If I’ve learned one thing about the Irish public in the five years or more that I’ve been doing this job, it’s this: Very few people are interested in the details of economic policy. Readers will, by and large, gobble up content related to the culture wars, or wars overseas, or immigration, or free speech. Start talking about the Government’s economic projections, however, and you can almost feel ten thousand sets of eyes glazing over.
There are, I think, two reasons for this: The first is one I’ve mentioned here countless times, which is the iron political law of big numbers. That is to say, you’ll get far more stick as a politician for wasting twenty thousand euros than you will for wasting two billion euros, because people understand the value of the former number but can’t really relate in terms of their own lives to the latter number. Once you start talking in billions, as you must do when talking about economic policy, people lose a sense of scale. This isn’t stupidity or lack of intelligence, it’s just a very natural thing which we also see in terms of human life: Most people will relate on a much more emotional level to the murder of a single child than they will to news that forty children were killed in a bombing in Ukraine or Gaza. It’s easier to empathise on the micro level than it is on the macro.
The second reason is something I’ll call the imperative of now, which is to say that people are generally always more concerned about the present than the future. This is a problem that the Climate Change people have, and one that they share with journalists writing about economics. It’s just bad messaging to tell people that they have to pay more for their diesel today to stop the world from getting warmer in eighty years. Equally, tell voters that the Government shouldn’t be spending as much as it is today because the national books might look a bit dicey in a few years time, and they’ll still always want that tax cut or extra grant for the GAA club. After all, can’t the Government cut spending somewhere else.
All that said, it really is important to write about the sheer scale of the Government’s current spending, and to note the problems with it. Daniel T. Murray did just that, at the weekend, in the Sunday Business Post:
“Government spending has surged by a whopping 47 per cent in the last five years, from €71.3 billion in Budget 2020 to a planned €105.4 billion in Budget 2025, an increase of €32 billion.
This is nearly double the rate of spending growth under the previous government.
…..Spending has in reality increased by nearly 50 per cent under this government, with basically no serious debate about the need to widen or deepen the tax base to sustain it.”
Putting those figures in some kind of digestible context for readers is difficult, but one way of thinking about it is that total spending on the Department of Health in 2023 was €23billion. In other words, over the past five years, the Irish Government has increased spending by the equivalent of one and a half health services. Another way might be to say that it has spent the equivalent of ten extra national children’s hospitals annually. A third way might be to say that Ireland’s extra annual spending under this Government would be enough to buy out Bank of Ireland and take it into public ownership. Three Times. Every Year. The additional spending is truly extraordinary.
There are some obvious questions here, like “where is all this money going?”
The answer, by and large, is that it roughly falls under four headings: Immigration and refugees, bribes to voters, infrastructure spending, and generic extra current spending.
We have covered the first category extensively here on Gript, and regular readers of my colleague Matt Treacy will know that, for example, €2.1billion went on refugee accommodation payments alone in 2023. Another €4-6billion in total has gone on a range of supports for refugees, ranging from direct payments to accommodation subventions for Ukrainians.
The second category is bribes for voters, which the Government re-brands as targeted supports to aid with the cost of living: This includes things like the allowances on electricity bills, the temporary reduction in fuel duties, and pay increases for public servants.
The third category is infrastructure investment – for example the Government’s flagship housing for all policy which is projected to deliver 30,000 homes annually for a cost of €4billion.
The final category is just regular spending: The spending increases needed every year just to keep the health service, for example, standing still. I mentioned for example earlier that annual health spending in 2023 was €24billion. In 2020, when the Government came into office, that figure was just around €18billion. In other words, spending on health has increased by a third over the lifetime of the Government, even though few would argue that the health service is 33% better than it was.
What is the significance of this, you might ask? Why am I writing about it?
Well first because it should be self-evident to anybody at a very basic level that spending cannot continue to increase like this. The next Government will, as a matter of very basic mathematics, have to tighten the spending reins considerably. That means that you’d best enjoy the forthcoming pre-election splurge on buying your vote, because it will be the last one for a while.
Second, because absent spending cuts, the Government will have to ensure annual revenues of more than €100billion just to stand still, moving forward. At the moment, it has been able to spend like a sailor because of a sharp and short-term rise in corporate tax revenues. Were those revenues to level off or decline (which is possible) then the Government will have to find that money elsewhere. Elsewhere means you.
Third, because there are real questions to be asked, I think, about what return the Irish state has received on all this spending: We are spending an additional €30billion annually – can a politician point to €30billion’s worth of betterment in Irish society? Is the Health Service better? Are the Gardai more efficient? Why do we still have a crippling teacher shortage?
These should be election issues. We elect Governments to be stewards of the public finances, amongst other things. I think there are real questions for voters to ask about why this Government has increased spending so much, for so little obvious in return.