Is Leo Varadkar the man to shake up the system?

It remains to be seen if Fine Gael’s Leo Varadkar is capable of shaking off the complacency
that has settled over Ireland’s political establishment, writes Kyran Fitzgerald.

IS the new Fine Gael leader, Leo Varadkar, the man to shake up the system? There are signs that the administrative and political establishments have become complacent.

Perhaps what we need is a youthful outsider, who does not have too much respect for the status quo. One thing is for sure: The Taoiseach designate will not be short of advice, much of it contained in bulky reports.

Last week, the National Competitiveness Council (NCC) produced its annual tome. This year, the surge in property costs is highlighted, along with the likely impact of Brexit on the country’s competitiveness.

The NCC correctly observes that “our housing market risks undermining our entire competitiveness”, due to the impact on living standards of rising rents and capital values.

The result is a hindering of labour mobility and a hobbling of the country’s ability to adjust to adverse economic shocks.

The report implies that the rising cost of office space may also be putting the squeeze on enterprises.

The service sector has been hit hardest by office lease annual growth costs, which have averaged over 14% in the past five years. The report welcomes the commitments in the ‘rebuilding Ireland’ strategy being pushed through by Housing Minister, Simon Coveney.

But its view that many of these commitments “will take time to implement” smacks of a defeatism at the heart of the civil service.

Outgoing Finance Minister, Michael Noonan, has indicated that a tax on land banks would be welcome and that measures in this regard have been held back, due to fears as to whether they would accord with the Constitution.

For too long, such legal arguments have been used as an excuse to hold back on necessary reforms.

Few people like to admit it, but the last leader to really get Ireland’s central government officials moving was Charles Haughey, and whatever the deep flaws of the man, he did push through reform.

Mr Varadkar would do well to ignore the temptation to move quickly to seek a mandate. Instead, he should roll up his sleeves and start addressing some of the blockages at the heart of the administration. Mr Haughey gathered together a talented team of officials and financial players to push forward the International Financial Services Centre (IFSC) project.

Of course, big mistakes were also made by that particular administration, one being the handover of bridge and motorway tolling revenues to private interests, at huge long-term cost to the people.

Energy has to be applied to administration and if pressure needs to be put on people, so be it, but ethical thinking must lie at the heart of governance. Outsiders view us in a rather more sympathetic light. The country has just emerged well up the field in a survey carried out by the international Swiss business school, IMD. The country is now in sixth place, globally, up from 24th in 2011, just after the bailout.

We rank in first place overall for business productivity and efficiency, and in third for ability to attract foreign investment.

But we get lower marks for labour market flexibility, access to finance, and infrastructure. No surprise here.

More than a year on, the Government has yet to respond to calls from groups like Engineers Ireland for the establishment of a national infrastructure commission, which would co-ordinate action in this key area.

Plans for projects are being long-fingered, while public sector interests prioritise pay restoration to ‘Celtic Tiger’ levels.

The employers group, Ibec, has shifted its focus away from a heavy concentration on pay restraint towards the development of an Atlantic cities strategy, as a counterweight to Greater Dublin.

The Taoiseach designate would do well to look at this, as he sets out, hopefully, to build links with a provincial Ireland that still feels left behind.

He has work to do. He needs to challenge the consensus that regular increases in the daily cost of running government are inevitable.

Pay increases need to be traded off against reforms that include a reduction in layers of management across the system.

IMD said that Irish weaknesses include competence of government and quality of corporate governance, alongside relatively poor access to low-cost finance.

The National Competitiveness Council attributes the high cost of lending to a concentrated market, with three lenders holding a 90% share, a legacy of the bust of 2008-2009.

According to the NCC: “It is vital that the cost of credit is reduced to align Irish rates with those of competitor countries.”

It is a pity that the NCC does not examine the effectiveness of measures promoted by the European Central Bank to promote cheaper lending. The continued lack of alternative forms of financing in Ireland remains a bugbear, one highlighted in the CSO’s recent report on access to finance.

The urgent challenges posed by Brexit suggest that governance, as usual, will no longer be an option.

As the NCC report makes clear, a hard British exit has huge implications for energy supply and for logistics and transport costs.

As for the cost of finance, while our labour market remains robust and foreign investment continues to flow, Brexit concerns have helped throw our public finances off-target, a signal that the new leadership cannot rely on being able to coast along in ‘business as usual’ mode.


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