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When deals are done, the parties will have to look beyond their manifestos

Colm McCarthy


Insisting there will €11bn for spending and tax cuts while adhering to targets for budget balance is mistaken

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POLL POSITIONS: Sinn Fein’s Mary Lou McDonald, with councillor Seamas McGrattan, casting her vote in Dublin. Photo: Niall Carson/PA Wire

POLL POSITIONS: Sinn Fein’s Mary Lou McDonald, with councillor Seamas McGrattan, casting her vote in Dublin. Photo: Niall Carson/PA Wire

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POLL POSITIONS: Sinn Fein’s Mary Lou McDonald, with councillor Seamas McGrattan, casting her vote in Dublin. Photo: Niall Carson/PA Wire

Once the votes are counted, attention will turn to the possible combinations needed for a new Dail majority.

The exit poll suggests that either Fine Gael or Fianna Fail plus Labour and the Greens is a possible grouping, requiring extra support from smaller parties and independents. But there could also be a coming together of Fianna Fail and Sinn Fein, and there could be another minority government supported with a confidence-and-supply arrangement.

In recent times each new government has been formed based on negotiations between the potential participants, resulting in a 'programme for government' which can be quite specific about the direction of policy. These negotiations will take as their starting point the manifestos issued by the parties during the election campaign. There are potential conflicts between Fianna Fail's plans and some of the proposals in the Labour and Green documents, and even more should Sinn Fein be involved.

All parties except Sinn Fein accept the notion that €11bn will be available for expenditure increases and tax cuts, while adhering to targets for budget balance. Unfortunately, they may be mistaken, since the €11bn is not a bankable figure, guaranteed to be available. It is a conditional forecast prepared by the Department of Finance and the conditions are essentially two: that economic growth at a decent pace will continue and that there will be no upward drift in the cost of existing spending programmes.

If there is uninterrupted growth, delivering improved tax revenues out to 2025, the recovery will be 12 years old at that point. It is tempting fate to expect no serious hiccups. The recent buoyancy of Corporation Tax revenues has flattered the budget figures and could reverse, and Brexit is not done.

When Leo Varadkar met the EU president in mid-January, he described the current juncture as 'half-time' in the Brexit process. He was exaggerating - the game has barely started. Our most important trading partner could be wholly outside the EU's economic orbit next January without a free trade agreement, delivering a severe hit to Irish business as tariffs, quotas and trade frictions emerge.

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Taoiseach Leo Varadkar (right) with partner Matthew Barrett at the Six Nations match at the Aviva Stadium. Photo: Brian Lawless/PA Wire

Taoiseach Leo Varadkar (right) with partner Matthew Barrett at the Six Nations match at the Aviva Stadium. Photo: Brian Lawless/PA Wire

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The assumption that there will be no upward drift in the cost of existing programmes requires a sharp improvement from recent performance. The budget balance finally achieved last year was due to unexpected tax revenues offsetting unplanned spending overshoots. For the years ahead, the pressure is building for another round of public service pay increases and the election campaign has stoked expectations. On Friday another capital programme overshoot was revealed, this time an unbudgeted extra €600m for a suburban rail project in the Dublin area. It will be no easier to contain spending to the projected figures than it has been in the recent past and the Labour manifesto sounds the most committed on this point, the party planning to restore a distinct cabinet minister for public expenditure to keep the lid on. Paschal Donohoe has combined the role with responsibility for Finance through the last government and it will be a statement of intent if the Labour view prevails.

The outlier in budgetary terms is Sinn Fein, whose manifesto could not be funded inside the €11bn envelope without tax increases, and whose capital plans would require further borrowing - and hence an increase in outstanding debt. The macroeconomics appear to involve a sharp fiscal stimulus in an economy already pushing against capacity constraints, reminiscent of the ill-starred Fianna Fail experiment back in 1977.

The parties are aligned on health, where the Slaintecare package has de-politicised policy at least for now, but there is plentiful scope for conflict over climate change and transport.

The Greens have made heavy commitments on shifting to public transport, which they appear to equate with rail. The feasibility of delivering rail-based service in most parts of both urban and rural Ireland appears to have been taken for granted, reflected in a Green bias against further road investment. But most public transport in Ireland, including in Dublin, is delivered by buses, which travel on roads, and there has been weak funding for road maintenance in recent years.

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Labour’s Brendan Howlin

Labour’s Brendan Howlin

There was a big public demonstration in west Galway a few months back. The people were not demanding a new railway line up to Sligo, favoured by a few local politicians, they were concerned about potholes. It is established policy from all parties to move the vehicle fleet to electric propulsion and to de-carbonise electricity generation. An all-out assault on the roads budget makes little sense if they will provide de-carbonised private transport and most of the public transport capacity.

All parties are pro-EU but focus largely on domestic measures to reduce Irish emissions (roughly one-tenth of one per cent of the world total) with surprisingly little to say about Ireland's ability to influence European policy. Membership in the EU is what the military people call a force magnifier for small countries, and what the EU decides to do really matters.

There will be big changes in EU policy over the next few years and it would have been nice to hear what the parties think about Commission plans to deal, for example, with emissions from aviation and marine transport.

Sinn Fein are flat against the taxation of carbon, as are People before Profit, in clear conflict with EU policy.

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Green Party leader Eamon Ryan at the polling station. Photo: Sam Boal/Rollingnews.ie

Green Party leader Eamon Ryan at the polling station. Photo: Sam Boal/Rollingnews.ie

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There will be agreement on aspects of housing policy, including the evasions. Everyone agrees on big targets for local authority newbuild and on better protections for private tenants - but there is little mention of the elephant in the room: the dysfunctional system of zoning and planning, which has strangled supply in the private buyer market, especially in the Dublin area.

Home ownership has fallen back to 1971 levels and a generation of first-time buyers will never be able to afford Dublin prices. But the city is plentifully endowed with derelict sites and surrounded by outer suburbs zoned for agriculture, or "amenity", whatever that means.

Election candidates promise new railway lines to places from which nobody would choose to commute if a coherent land-use policy was in place and land prices reduced. Every derelict side in the city and every deserted wilderness on the outskirts is defended against development by an unholy alliance of residents' associations and hypocritical politicians, who champion affordability but obstruct policies to bring it about.

The Greens come closest to acknowledging the presence of the elephant with some language hostile to urban sprawl and commitment to a site-value tax. Affordability means lower house prices, which means more zoning and easier planning permission for developers of derelict sites. This is not complicated.

The flurry of excitement late in the campaign about pensions has brought forth a plethora of sticking-plaster 'solutions' which do not acknowledge another elephant.

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Fianna Fail leader Micheal Martin and wife Mary voting in Cork. Photo: Yui Mok/PA Wire

Fianna Fail leader Micheal Martin and wife Mary voting in Cork. Photo: Yui Mok/PA Wire

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The purpose of higher retirement ages is to get people to work longer. If life expectancy continues to rise, the tax and savings rates required to sustain the system at today's retirement ages will cost everyone dearly one way or the other. It is time the public were allowed to share the following secret: if you would like to live into your 90s and have enough pension income to do so, you are going to have to work well into your 70s, saving or paying taxes.

The inability of the first-time buyer generation to afford mortgages and the lifetime saving that follows from their repayment is part of the looming retirement income crisis. The housing affordability crisis and problems with retirement income provision are linked. The negotiations for a new government provide the opportunity to address issues ducked in the manifestos.

Sunday Independent