How Fine Gael’s tax cut proposal soured relations in the Coalition

Since 2011, the walls of the Fine Gael party rooms in Leinster House have been adorned with large sign spelling out the party’s core values: things such as “enterprise and reward”, “hope”, “integrity”, “security” and so on, hung beside the Tricolour, EU flag and a portrait of Michael Collins.

This week saw an extended and contentious outing for another core Fine Gael value – albeit one that’s not spelt out on a banner – tax cuts.

The high-profile gambit by a group of three Ministers of State, to publish an oped in Monday’s Irish Independent calling for budget tax cuts worth €1,000 for families, was no solo run. It was, in the words of Fianna Fáil TD for Limerick Willie O’Dea, an “old fashioned political stroke” – seen as an attempt to brand tax cuts as a specifically Fine Gael innovation, and for the party to have a sustained period of coverage talking about its policies and core values. As far as politics go, so far, so predictable. But the foray has soured relations between Fine Gael and Fianna Fáil.

While there is no danger to the Coalition, there is a widespread view in Fianna Fáil that the intervention was, in the words of one Fianna Fáil minister, designed to “provoke and undermine” – or that the fallout was simply seen as a price worth paying, even if it endangers cohesion in government. Fianna Fáil backbenchers have privately bridled, branding it “juvenile” and “transparent”.

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After a week of barbs and political jousting, what is the true cost of the €1,000 tax plan?

The oped at the centre of the controversy landed with “zero” notice, a Fianna Fáil minister says: “completely from left field”. But the article had been in gestation for a couple of weeks.

[ ‘Far too early’ to say if FG proposal for €1,000 middle income tax break will be in Budget ]

There was careful planning, including the format – a traditional newspaper article was seen as more telling than a tweet, a podcast or being floated during a routinely leaked meeting of the parliamentary party. Ministers of State, not backbenchers, would carry the message.

Seanad leader Lisa Chambers said it was ‘populist and not costed’ and said it led to ‘eye rolling’

Age, outlook and profile mattered: of Jennifer Carroll MacNeill, Martin Heydon and Peter Burke, Heydon is oldest at 44. All three are members of the Fine Gael officer corps, in politics for the long haul and anxious to influence matters – as well as see themselves elevated. With Fine Gael hit by no fewer than five planned retirements from their backbenches, a logistical and political headache for Taoiseach Leo Varadkar, the optics mattered.

Fianna Fáil’s response was publicly measured, but belied an internal unease. The even-tempered Minister for Finance Michael McGrath called it “unusual”; Minister for Housing Darragh O’Brien said it was “far too early” to speculate on whether the tax break would make the budget. Their backbenchers were less guarded: Seanad leader Lisa Chambers said it was “populist and not costed” and that it led to “eye rolling”; Niall Collins, the Minister of State, was also critical. McGrath told reporters he would not be bullied on the budget.

‘A bit desperado’

It was becoming clear that Fianna Fáil was more than mildly miffed. Speaking privately, figures across the party railed against the intervention. It was a “distraction” as Varadkar has had a “bad few weeks”, said one party figure, branding it “all a bit desperado”. A backbencher also blamed the Taoiseach: “There’s an immaturity at the top of Fine Gael that reflects how it does politics.” The party was also fuming that Fine Gael had attempted to take ownership of what is a Programme for Government commitment for tax relief, raising voter expectations in the process.

Fianna Fáil believes that the Fine Gael proposal overstates how many people would benefit and by how much, and is based on a generous interpretation of Revenue figures

But perhaps most importantly, it put Fianna Fáil in the unexciting position of defending the integrity of the budgetary process – rarely much of a vote winner – against the backdrop of swashbuckling, tax-cutting policy from its Coalition partners. Ministers feel they were on the receiving end of an orchestrated and choreographed plan which, one said, “certainly undermines the core trust. Even if it’s proxies doing it on behalf of Leo, it’s clear it’s got his imprimatur.”

“Trust,” this minister says, “is what enables stability in government and if trust breaks down, it can have a cascading impact”.

Fianna Fáil also believes that the Fine Gael proposal overstates how many people would benefit and by how much, and is based on a generous interpretation of Revenue figures – a slapdash approach to what they say should be done within the structured confines of the budget process.

Backbenchers such as O’Dea point out that Fine Gael “on its own wouldn’t be in a position to increase the price of a postage stamp”, and that tax relief is a cross-Coalition plan. “There will be tax relief in the budget. Fine Gael are trying to give the impression it is down to them.”

[ Fine Gael throwing a €1,000 tax cut into the mix started a row ... but it may not be far off what happens ]

There is also pressure from rebels such as O’Dea on his own party leadership to go toe to toe with Fine Gael – another destabilising ripple.

“We need to be more assertive ourselves and start putting forward our priorities,” he said. “If the leadership doesn’t do it, I’ll be doing it myself.”

Even as the fallout rained down, there was a distinct sense of satisfaction within Fine Gael, even if they claimed to be a bit perplexed by what one party source called “the ferocity of Fianna Fáil’s opposition”.

There is a view in Fine Gael that their Coalition partners have gone offside themselves on occasion, and the party has stridently defended the op-ed. It was “Fine Gael talking about Fine Gael priorities, not Sinn Féin or some sh*** proposal from the opposition”. It rallied the party, tapping into something – tax cuts – popular with both its base and backbenches, moving the Taoiseach on to familiar ground, and differentiating the party from its Coalition partners.

While Civil War politics has effectively been dead and buried for several years, the parties still have a deep wellspring of tribalism they can dip into which galvanises them – for example, Fine Gael’s Michael Creed telling his parliamentary party colleagues that they shouldn’t “take lectures from those who crashed the economy”.

Ministers also believe that there is a clear opportunity to take the policy initiative, backed by the weight of an exchequer laden with money, in a way that the party has not been able to despite being in power for 12 years unbroken. The theory goes that Fine Gael has always been constrained by crisis in this period – by recession, the strictures of recovery, Brexit, Covid, a war in Europe – and that notwithstanding the cost-of-living crisis, it has a chance to stake out ground for itself with an election on the horizon and drawing nearer.

Copping blame

As the week drew to a close, there were efforts to draw a line under the controversy. Green Party leader Eamon Ryan, one of the Coalition leaders, said the electorate would not appreciate budget negotiations going on in public. Thomas Byrne, the Fianna Fáil Minister of State, told The Irish Times on Thursday: “We all have very important jobs to do and the budget negotiations will take place in autumn. People will judge us by what we do, not what we speculate on”.

The move is seen as reflective of a style of politics his Coalition partners closely associate with Varadkar, one they were wary of when he took up the reins in the Taoiseach’s office again

Taoiseach Leo Varadkar told this newspaper he didn’t send his junior ministers out to write the piece, but owned the argument that underpinned it. Rightly or wrongly, the Taoiseach is copping a lot of the blame within Fianna Fáil for the gambit, seen by some as a replacement for his 30 per cent tax rate proposal.

The move is seen as reflective of a style of politics his Coalition partners closely associate with Varadkar, one they were wary of when he took up the reins in the Taoiseach’s office again: high-profile plays that tie him or his party to visible and voter-friendly policies, even if they risk cohesion within government.

The warning from one Fianna Fáil figure was clear this weekend: “He knows the consequences of playing games that are damaging.”