Relative calm and stability returned to the Coalition this week after the excitement of the public budget rows last week. There was something of a clearing of the air at the weekly leaders’ meeting on Monday night, I’m told, after which the atmosphere was, if not one of bonhomie, then at least businesslike and co-operative. Perhaps this was due to the calming influence of the two budget Ministers, Michael McGrath and Paschal Donohoe, who later attended with their officials, including the Department of Finance chief economist John McCarthy. He presented an economic briefing for those present.
McCarthy warned of the dangers of persistent inflation, according to sources with knowledge of the meeting, with demand across a range of areas increasing, while supply remains constrained – in housing, labour and so on. There was sombre talk of recessions in Germany and the UK.
To adapt the old adage about the US Federal Reserve, it’s the job of McCarthy and his pals in Merrion Street to take away the punchbowl just as the party is getting going – in other words to dampen down economic activity as growth is really taking off in order to promote stability and steady (rather than runaway) growth, and to counter the threat of inflation.
But this is increasingly difficult in recent years, and it is likely to get harder. Even as the economy’s rebound from Covid gathers pace, the public and political appetite for a good old party has strengthened. Let’s not put away the punchbowl just yet, the politicians reckon. Let’s have a few more drinks first. There does not appear to be great opposition to this from the public, to put it mildly. And, to continue with the party metaphor, last week Leo Varadkar was suggesting that we send someone down to the off-licence for a couple of slabs of beer in case the punch runs out. As the old political svengali PJ Mara used to say: when we’re out, we’re out.
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There are differences within the Government for sure: between McGrath and Donohoe on the one hand, urging prudence, and everyone else on the other hand, demanding spending
But the row over the budget wasn’t so much about the budget anyway. It was about political positioning and the coherence of the Coalition. The biggest divide in the Government isn’t between Fianna Fáil and Fine Gael about tax cuts and spending; such differences as there are can and will be overcome, their resolution smoothed by the rivers of cash at the exchequer’s disposal.
There are differences within the Government for sure: between McGrath and Donohoe on the one hand urging prudence, and everyone else on the other hand demanding spending; there are (very profound) differences between the Greens on one side and Fianna Fáil-Fine Gael on the other over the pace and extent of climate action. But whether tax cuts amount to €1.5 billion or €2 billion is unlikely to cause the breakdown of the Government.
Where governments do break down, though, is when trust disappears. And, according to people with knowledge of affairs at the heart of Government, Varadkar’s initiative on tax last week significantly damaged trust. Other words used to me were “one-upmanship” and “respect” – as in lack thereof. Personally, I think they’re overreacting a bit. But several conversations suggest that they are genuine. And that matters.
We have to go back to the early 1990s – a political lifetime ago – for the last time a coalition government collapsed. On two occasions governments led by Albert Reynolds – first with the Progressive Democrats, then with Labour – fell apart in a welter of mistrust. The electoral and political consequences for the people involved were not pleasant, which is one of the reasons why coalitions since then have tended to stick together. In each case those governments fell not because of individual issues (the Beef Tribunal, the extradition of paedophile priests and rows over judicial appointments), but because trust collapsed between the principals.
If Varadkar’s Coalition partners conclude that he intends to use his position as Taoiseach to advance Fine Gael’s political interests at their expense then things will get very rocky indeed for the Coalition over its final 18 months. True, voters don’t much care about all that – whether Micheál trusts Leo and what Eamon thinks of it all. Their focus is on the outputs of the Government. But a lack of trust will slow down business in the Government at a time when a rapid acceleration is what’s needed, retard the administration’s ability to deliver anything and make it impossible to present a coherent message. That is not a recipe for political success.
What this week also made clear is that the economic fortunes of the country continue to dazzle, with unemployment at an all-time low, and average earnings rising by a healthy, but not dangerous, 4.3 per cent. Exchequer returns and quarterly national accounts on Friday added to the picture of jobs and earnings numbers published earlier in the week – the economic outlook is still impressively healthy.
Any government has a responsibility to hand over the leadership of the country to its successors in as healthy a state as possible
All this provides the Government with a massive war chest ahead of the next election. And while any government in such a position will always ramp up giveaways before an election, there is a great responsibility on the Coalition to do this in as responsible and sustainable way as humanly possible.
Before the last election a senior Fine Gael figure confided to me that the party’s intention was to buy the election – but to do it more prudently than anyone else would. This time round, there are some people in Fine Gael who believe that the most prudent thing they can do is to keep Sinn Féin out of power, whatever the cost.
That would be the wrong approach. Any government has a responsibility to hand over the leadership of the country to its successors in as healthy a state as possible. As Cicero – or was it Ryan Tubridy? – said, virtue is its own reward. In the long run my guess is it’s better politics too.