Parties limber up for row over Covid-19 payments

The battle lines are already being drawn. Minister for Finance Paschal Donohoe repeated again on Wednesday that the special pandemic unemployment payment would be reduced eventually, though not ended immediately. They would continue “in a form”, Mr Donohoe told Morning Ireland, and would continue “in a way that is affordable but also makes sense for our citizens”.

His comments reflect a view in Government that the temporary special arrangements – welfare payment, business supports, etc – to deal with the pandemic are just that: temporary. For one thing, paying two rates of unemployment benefit indefinitely (one at €350 a week, one at €200) is not just socially unwise, it is fiscally unsustainable, some officials say. Government Ministers, present and putative, agree. But few relish the prospect of “tapering” (another Donohoe term) the special supports.

In the Dáil, Sinn Féin leader Mary Lou McDonald laid out her position clearly: “There can be no return to austerity.”

She sought specific assurances on the continuation of the special Covid-19 payments in June.

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Richard Boyd-Barrett predicted that the “European Union and the Irish Government are . . . planning to revert to the failed austerity policies that did such damage in the aftermath of the financial crash of 2008, and to impose the cost and burden of this emergency once again on working people and the key public services on which we depend more than ever.”

Of course, both the leaders of Fine Gael and Fianna Fáil have pledged that there will be no return to austerity policies if they can actually manage to form the next government, along with the Greens. Their approach is to continue to hugely increase borrowing to meet the immediate costs of the pandemic and use the proceeds of renewed economic growth to pay for the enduring costs of a larger State.

And sources within Government who have been briefed on the subject say that at present, the National Treasury Management Agency (which borrows on behalf of the Government and oversees the handling of the national debt) says there are “no constraints” on Ireland’s ability to tap the bond markets to fund a deficit.

Potential problems

But there are two potential problems: firstly, the external market conditions are something over which Ireland has no control, and they could change abruptly depending on what is happening elsewhere in the world; and secondly, the Opposition are unlikely to accept the Government’s definition of austerity.

In other words, Donohoe might not call the tapering of the special welfare payments “austerity”; but McDonald certainly will. It is virtually certain that whatever the Government does on welfare payments and general public spending, it will be accused of austerity. Get ready for a pantomime political debate: “That’s austerity!” “Oh no it isn’t!” “Oh yes it is!”

And that’s before the costs of the climate action that will be central to the next government’s programme (if the Greens are to be involved, at any rate) are included. The Greens make a compelling case that climate action (on a global scale at least) is required to avert much greater costs down the line. But some – perhaps very significant – upfront costs are involved, too.

Talks on a programme for government get under way between the Greens and Fianna Fáil and Fine Gael on Thursday. They are expected to be heavily policy-focused. But even before they start, the pitch is being rolled for the politics to come.