Pat Leahy: The squeezed middle are back, and they’re mad as hell

There was a time, not so long ago, when “the squeezed middle” was the buzz phrase of politics. As economies recovered from the financial crash a decade ago, middle income workers felt were not getting any benefit from the recovery. The top earners seemed to be flying (don’t they always); lower-paid workers were prioritised for pay restoration in the public and private sectors after the grinding years of austerity; but as growth accelerated and so did day-to-day costs, those in the middle felt they were being left behind. And so the idea of the squeezed middle was born.

Politically, it was potent: in 2016, the Fine Gael-Labour government campaigned on the party’s record of steering the country out of penury towards a modest prosperity. But with most voters saying they weren’t feeling the benefits of the recovery, Fine Gael’s message – “Let’s keep the recovery going” – fell flat on its face. Labour was decimated; Fine Gael lost 26 seats – squeezed out by the squeezed middle.

Now the squeezed middle may be about to make a comeback.

The Government knows that it will have to produce another package of measures to alleviate the impact of rising costs. Never mind the economics; that is the political reality.

It’s less than two months since the Government unveiled its package of cost-of-living alleviations, a half a billion euros worth. The Government retrospectively added this to the budget giveaways to make it – by its reckoning anyway – a billion euro it has bunged at the public in the last six months to help deal with rising costs. Economists warned that chasing inflation by throwing money at it was a fool’s errand. The Opposition howled that it wasn’t enough. They’re both right, in their own way.

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Confronting

Since then the political pressure has continued to build as costs escalate. Sinn Féin leader Mary Lou McDonald hardly lets a day go by without confronting the Taoiseach about it on the floor of the Dáil.

“Without action, low- and middle-income households face an income squeeze that they will struggle to withstand and, indeed, many are already unable to cope,” she told him on Tuesday. “The Society of St Vincent de Paul has seen requests for help soar, with households facing an impossible and unacceptable choice between keeping the heating on and doing the weekly food shop.” Within hours the clip was pinging around hundreds of thousands of social media accounts.

The Government knows that it will have to produce another package of measures to alleviate the impact of rising costs. Never mind the economics; that is the political reality. As all politicians have told themselves at some stage, the economists don’t have to get elected. The political pressure for short-term measures will only intensify, and the Government will have no option but to answer it.

Prior to this week – which saw further whopping increases in electricity prices – the general expectation was that another package might have to come just before the summer. I think that has now moved closer. Speculating this week with one Minister that the Government will be forced to produce a new package before the summer recess, I was told: “Much sooner than that.”

“What we’ve done so far is not going to be enough,” Green Party leader Eamon Ryan told the Dáil on Thursday. “We’re going to need to do more.”

Ryan said the Government “will come forward in the coming weeks with a number of other measures . . . to try and help address this real crisis we have”. On the same day, the Taoiseach made noises about an expansion of the eligibility criteria for fuel allowance and a move to give families with children “extra help”.

Another package

A senior member of the Cabinet told me that it was not a question of whether there would be another package, but rather a question of "what, how much and when". Minister for Finance Paschal Donohoe and Minister for Public Expenditure Michael McGrath – whose axis grows ever more important in Government – will plead for caution, but they are politicians too, and no finance minister can stand indefinitely against the will of the leaders of government. Exchequer returns next week – likely to be robust – will further bolster the calls for action.

So I think we can say with some certainty that another package – assuredly costing many hundreds of millions of euro – is on the way. We can also say confidently that when it comes, it will not be enough. And with inflation running at between 7 per cent and 8 per cent, central banks – and finance ministers – will simply not have the firepower to do what they did during Covid. The concept of unaffordability – absent for some time in Government decision-making – will return.

The inescapable truth of all this is that the politics will become extremely difficult. Governments that preside over growing incomes and rising living standards are not, by any means, guaranteed to be popular or certain to be re-elected. But Governments that do the opposite are pretty much guaranteed to be unpopular.

We are now facing into a period where the real incomes of many people are likely to fall. That will revive the discontents of the squeezed middle, to be sure. The more serious implications will be for those further down the income scale for whom the decision is not to cancel the second holiday, but how to meet food and heating bills, how to pay the rent, how to keep their heads above water. It is they who should be the focus of Government action.

The last time incomes dropped was in the 2008-2011 period. That led to the biggest earthquake in Irish political history, upending the political landscape with such violence that its aftershocks are still working their way out. We are not, let us hope, facing something of comparable economic magnitude. But even a pale imitation of those difficult days would have profound political consequences. The outlook is for a year of turbulent politics, fuelled by harsh economic pressures.