Yesterday saw the return of the Dáil after its summer recess. After a weekend of think-ins across the country, where parties took stock and prepared their policies for the rest of the year, the three-pronged coalition government returns for its last few months of being led by Fianna Fáil leader Micheál Martin, with the Cork TD set to switch with his Fine Gael counterpart and current Tánaiste Leo Varadkar on 15 December. The next three months, however, are set to be exceedingly busy, with the cost-of-living crisis, a new British Prime Minister, and the ongoing economic recovery from the pandemic set to take up the majority of the government’s time and energy.
Addressing cost-of-living pressures
First up for the government is the Budget 2023 on Tuesday 27 September. Brought forward by several weeks this year, it will be dominated by the State’s response to the cost-of-living crisis, with significant supports likely for both businesses and households. As well as the usual recurring tax and spending measures, there will also be a separate one-off package to ease the crisis.
The Budget, however, will be a tricky political balance for the coalition to strike. The State’s coffers are healthy, with a €6bn surplus reported recently, thanks to large tax receipts. However, Finance Minister Paschal Donohoe is reluctant to spend this all in one go and has also warned about the country’s overreliance on corporation tax. Ministerial colleagues, however, will be cognisant of the need to act swiftly and decisively to both address the crisis and help their ailing polling numbers.
The Irish Fiscal Advisory Council and the Economic and Social Research Institute have both argued strongly for a more targeted approach. They’ve also warned about the danger of adding to inflation by promising and delivering too much state intervention. The Taoiseach said as recently as Monday, however, that Budget 2023 will focus on safeguarding jobs and protecting people’s incomes ahead of a very difficult winter.
The war in Ukraine and the subsequent energy crisis has also highlighted the weaknesses within Ireland’s energy infrastructure. Government documents have highlighted that Ireland could become fully reliant on the UK for gas by 2026 and notes the infrastructure might not be able to handle peak demand if this occurred. The Government has now sought approval for the construction of an emergency power plant and will seek to ban gas and oil heating systems in new homes. Not only this, but work could begin this year on the €1bn ‘Celtic Interconnector’, which will allow the export and import of electricity between France and Ireland.
Are the Coalition’s days numbered?
The coalition will also be acutely aware of its widespread unpopularity, to put it mildly. A recent Sunday Times poll put Fine Gael on just 20%, while Fianna Fáil had increased slightly to 24%, still a dismal return. Sinn Féin remains the most popular party in the State on around 35% of the vote. After the resignation of Fine Gael Donegal TD Joe McHugh and suspension of the party whip of a number of Green TDs, the government will be conscious of their lack of a working majority. In this scenario, the support of the substantial number of independent TDs will be crucial before Budget Day.
Harmony within the coalition will also be tested over Micheál Martin’s future position after he relinquishes the office of An Taoiseach. Despite a desire to show ‘stability’ and ‘business as usual’ to the electorate from Varadkar’s coronation from 15 December onwards, it is reported that the future of the Finance Minister remains the key sticking point. While Mr Martin told reporters on Tuesday that ‘parity of esteem’ was a foundational principle of the Programme for Government and that this would be Pashcal Donohoe’s last budget as Finance Minister, Fine Gael appears unwilling to step their man down from controlling the public purse strings. Despite Fianna Fáil protests that it was a Programme for Government commitment, Virgin Media Political Correspondent Gavan Reilly has also pointed out that no such explicit commitment was agreed to.
Irish Independent Ireland Editor Fionnán Sheahan, however, has reported that the “Keep Paschal Campaign” is merely political posturing to appeal to the Fine Gael base and that a deal has been done to swap Donohoe with his junior partner Michael McGrath as Public Expenditure Minister. McGrath will likely be Finance Minister for the second half of this coalition’s lifespan, but we can expect the uncertainty to rumble on for slightly longer.
What else is a priority?
As always, housing remains an issue for the Government. Ireland is facing record low levels of rental properties combined with a steep 12.6% rise in rent year-on-year in Q2 2022 - demonstrating the shortcomings of the Housing for All initiative. To combat this the Government has announced its intention to introduce a package of tax reliefs for renters, as well as tax breaks for landlords who provide long-term lets. However, it remains to be seen whether this will be enough to tackle the long-standing challenge.
Enterprise, Trade and Employment officials are also currently combing through submissions to the Government’s consultation on the development of a white paper on enterprise, which will “ultimately serve as a cornerstone in protecting the core elements which make Ireland’s economy attractive for enterprise to flourish.” Ministers will also be keen to ensure there is no break in service for the State’s successful inward investment agency, with a replacement for IDA Chief Executive Martin Shanahan still to be appointed.
Finally, Brexit and the State’s relationship with the UK remains front and centre. Liz Truss, former Foreign Secretary who last week became Prime Minister, held her first phone call with the Taoiseach last Friday. No 10’s latest inhabitant has promised to address the issue of the NI Protocol. The Taoiseach has also said her victory presents an opportunity to reset negotiations with the EU and repair the damaged relationship between the UK and Ireland. Only time will tell whether this will come to pass or whether the Protocol and post-Brexit trading arrangements continue to dominate the relationship between the two countries.