As an escape from the hurly-burly of politics, Paschal Donohoe loves to get lost in a bit of science fiction. On the window sill beside his desk in the Department of Finance sits a collection of bobble-head figurines and collectibles, including Darth Vader and Chewbacca from Star Wars, the new Doctor Who (Jodie Whittaker), a Dalek and the Flash.
“I buy a couple of bobbleheads a year ... and I’ve a nice collection there. Informed guests sometimes give me gifts,” he says with a smile.
His collection might soon need a new home if this week's opinion poll ratings become a reality when people cast their votes on February 8th. An Irish Times/Ipsos MRBI opinion poll had Fine Gael at 23 per cent, trailing Fianna Fáil by two percentage points.
More worryingly, perhaps, for Donohoe and Fine Gael was the finding that three-quarters of voters say they want to see a change of government, with 55 per cent saying the State is going in the wrong direction.
Donohoe is not for turning on pushing out the pension age to 68, arguing that such a move would cost about €200 million a year. But he says Fine Gael will put forward a compromise
Donohoe's pitch to voters is based firmly around the Government's record on the economy, Brexit and its €116 billion Project Ireland 2040 plan to rebuild the State.
With the budget back in surplus, a record number of people at work, incomes rising again and an initial deal on Brexit that prevents a hard Border, it’s not an unreasonable pitch.
Yet on the hustings it has been pensions, housing and the health service (issues that affect the everyday lives of people) that are dominating the debate, with Fianna Fáil and other parties producing punter-friendly policies to woo voters.
“I would make the case...that to be coming into 2020 with a budget surplus of 0.7 per cent of national income, with the ability to get to a surplus of 1 per cent next year, which would then give a cash surplus to the State of €3.5 billion or €3.6 billion, and also having capital investment levels that are now in line with the EU average has been a good journey for a Minister for Finance in a minority Government with the competing political demands I’ve had,” he says.
Yet in the “here and now”, as he repeatedly calls it, some 1.5 million private sector workers have woken up to the fact that, while they are required by their employers to retire at 65, the qualifying age for the contributory State pension will rise to 67 next year and to 68 in 2028. To bridge the gap they have to apply for dole benefits, which are worth less and will be means tested for some.
Public servants don’t face the same issues as they are protected under a deal dating back to 1995.
Transitional pension
Both Fine Gael and Fianna Fáil have promised to establish a transitional pension that would help private sector workers bridge the gap, although the precise details remain fuzzy, with both parties only publishing their manifestoes today.
Donohoe is not for turning on pushing out the pension age to 68, arguing that such a move would cost about €200 million a year. But he says Fine Gael will put forward a compromise proposal to help those impacted by the pension changes.
“If we begin to undo that particular change [making the retirement age 68] it will create challenges for us in the future regarding how we honour pension commitments that we have now, never mind the fact that we would have more people in the future looking for this pension.
'I don't believe the State can play a role in determining the contract in relation to retirement age between a [private sector] worker and the employer'
“The thrust of the reform overall, if changed, will not only create great costs in the here and now, but the long-term consequences of that change will be very significant and serious.
“If any party is looking to reduce the retirement age and pare it back not only do they have to explain how they’re going to pay for that in the here and now they also need to acknowledge that’s it’s a change that happens each year, needs to be paid for each year. It’s not a single payment that we’ll need to make.
“Also, what will be the consequences for the long-term sustainability and funding of the social insurance fund.”
Mind you it’s not clear how a transition payment at the same level as the State pension, paid out of the social insurance fund annually, will save any money but that detail might yet come.
Donohoe also attacked Fianna Fáil’s promise to “outlaw” contracts that require private sector workers to retire at 65.
“I don’t believe the State can play a role in determining the contract in relation to retirement age between a [private sector] worker and the employer. It’s really important to be clear that what Fianna Fáil are talking about is a change in the law that will only impact the future; it won’t impact anybody who is grappling with the issue now.”
Housing
On housing, Donohoe says he "absolutely" understands the "anxiety and concern" people have about being able to put a roof over their heads. Goodbody this week estimated that 21,500 homes were built in 2019. While a substantial increase on the previous year, it still fell well short of the 34,000 units that the Central Bank says need to be built each year to meet demand.
Separately, rents are at record levels, hobbling the ability of first-time buyers to save the deposit necessary under the Central Bank’s mortgage rules to secure a home loan.
“The case I will put to them is look at the change in the number of houses that we are delivering at the moment,” he says. “We are going to see, as we move through this year, more houses being built ... between 24,000 and 25,000 homes. This is a huge increase on recent years, and the plans that we have in Project Ireland 2040 mean we will be able to continue with that kind of increase.
“But I understand that for many at the moment it is a long wait. This is why we have put investment behind housing, and why we have made a number of changes in the planning system.”
Fianna Fáil is offering an SSIA-style scheme that would give first-time buyers €1 for every €3 they save for a deposit, up to a maximum of €10,000. It’s an easy message for voters to digest. This would be in addition to the tax rebate of up to €20,000 that is available to first-time buyers under the Help-to-Buy scheme, which Donohoe extended in Budget 2020 for two years.
Again, Donohoe is happy to poke holes in Fianna Fáil’s policy.
'I wouldn't want to see a level of house price decline that is commensurate with what we went through in the crash period'
“The value of Help-to-Buy is that it’s concentrated on first-time buyers and new homes. If we’re going to have a scheme that’s applicable to all purchases [new and second-hand homes] is that not going to have huge costs? And Fianna Fáil needs to explain how that’s going to avoid contributing to the house price inflation that they themselves were so critical of in recent years.”
Recent data from MyHome.ie, the property website owned by The Irish Times, and Daft.ie suggest that house prices fell in the fourth quarter of last year, the first time they have gone into reverse since 2012.
