There was a time, not that long ago, when the Irish state could really have used a free €13billion, shoved into its unwilling pockets by the European Court of Justice. At that time, circa 2011 or 2012, the state was in the humiliating position of having its finances monitored by the International Monetary Fund to the extent that the Minister for Finance essentially had to have his budget approved by the state’s lenders annually. It’s almost hard to remember that just a decade or so ago, “Austerity” was one of the most regularly cited words by left-wing opposition politicians. Today, you never hear them use it.
The simple reason for that is that we no longer live in an age of austerity. Depending on what accounting you make for inflation, this Irish Government has exploded annual spending over its five year term of office by 50% (taking no account of inflation) or 20% (giving it the most generous possible account for inflation). Even before the windfall the state received yesterday, politicians were planning an enormous spending splurge in a pre-election budget.
Aside from that, it is simply the case that very few – if any – of the many problems the state has are related to a lack of money. Just last week, Sinn Fein pledged an astonishing €39billion spending programme on housing alone. You may have heard criticism of that from some quarters, but there’s one criticism you didn’t hear: Nobody in Government or media said “that’s unaffordable”. They probably should have, mind you, but they didn’t.
The budget surplus for this one year alone in Ireland was projected by the Minister for Finance in April to be in the order of €8billion. That is to say, on current performance, the money from Apple represents about 18 months of Government income over expenditure, just on current performance. It’s a lot of money to be sure, but it’s not money that the Government needs, right now.
Which is why, in truth, the only sensible thing to do with it is to use it to pay down national debt or put it into some other ringfenced future fund, like pensions.
In truth, we don’t really need to pay down any national debt either. As things stands, Ireland owes what might appear to be an eye-watering €235billion to its lenders. Yet as a percentage of GDP, which is the traditional measure of these things, the figure stands at a very healthy 57%. That is to say, 57% of what the country produces in a single year could pay the whole thing back. By contrast, for the USA that figure is 124% and growing. They have a debt problem, we do not.
One problem Ireland does have – in common with many other countries – is an aging population and a future pensions crisis that is, on current trends, inevitable. As healthcare outcomes continue to improve, people will spend more and more of their lives as pensioners and in need not only of income support, but of more healthcare spending. At the same time, with the birth rate falling, we will eventually and inevitably reach a point where demand for money for pensioners outstrips the ability of younger people to pay the taxes necessary.
Ireland, in fairness to successive Governments, has long recognised this problem. At the moment, the state has an investment fund – ISIF, the Irish Sovereign Investment Fund – whose job is supposed to be to manage a rainy day fund for this eventuality, and any other crisis that comes down the line. That fund, per its website, currently manages about €4.8billion in sovereign investments. There’s an argument for giving them the entire €13billion and telling them to invest it.
Making this decision – or one very similar to it – now, and making it quickly, would be both good policy and good politics. Good policy for the reasons outlined above, and good politics for the following reasons:
We are now just a few months away from an election. Politicians and money at election time is a bad combination. Politicians and money, and voters who (respectfully, dear reader) don’t understand the scale of the figures involved is a recipe for pure chaos. Leave that €13billion on the table, and it will be promised by various parties to solve just about every problem under the sun. It would fix health, we’ll be told (it wouldn’t, since health spending annually is already almost twice the €13billion that we’ve just received). It will build new roads and bike paths and railways (we have a shortage of builders, not cash). You name the problem, and some local wag will say that the €13bn will come in handy to fix it.
For the Government, this risks becoming a running sore: It simply won’t be able to make any kind of economic case against opposition proposals – especially those from the loony left – if the ready-made answer is “we’ll use the Apple money”. What’s more, Government will come under pressure itself to find things to spend the money on that are better and more voter friendly than simply investing it.
Further, while a Government that has splurged like this one has absolutely no case to make that it is fiscally responsible, it is in the relatively happy position of having been able to splurge so far without consequence – so the public likely still thinks of it as fiscally responsible. One of the really positive things the Government has going for it, going into the election, is the overall fiscal performance of the state. “We made this”, it will say.
As such, it probably makes more sense for Government to hand the €13bn over and say “we don’t need it right now because we’ve run the country so well, so we’ll save it for a rainy day”. Since the opposition won’t be able to resist spending the money in promises, Government can then create a political contrast between fiscal rectitude (laughably) and fiscal irresponsibility.
For once, good politics and good policy align here. Which is why, unfortunately, one might not be surprised if Government was to do something else entirely.