is something that needs to be considered as part of the policies of a new government,” Hallahan says.
“From a policy perspective, we also need to put in place thoughtful policies and regulation that ensure we harness the opportunities of AI, cybersecurity and cloud deployment,” she said.
At the forefront
As host to most of the big tech giants, Ireland is at the forefront of regulation in this area. The Data Protection Commissioner currently has 21 investigations into big technology firms in progress, the majority of which relate to Facebook – or companies it owns such as WhatsApp or Instagram.
“These new technologies are powerful tools that can help improve public service and drive economic growth. But we need a supportive policy environment that secures the trust of citizens in the new digital world we are all living in,” Hallahan says.
Another issue she puts to the fore is climate change, something the current Government has been accused of failing to get to grips with. The €6 hike in carbon tax announced by the Government in the last budget was seen by environmentalists as too little. Hallahan believes companies such as Microsoft must take a leading role in addressing the issue.
As the US formally sat out last month's UN climate summit, the bosses of the biggest and most well-known US brands – Apple, Google, Microsoft, Tesla, Total, Pepsi, Coca Cola – wrote an open letter to the White House administration, calling on it to stay in the Paris climate pact, which US president Donald Trump has vowed to leave.
Just this week, the world’s biggest asset manager, BlackRock, said it would ditch investments that “present a high sustainability-related risk” – a move welcomed as a landmark by activists.
Goodbody analyst Dermot O’Leary says a big issue for investors might have been whether the next government would herald a change in economic policy; but, with the two big parties essentially following broadly the same economic policies, this is considered unlikely.
He also highlights Brexit and Ireland’s future trading arrangements with the UK, which are likely to come into focus again later this year under the guise of EU-UK trade, as an issue facing any incoming administration and a major issue for business here.
Cordial relations
O'Leary says the Government is seen as an administration that is able to manage the process well, and Taoiseach Leo Varadkar is viewed as having reasonably cordial relations with his UK counterpart.
“There is a risk that, if new personalities come on board, relations will not be as tight,” he says.
While visiting forklift manufacturer Combilift's plant near the Border this week, Varadkar and his Ministers insisted Fine Gael had the best TDs and politicians to negotiate the next phase of Brexit.
O’Leary acknowledges that housing is undoubtedly a touchstone issue for the State at the moment, suggesting the negative consequences of the scarcity of accommodation and its high cost was impacting the State’s attractiveness for mobile investment and talent.
The cost of liability insurance for retailers has risen by more than 200 per cent over the last five years
By the same token, he says, “there’s no silver bullet for solving” it, even though parties will claim to have just that.
For Leo Crawford, chief executive of BWG Group, the business behind Spar, Londis and Mace, the high cost of insurance is a major election issue.
“The cost of liability insurance for retailers has risen by more than 200 per cent over the last five years, and these now-excessive costs are limiting the sector’s ability to grow, create jobs and deliver value and choice to customers,” he says.
“Systemic reform of the insurance industry in Ireland is critical and the next government must work with our industry to combat spurious claims, reduce awards for very minor injuries, increase transparency in the way our premiums are calculated and claims settled and, ultimately, to reduce the cost of premiums, particularly for consumer-facing businesses like those in the retail, hospitality and leisure industries,” he says.
Louise Phelan, the former vice-president of online payments company PayPal and now deputy chief executive at Phelan Energy Group, believes employers need to be more flexible on workplace arrangements, principally to allow their staff avoid congested commutes. But that also relies on government actively promoting locations outside the big cities to prospective employers.
“We as CEOs need to shift our focus to workforce outputs rather than workforce visibility,” she says. “We should be holding our teams accountable to deliver outputs as opposed to have them in the office every day; let them work from home, work from their local regional hubs,” she says.
Affordable accommodation
Phelan agrees that quality of life has become the number one issue for business. And one way of addressing that is for companies to be open to locating away from the major urban centres. Cities have advantages, but the increasing problems in finding affordable accommodation and the hassle of commuting can offset many of these.
Pressures around childcare availability and increasing costs have had a negative impact on parents in our business
"Our new vision needs to understand that foreign investors would prefer to travel an hour by motorway from Dublin airport, rather than spending non-productive time in Dublin traffic," she says. "PayPal has proven this already with their move to Dundalk in 2012. PayPal chose Dundalk over Dublin when opening an operations centre in 2012, which would eventually go on to employ 1,000 people.
Childcare is another high priority for business leaders, with Vodafone Ireland chief executive Anne O'Leary arguing that a new policy relating to the provision of childcare should be high on the action plan of the next government.
“As a business with more than 2,000 employees in Ireland, we know that pressures around childcare availability and increasing costs have had a negative impact on parents in our business,” she says.
“We have taken proactive steps to address this problem through our market-leading maternity and parental leave policies; however, it is important that the new government puts in place the right policies to support parents across the wider industry,” she says.
Fine Gael’s election slogan last time around – “keep the recovery going” – bombed precisely because people weren’t necessarily feeling it and because of overburdened, poor-quality public services. If the views of the business figures we spoke to are representative of the wider sector, there’s probably never been a time in Irish political history when the interests of business coalesce so closely with those of voters.
