Here’s a quote from Simon Harris yesterday, on the economy. It deserves its own paragraph so that the reader can really take it in:
“Mr Harris said the country is “in a healthy economic space but with dark clouds on the horizon”.
Perhaps you, dear reader, are feeling a little more generous than I am. Because when I read that I am inclined to imagine a dispatch from the wheelhouse of the Titanic in 1912, a day or so after sailing from Cobh: “Ship in fine condition and sailing full steam, but with icebergs ahead”.
It goes without saying that a car is in fine condition right up until the very second that it impacts a wall. Or indeed that the wall was in fine condition right up until the car hit it. The point is simple enough: If you can see the wall approaching, or know that the icebergs are dead ahead, the wise thing to do is to take avoiding action.
That, dear reader, is not what the Irish Government proposes to do. As such, that Simon Harris quote should never be forgotten.
Harris made the comments in the context of the forthcoming budget, which is still months and months away but is already generating political chatter since in truth the budget is the only legislative event of the year that politicians really care about.
As my colleague Niamh noted yesterday, Irish Government spending has essentially doubled in just a decade. In 2015, the Government of Ireland spent €55billion. In an analysis by the Sunday Business Post at the weekend, it was found that this year the Irish Government will spend €110billion. Some of that – and I stress some – can be accounted for by inflation. Most of it is just pure politics.
The question Irish people have to ask themselves is this: Is the country twice as good a place to live in 2025 as it was in 2015? Has each additional euro of public spending improved the country as much as the last?
In economics, there is a well-known principle called “diminishing marginal returns”. It essentially goes right to the heart of the Irish problem. Imagine you have an enormous box of chocolates in front of you, and you are starving. The first chocolate – you’ll likely pick your favourite from the box – will be delicious. Will the last one, when you are full of chocolate and are down to eating some Turkish strawberry muck, taste as nice? No, it will not.
The same principle applies to spending. A few weeks ago, I noted that the Irish Government spends roughly €25,000 per year, per homeless person in Dublin. Suppose that went up to €26,000 (a 4% increase) – do we really think the issue would be fixed? Blindly increasing spending year after year simply leads to waste, because after a certain level of funding, the problem is no longer money.
In housing, for example, politicians love spending money. Multi-billion programmes here, ten year investments there, and all the rest of it. But the problem is that diminishing marginal returns kicks in: Soon, the Government is bidding against itself and the private sector for the services of builders, labourers, materials suppliers, electricians, and plumbers – all of whom can increase their prices, driving the cost of housing up even further.
Here’s a statistic for you: In 2023, the Irish Department of Housing had an annual budget of €6.3billion. In that same year, the Irish housing sector delivered 32,525 new homes. That means that the Government spent €190,000 on housing for every single new home built in 2023.
That doesn’t sound like much until you realise that most of those homes were built by private developers. How many were actually built by the state?
Given the lack of precise data on direct State-built completions, an estimate can be derived from social and affordable housing figures, as these are most likely to involve direct State involvement or funding. Assuming social housing completions in 2023 were around 6,500 to 7,500 (based on 2022’s 6,500 and allowing for some increase), and considering some affordable and cost-rental homes delivered via State land (potentially a few hundred), a rough estimate suggests approximately 7,000 to 8,000 homes may have been built with direct State involvement or funding in 2023.
If we take the higher figure, that would mean the state spent about €700,000 on housing for every home that it actually built.
When Simon Harris says “there are dark clouds on the horizon”, he is of course talking about external factors: The wall, or the iceberg.
But as all students of the Titanic and car crashes know, the survivability of an impact is connected to how fast you are travelling when you hit. The Irish state is travelling faster, in terms of increasing spending, than at any time in its history and far faster than any comparable European State. And what are we getting in return?
Yesterday, the predictable parade of lobby groups and NGOs gathered in Dublin Castle – not to demand restraint or retreat on spending, but to demand more taxes to pay for it. Ireland has no fiscally conservative parties because the Irish voters are not fiscally conservative. But those few of us who are: Those of us who can see “the dark clouds on the horizon”. What are we to do?
Sit back and enjoy the show, appears to be as much as we can manage. Because tell the average person in Ireland that the state is already spending nearly 700k on housing per house constructed, and they’ll tut, shake their heads, tell you it’s a disgrace, and then vote for the man who says he will spend more on housing.
We get what we vote for. And we vote, reliably, for utterly insipid statements like the one Deputy Harris made yesterday.