Ireland needs to ditch empty promises and economic fairy tales and start confronting reality
The next six weeks or so are going to go a long way to defining the Government's term in office.
The printers are going to be busy. We are due an updated housing plan, a new strategy on competitiveness and productivity, the Summer Economic Statement and a new medium-term budget strategy along with a revised
National Development Plan
outlining state investment plans.
Then, in the middle of all this, there is the deadline for the US/EU
tariff
talks on July 9th.
The Government needs to use this crucial period to set some kind of coherent economic narrative for its term. So far it has been firing blanks. For example,
bits of its housing plan
are drip-feeding out in an often-disorganised fashion. Perhaps this is meant to give the impression of busyness, but all it does is confuse people.
READ MORE
At the heart of all this is credibility. A believable strategy must have some hope of delivery. And here the State – in the widest sense of the Government and the public service – is struggling.
It is not just that things are happening late – like the National Children's Hospital. Or that there are signs of waste and carelessness with public money – step forward the Leinster House bike shed. It is that a lot of vital stuff is simply not happening at all.
It is a stretch to believe that the Metro will ever get built. Or the giant project to bring water from Shannon across the State. Or the offshore wind infrastructure that is meant to be
at the heart of our energy transition
, where the Draghi report on EU competitiveness showed Ireland has one of the most long-drawn out consent mechanisms in Europe.
In this context, government targets take on an air of fantasy. Less than six months into the Coalition's term, Minister for Housing
James Browne
told us this week that the target of building 41,000 homes this year is not going to happen. So why should we believe the target for 2026 or the 300,000 plus homes promised during the Coalition's term?
The Departments of Finance and of Public Expenditure will publish a budget strategy over the summer, based, we must assume, on tighter control of day-to-day spending. But key spending targets have ended up being roundly ignored in recent years. Central Bank researchers estimated this week that permanent Government spending has risen by 37 per cent since 2021. Had the annual spending limits of 5 per cent set by the previous administration been adhered to, the increase would have been 16 per cent. That is a €16 billion difference.
Official documents and targets seem to exist in some kind of parallel universe where no one really expects them to happen. They are more fairy stories than strategy. And the risk with the plans coming in the weeks ahead is that these are more endless checklists of stuff that is happening already and stuff that might or might not happen at all.
Some central themes and directions are urgently needed. And some convincing messages of actual action to get things done. Investment is built on certainty, yet in key areas such as climate change and housing this is simply missing.
The current drift has a cost. The stalling of investment across the economy is in part due to threats of tariffs from
Donald Trump
. There isn't much the Government can do about that. But it can start to get its own story straight.
Lack of clarity about housing policy is causing parts of the construction industry to sit on its hands. With talk of more incentives and tax breaks on the way, and
uncertainty on state commitment in areas of social housing,
builders wait to see what emerges. House building volumes slipped by 4.3 per cent in the first quarter of this year, compared to the previous three months.
Meanwhile, big foreign investors – and their international headquarters – are starting to realise that promises to deliver better energy and water infrastructure are simply not being met.
Investment plans, on hold to see how the US/EU talks work out, will restart at some stage. Ireland is at risk of not being in the frame. The first real alarm bell for this was when
Intel ditched Oranmore in Co Galway
as a possible site for a big new plant in 2021 because the State could not guarantee how long planning would take on vital supporting infrastructure. This followed the seemingly endless planning saga for the
Apple data centre in Athenry
, also Co Galway.
A convincing economic narrative needs a few central points that everyone has signed up to. Read the
Central Bank
research out this week for a convincing case on how state investment remains low here, despite tripling over the past decade. This is because the economy and population have grown so fast and the economy was already hobbled by years of underinvestment after the financial crash.
To allow space for investment to continue to grow – and provide a buffer if the public finances tighten – other parts of the budget need to be under control. This means keeping the budget in surplus and continuing to put away excess corporate taxes in the funds for the future.
This needs to be a central part of a coherent strategy. To be credible, the whole Government – including
Micheál Martin
and
Simon Harris
– need to explicitly sign up to this. If it is just a creature of the budget departments, then it will be there to be negotiated away during the budget process.
It goes without saying that the second leg of any strategy needs to focus on prioritisation and delivery. Many thousands of words have been written about this. And the challenges are significant. But Ireland, for now anyway, is in a uniquely privileged position with a flush Exchequer and room for manoeuvre. The resources are there. Spending them well is the challenge.
Ireland can consider how to respond as the Trump story plays out. The odds are that it will continue to do so long after the July 9th talks deadline. But the Government needs a convincing narrative of how it is going to manage what is under its control and use what may prove to be transitory budgetary riches.
There are dangers ahead. But we are starting from a good position, with full employment and flush coffers that are the envy of many other countries. The Government needs to start telling a better story – not just to the public and investors, but also to itself.
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To allow space for investment to continue to grow – and provide a buffer if the public finances tighten – other parts of the budget need to be under control. This means keeping the budget in surplus and continuing to put away excess corporate taxes in the funds for the future. This needs to be a central part of a coherent strategy. To be credible, the whole Government – including Micheál Martin and Simon Harris – need to explicitly sign up to this. If it is just a creature of the budget departments, then it will be there to be negotiated away during the budget process. It goes without saying that the second leg of any strategy needs to focus on prioritisation and delivery. Many thousands of words have been written about this. And the challenges are significant. But Ireland, for now anyway, is in a uniquely privileged position with a flush Exchequer and room for manoeuvre. The resources are there. Spending them well is the challenge. Ireland can consider how to respond as the Trump story plays out. The odds are that it will continue to do so long after the July 9th talks deadline. But the Government needs a convincing narrative of how it is going to manage what is under its control and use what may prove to be transitory budgetary riches. There are dangers ahead. But we are starting from a good position, with full employment and flush coffers that are the envy of many other countries. The Government needs to start telling a better story – not just to the public and investors, but also to itself.
