Paschal Donohoe: ‘Not spending every cent you have is the best insurance policy’

Running a big budget surplus is “the best insurance policy you can have”, the Minister for Public Expenditure and Reform Paschal Donohoe has said, defending the Coalition’s core message of economic prudence as he prepares to hammer out next month’s budget with his Government colleagues.

In an interview for The Irish Times Inside Politics podcast, Mr Donohoe strongly made the case for his brand of political centrism – “to make the case for centrism, or moderation, of itself can feel a little bit radical,” he says – but he also acknowledged the failures of the centre in Ireland.

On the story of the day, Mr Donohoe is guarded: “We need a viable RTÉ. We need a public service broadcaster. It’s essential to our society and its understanding of how institutions function,” he says.

But he is non-committal on RTE’s performance in fulfilling that role, and won’t budge on questions about funding the station. He says he will scrutinise the submissions by RTÉ – seeking an interim bailout of more than €50 million, according to reports – “really, really carefully”.

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Then, he says, he will bring proposals to Government for any RTÉ bailout. Mr Donohoe has a reputation as something of a hardliner within Government on the RTÉ issue – he is likely to want to see deep reform and cost-cutting before he commits any more public money to the station.

He strongly rejects the assertion that the Government has contributed to RTE’s difficulties by failing to reform the licence fee over the years.

Is he prepared to contemplate anything like the €50 million that RTÉ is looking for?

That’s a budget question, he says, and won’t go there. But he offers little by way of encouragement to the broadcaster except in the most general sense, insisting that he favours some public funding for public service broadcasting.

Is this budget more difficult than the others he has?

“The most difficult budgets that I was involved in were the Covid budgets – the budgets that happened in 2020 and in 2021, particularly the first of those two ... The levels of uncertainty about the basics of our society and out economy at that point were so high that framing a budget in that environment was by some measure the most difficult I was ever involved in.”

But this one is different?

Paschal Donohoe on spending v saving, RTÉ's future and Fine Gael's vigour

Listen | 44:23

“Absolutely yes. I accept that it is a difficult argument to make, about why should we not spend all of the money available to us today, why should we not do it.

“There’s a school of thought that says if you’re explaining you’re losing in politics. I disagree with that completely. I think that’s an enormously reductive view of what politics is about. Politics, particularly for those of us who aspire to be in Government which I do, is about making decisions and then explaining the decisions.

“I believe that even with all the pressures we’re going to touch on, there’s such a really strong argument about why maintaining a budget surplus has served us well in the past, but could serve us even more in the future.”

But really nobody is making the argument that we should spend all the surplus, are they?

He contests this, strongly. “Is anyone saying we should spend all of the 10 billion? One or two are. But actually in the round, putting all of the different requests together, would easily spend the entire surplus. And that’s the point.”

Those requests are coming from his colleagues, in many cases. But we know the entire surplus won’t be spent. The question is where he draws the line – it’s likely that the budget day package will be €10-11 billion. Very big, maybe, but not big enough to keep everyone happy. Mr Donohoe doesn’t bite.

“The majority of the opposition I face in the Dáil every day are up for spending it. They’re up for spending it. And they question even the philosophy of why we have a surplus.”

Mr Donohoe is, he says, guided the failures of the past, the long shadow of the financial crisis and the subsequent era of austerity which left such deep social scars, and – though he doesn’t mention it – upended the pre-existing political order, sweeping away nearly a century of the Fine Gael-Fianna Fáil duopoly.

“It’s my defining experience of politics, starting off as a councillor in 2004 and when I got into the Oireachtas from [2007] onwards – the trauma, on an individual level, beyond the big events of Nama and going into an IMF programme, and what that meant for the lives of the people I represent.

“That’s why a continual theme in the arguments that I’ve made – and there are ups and downs along the way, God knows you don’t get everything right – is that not spending every cent that you have is not a guarantee that there’ll never be a bust, but it’s the best insurance policy that you have,” he says.

The fact, he says, that the public finances are in such robust health is not just an crash. It’s not “a background event that just happened.” It is, he animatedly insists, the result of political choices.

The reason the corporation tax receipts are in Ireland is because the companies are in Ireland, he says, “which in turn is the result of political and policy choices – not all of which I’ve made, it goes without saying. Predecessors over decades have made those choices as well. But there is a thesis and an argument regarding that model which I believe has played a vital role in the transformation of our state.”

He cites concerns about the most recent figures for corporation tax showing a fall-off from the levels seen last year. But even on this he advocates caution – wait until November, he says, and then we’ll have a better idea. That, of course, is after the budget.

In the absence of financial stability, all the other things you want to do, you can’t do

Isn’t that an argument for running an even bigger surplus? And having fewer giveaways in the budget?

“This goes back to my role and the role of Michael [McGrath, the Minister for Finance] as politicians as well, where we recognise all of the different competing demands that we have to respond back to.”

Going beyond a €10 billion surplus right now, he says, “would not be feasible”.

Is fiscal prudence the Government’s big idea?

“We have a group of parties in the political centre that do differ but are united in the view that the political centre serves our country well and can respond back to all the ills, all the difficulties we have.

“And in the time of raised voices and competing and simple arguments, I know to make the case for centrism, or moderation, of itself can feel a little bit radical. But I believe the centre has served this country well, and this is a Government of the centre.”

But hasn’t his sensible centrism failed many of the people who now feel that they have no chance of owning a home, who feel excluded from having that stake in society?

“And this is why I am – despite the vigour of our debate here, which is great – I make the case for a degree of humility about the political centre. I make the case for it ... but the centre itself has to acknowledge its own failings, its own deficiencies.”

He knows that the centre has failed to realise the expectations of many people. But he also adds that for too many people, the political centre has become identified with a conservative outlook, and the maintenance of the status quo.

But, he adds, citing the efforts on his home patch of Dublin Central, where the State has been trying various approaches to help disadvantaged areas, sometimes successful, sometimes not: “You keep on trying, you keep on trying different things.”

Typically, he brings the argument back to the need for careful and prudent management of the public finances: “In the absence of financial stability, all the other things you want to do, you can’t do.”