The departure of Michael McGrath to Brussels, where he been nominated as Ireland’s European Commissioner, and the appointment of Jack Chambers as Minister for Finance is an important moment, as the Coalition enters the latter part of its time in office. McGrath’s relationship with public spending minister Paschal Donohoe – before and after they swapped jobs in late 2022 – has been a central feature of the Coalition, which has acted as a brake on budgetary extravagance. Now that one half of this partnership has moved on, the question is whether the way is clearer for a more nakedly political pre-election budget.
As an experienced and able senior politician, McGrath may land a senior commissioner role in Brussels, though the intense haggling that will now take place makes this unpredictable. The value to Ireland of getting a senior role for the commissioner can be overstated. In theory, at least, and to a large extent in practice, commissioners act with an EU-wide mandate. However, the competition for top jobs this time around suggests some big countries are thinking otherwise.
At home, the preparations for the budget are stepping up and the timing of McGrath’s departure is far from ideal. The Summer Economic Statement, which outlines the broad parameters of the budget package, is due to be published in early July. The new minister will have to read himself in quickly and faces a hectic period of negotiation in the run up to the package itself.
It is an open question the extent to which the change in personnel will alter what is decided. However, it is clear that McGrath and Donohoe, while announcing large packages, have sought to keep the public finances in check, moving the budget into surplus and establishing two new funds to save money for the future, which will also act to limit giveaways in the short term.
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Their policy has faced criticism from the Irish Fiscal Advisory Council, the budget watchdog, for being too loose. However, the imminent general election is now another factor in the equation and senior ministers have already hinted at big plans for spending and tax changes.
The job of the budget ministers will be to say “no” to many of these. Inevitably the package will have a political veneer, but it cannot turn into a blatantly pre-election giveaway. This would risk pushing up inflation and would leave less scope in the years ahead for the vital investments needed in economic and social infrastructure, a point underlined in the latest Economic and Social Research Institute quarterly commentary and in the Ibec pre-budget submission.
The incoming Minister for Finance has a key role. The two budget ministers must hold back the tide of pre-budget demands and ensure some control is kept on the public finances, while focusing on the economy’s vital longer-term needs. It will not be an easy job.