Daniel McConnell: Cost-of-living crisis puts Coalition in tricky territory

Lack of a clear, concise message proved damaging during Covid, the same applies now

The opposition has called for an emergency budget.

When one speaks about the Government, the temptation is to believe or think that it is this one coherent behemoth, speaking in unison, led from the front by the Taoiseach.

The truth is totally different.

In fact, the Government is made up of a series of individual departments and their agencies, which often spend their time working in silos, or against each other, and often are barely able to coordinate themselves into a coherent stance.

Much of the time, these clashes relate to turf wars, empire building, or simply trying to avoid tackling thorny issues, but there are other times when these chaotic disputes have real implications.

At their most heated, you can have ministers and their departments attempting to scupper the work of other departments as part of some power play, all the while neglecting the true work of serving the public.

Any head of an organisation knows the importance of clarity of message — the need for a team to speak with one voice. They recognise the dangers of mixed messaging, and the need to avoid it.

As we saw from this sporadically shambolic government during Covid-19, when the public messaging was clear and concise, the people bought into it and largely complied, even when the scientific rationale behind it was distinctly dubious.

But when the messaging was not clear, public confidence in the Government’s capacity to manage the pandemic was sorely damaged.

Now that the cost-of-living crisis has replaced the pandemic as the main area of concern for government ministers, the absence of a clear and coherent message is proving once again to be confusing and damaging.

Thursday’s news from the European Central Bank that interest rates are to rise several times in the months ahead, presents a perfect storm for a government that has struggled to keep pace with the inflation crisis.

Since last October, we have seen government interventions to the tune of €2.5bn aimed at shielding the public from the sharpest pain, but having to acknowledge the limit to what it can do.

We have seen both Paschal Donohoe and Michael McGrath, the two money ministers, bring forward several initiatives in a bid to combat the double-digit increases in costs.

Yet, despite these sizeable and costly moves, the opposition has been rabid in its demands for more.

Sinn Féin only this week restated its demands for an emergency budget with Labour, People Before Profit, and other left-wing TDs demanding the same.

Such political heat has made it increasingly difficult for the various strands of this government to hold the line, and while Donohoe and McGrath may insist there will be no more moves before this October’s budget, privately the mood is quite different.

Several ministers conceded this week to me that the Government will find it “extremely difficult” to resist intervening in the cost-of-living crisis before the October budget.

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One minister said they felt there has been “confusion and incoherence” from the various arms of government as to what people can expect.

It is also clear a recent round of briefings from Leo Varadkar’s side of the Coalition, promising further moves on the cost-of-living crisis in areas such as childcare, transport, and education, have not pleased the money men.

The sense from within the finance departments is that such kite flying so early in the year “never ends well” and can only lead to a raising of expectations which ministers will inevitably fail to meet.

Undoubtedly driven by poor opinion poll ratings for Fine Gael and Fianna Fáil, whose combined support base of 35% is now below the support for Sinn Féin, the desire by those behind those leaks is to offer some form of hope and reassurance to people who are genuinely having to make tough decisions as to their spending.

Just telling people things are bad and giving them nothing to help them is not a tenable response, one minister confided in me.

Justifiable measures?

There is a sense that such measures as outlined by those briefings will not be inflationary, and therefore are justifiable.

Not everyone is so sure.

Donohoe, speaking in the wake of the ECB hikes on Thursday, made it clear that from his perspective the locker is empty, and there is little or no room to cut the costs anymore.

What is clear, is that for the first time since Varadkar became leader of his party in 2017, there now appears to be a widening gulf between him and his finance minister.

One needs not to look any further than the very cool response Donohoe and his officials gave to Varadkar’s 30 cent tax rate proposal a couple of months ago, and it has been interesting how little is being said of that now.

Such tensions between a finance minister and their leader is not unusual, and there are countless examples of such tensions between previous incumbents down through the decades.

Since 2017, Varadkar and Donohoe have largely been on the same page, but ministers speaking to me this week have questioned whether a rigid sticking to the rules will cut it, with some saying Varadkar’s instincts to move further “are the correct ones”.

It is certain that debate is set to rage in the coming weeks, with further pain expected in terms of higher prices as it is clear we are nowhere near the peak of this cycle.

But the upshot of all of this is a less than clear and incoherent message coming from the government, at a time of genuine crisis for the country.

Growing split

Internal debate is one thing, but clearly, there is a growing split emerging as to what the right thing to do is for the country.

And all of this points to an extremely difficult period ahead for the coalition.

Government backbenchers are restless, unhappy about an increasing list of issues from passport delays to the cost of fuel.

Added to this mix is the increased uncertainty about the delivery of the Government’s Housing for All plan, and the negotiations for a new public sector pay deal, which itself could lead to greater uncertainty about the government’s capacity to run the country.

Unlike the last two budgets, when money really wasn’t an issue because of Covid, the runaway spending has to come to an end.

The sorry truth is that given the impact of Russia’s invasion of Ukraine, Ireland and Europe are facing into a significant economic slowdown, and recession cannot be ruled out.

Such a scenario would leave Ireland badly exposed given our high levels of debt.

What is clear, we need the internal bickering and squabbling to end, and a unity of purpose to steer the country through the time ahead.

Difficult decisions have to be taken and while the coalition has proven itself to be stable so far, it is facing into its trickiest period in office to date.