Business

Legacy of the crisis still hangs over 2018 Dail budget

Dr Muiris MacCarthaigh at his book launch at the Royal Irish Academy with the current Minister for Finance and Public Expenditure and Reform Pashcal Donohue
Dr Muiris MacCarthaigh

AS the now traditional party ‘think in' season kicks off in advance of the Dáil and Seanad returning, eyes are increasingly focused on the Irish government's Budget for 2018.

A decade since the economic crisis began to bite, Minister for Finance Paschal Donohoe has some spending latitude arising from strong economic growth over the last year.

But not much. The effects of Brexit (including the declining value of sterling), a new pay deal with public service unions, as well as European rules that impose limits on what eurozone governments can spend, do not leave much room for largesse. And last week the independent Irish Fiscal Advisory Council urged caution, noting that debt levels remain high, leaving the economy still vulnerable to shocks.

It is also the first budget on new taoiseach Leo Varadkar's watch, and will be closely monitored for indications of the government's political intentions. Varadkar has already stated his preference for tax cuts rather than welfare increases.

And he will be keen to present a responsible budget that begins to address the infrastructure deficits caused by the recession, including social housing.

What may not be noticed is that this will be the first budget since 2010 in which a single Minister controls both taxation and spending plans for the year ahead. In 2011, the new Fine Gael/Labour Party government had split the powerful Department of Finance, a Ministry that absorbed much of the criticism for the scale of the Irish economic crisis.

The Department retained control over revenue raising and was tasked with sorting out the banking sector that had almost collapsed in 2008.

The expenditure side of the Department was removed and combined with industrial relations and public service reform into a new Department of Public Expenditure and Reform (DPER). In the process the Department broke up the decades old duopoly at the heart of Irish government between the Departments of Finance and Taoiseach.

DPER has played a major, if unheralded, role in the Irish economic recovery. As well as enforcing strict spending controls across every public service organization, it negotiated two very significant pay deals which resulted in significant changes to public service employment. And at the same time it introduced a suite of political and administrative reforms, many of which had evaded previous Irish governments.

These reforms ranged from ‘whistle blowing' legislation covering private and public sectors, to regulation of political lobbying and a new accountability regime for the top layers of the civil service.

With the election of the new taoiseach in June, rumours abounded that DPER and Finance would be reunified. In the event, Varadkar decided to retain both Departments but gave existing Minister for Public Expenditure and Reform Paschal Donohue responsibility for the Department of Finance as well.

The co-existence of both departments will certainly come under further scrutiny after the next general election. But for now, a decade may have passed since the economic crisis took hold, but its effects continue to be keenly felt in both budgetary policy and the organization of Irish central government.

:: Dr Muiris MacCarthaigh is senior lecturer in politics and public administration, from the School of History, Anthropology, Philosophy and Politics at Queen's University. His book ‘Public Sector Reform in Ireland: Countering Crisis' has just been published by Palgrave.

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