Is it a good thing that house prices are falling?
Some “rebalancing” would be a “positive”, he says, but “I wouldn’t want to see a level of house price decline that is commensurate with what we went through in the crash period”.
There’s no evidence of such a crash in prices, but the Central Bank has suggested that its macroprudential rules have kept a lid on prices, which would otherwise have been 26 per cent higher.
Donohoe describes the regulator’s mortgage rules as “appropriate” in spite of them being criticised by construction industry figures as being too restrictive.
Ultimately, Donohoe’s plea to voters on the housing crisis is to trust that the policies Fine Gael has put in place in the past few years will bear fruit. He notes how mortgage arrears and negative equity dominated headlines only a few years ago but now hardly feature on the political agenda.
"I remember sitting in my constituency clinic in Phibsborough and the most difficult issues I was dealing with were with people who couldn't pay their mortgage, or who had bought homes the value of which had come down hugely in a really short time period. And we managed to make progress in addressing issues like that.
“In dealing with recent housing issues, I’m absolutely confident that we will show progress in relation to these issues soon.”
Brexit
Many commentators think the Government has played a blinder on Brexit. Last October, Donohoe produced a sober budget designed to protect the economy against what was, at that time, the live possibility of a hard Brexit.
With a general election around the corner, many in his party felt they should have loosened the purse strings with a raft of tax cuts and spending pledges. Donohoe has no regrets.
“It was the right decision to make. No minister for finance, no government on the eve of an election has made the decision to go ahead with a budget like that. We were at a time of the most significant uncertainty, and you have to make a decision based on what you think is most likely to happen. There was a real possibility that we were going to face into a no-deal Brexit.”
Will it be possible for the UK to cut a trade deal with the EU by the end of this year, as per the timetable set out in their agreement?
“I believe it’s possible, but I believe it’s really demanding. It is possible but that in turn will change the nature of the trade deal if the ambition is to complete it by the end of this year.”
He notes that it took more than eight years for the EU to complete a trade deal with Japan.
Climate change
On climate change, Donohoe says he will continue to raise the level of carbon tax up to €80 per tonne by 2030, as set out in Budget 2020. This would raise about €6 billion a year for the exchequer.
“I’m committed to continuing to move up the price of carbon in every single budget that I get a chance to do.”
He is “fundamentally opposed” to the Green Party’s proposal to give the revenue generated by the carbon tax back to people by way of a social welfare payment or tax credit.
“I know from having gone through all I did with Irish Water that by the time you set up the system [to refund payments] and go through all the administration in relation to it, you will end up paying to give people back the money they have paid in carbon pricing.
“We have just made a significant move on the price of fuel in Ireland. I believe we can continue with those moves . . . but the key to it is showing those who are paying it that the revenue being generated by their taxes is being used back in a visible way in their community.”
Donohoe recognises that the global economic landscape has changed, with globalisation replaced by protectionism, trade wars once again a feature, and increased pressure from big nations for corporation tax reform.
The OECD’s process on corporation taxes could cost Ireland about €2 billion a year, he acknowledges. Our corporation tax receipts hit a record €10.9 billion in 2019, and are a key reason why the budget is now in surplus.
Tax codes
“Predictability and the way we plan change in our tax codes is going to be more vital than ever. As we respond back to what is under way in the OECD, companies knowing the journey that Ireland is on and the predictability of that will be a huge competitive advantage in the years to come.”
In recent budgets Donohoe has introduced a number of measures to assist SMEs and the self-employed. He wants to continue this work, to encourage such businesses to "scale up" to become the next CRH or Glanbia.
“For example, the change I made in the R&D [research and development] tax scheme to make it applicable to smaller Irish companies is a positive development and the kind of thing we should be open to looking at in the future.”
Donohoe has been Minister for Finance since mid-2017, arguably the second-biggest job in government. Before he heads off to canvass in Dublin Central, where he should comfortably retain his place in the four-seat constituency, I ask if he would one day like to become Taoiseach.
“No. I’ve worked with two separate taoisigh up close. I’ve been with both of them continuously, and I’ve seen the demands that are placed on them. I love the job that I have here, and I would love the opportunity to continue with this work.
“Politics is a deeply serious craft. This is not a reality TV show. I’m not a celebrity. I want to do it [politics] for a good while longer. I’m not one of those politicians who is hoping for a quick exit, and I would ask anyone living in Dublin 1, 7, 3, 9 or 11 to consider that carefully.”
Paschal Donohoe on ...
... his biggest achievement as Minister for Finance "The thing that means the most to me is when you go along to a new housing project that is now happening because you made resources available for it in 2016 and 2017 and to see the difference that makes to people.
“On a macro level, that I managed to put together a series of budgets that led to our country having a growing surplus in a minority government. It’s something that I’m proud I was able to do.”
... and his biggest regret "Not managing the National Children's Hospital better. I take my job really seriously. It was a huge project and I take responsibility in how we manage taxpayers' money. I really believe that the National Children's Hospital, when it's open, will be an enormous public asset. But I will always look back at the controversy ... and challenge myself as to how I could have done that better."
. . . his Prudent Paschal nickname "I don't do nicknames. It's for other people to give them to me and I'm not interested in the kind of simplicities that are sometimes associated with the charges that are made against me."
CV
Name: Paschal Donohoe
Age: 45
Position: Minister for Finance (since June 2017) and Public Expenditure Reform (since May 2016)
Lives: Phibsborough, Dublin
Family: Married to Justine Davey with a son and a daughter.
Hobbies: Science fiction and book reviewer. Supports Tottenham Hotspur.
Something we might expect: He lives in the constituency (Dublin Central) that he has represented since 2011.
Something that might surprise: He collects science fiction figurines.
