Leo Varadkar warns against ‘excessive caution’ in policymaking
The Taoiseach said Ireland’s economy had bounced back from the banking crisis, Brexit and the Covid-19 pandemic faster than expected.
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Your support makes all the difference.The Taoiseach has expressed a desire for government to be “less cautious” in its approach to policymaking.
Leo Varadkar also warned of the potential for multinational companies that invest so heavily in Ireland to relocate elsewhere if the state fails to sustain an environment that allows them to prosper.
Mr Varadkar also cautioned future governments not to “raid” an infrastructure fund being created by the current coalition with part of the multibillion-euro tax surplus generated by the multinationals.
The Taoiseach made the comments as he fielded questions at an event at Grant Thornton’s offices in Dublin to mark the opening of the professional services firm’s new Mobius workspace area, which has been designed to improve collaboration with clients.
I think if I knew what I know now, there are decisions that we made that we would have made sooner
During the event, the Fine Gael leader reflected on his time in government and was also pressed on his priorities for the forthcoming Budget.
Mr Varadkar said the economy had bounced back from the banking crisis, Brexit and the Covid-19 pandemic faster than expected.
“I think if I knew what I know now, there are decisions that we made that we would have made sooner,” he said.
“So, we really ramped up capital spending and investment in infrastructure since 2018.
“If we’d known that we were going to bounce back so well and so quickly, both from the crisis 12 years ago and from the pandemic, we would have done more sooner, which is why I’ve spoken before about one of the biggest risks I think in policymaking is excessive caution.
“And you’ve always got civil servants and advisory bodies advising caution, but there’s a cost to excessive caution and among the things that would have been done in those early years, and they had to be done, was slashing the budgets for things like housing and transport. And there’s a cost to that and we can see what that cost is.”
He added: “The way I think about it is in 12 years I’ve served in government, we’ve had three major external shocks – one the global financial crisis and the banking crisis here; the second was Brexit; and the third was the pandemic.
“And in all three occasions we bounced back much more quickly and much more strongly than we thought would be the case, than anyone thought would be the case.
“So that’s kind of got me to the space where I think we need to be less cautious about decisions we make for the future and more ambitious.
“Of course, the time will come when that doesn’t happen, by the way. That will come when it comes, and we won’t bounce back as quickly as we hope to. That’s why we need to build resilience.”
Mr Varadkar said the Government would use the surplus to build that “resilience”. He said it would be partly used to bring down the debt with money also diverted to two new funds – one to address future pension costs and the second an infrastructure reserve, which future governments could use to maintain spending on capital projects at times of economic difficulty.
“What we’ve done historically in Ireland is when we get into economic trouble, it’s the capital budgets that get cut fastest because that’s understandable,” he said.
“It’s much easier to delay a new road or delay a metro or delay a school building than cut people’s pay and welfare and increase taxes.
“So, the whole idea of this (infrastructure) fund is that it’ll be counter-cyclical and if and when we do have the next downturn, the next time the public finances go into significant deficit, that we will then be able to draw on that fund to bolster capital spending, or at least maintain capital spending at the same levels.
“The big challenge for whoever is in government at that time, and I don’t know when that’s going to be, but at some point there will be another recession, and the public finances will be in the red, the challenge for the people at that time will be to not raid those funds for other things. And that’s going to be the test whenever it comes.”
Mr Varadkar said he could not predict whether he would still be in government when the next economic downturn happened.
“I don’t know when the next major economic crisis is going to come,” he said.
“Or when the next downturn will happen. I do hope, if it isn’t me, it’s people who think like me, who were there at the time.
“I would fear the decisions that others might make if they were genuinely faced with dealing with a crisis, given their history.”
Mr Varadkar said the Budget would prioritise three areas – those struggling with the cost-of-living crisis; support for small businesses; and measures to tackle child poverty.
On Ireland’s chronic housing shortages, the Taoiseach said current supply was meeting demand in terms of the population rises Ireland was experiencing.
He said the problems stemmed from the lack of homes built during the post-crash years of 2010-2017.
“I think supply is probably at the point where it’s meeting demand, the problem is we have a deficit,” he said.
Mr Varadkar was also asked about entrepreneurship and whether Ireland took multinational investment for granted.
He insisted his Government did not take it for granted.
“My concern, and I don’t want to get too political on this, is that there are people in Ireland who I think do take FDI (Foreign Direct Investment) for granted,” he said.
“And just think it’ll be there to pay for staff, and pay the taxes and carry out the investments, no matter how restricted. And one thing a very wealthy person said to me once, he said to me, I’ll never forget it, I was a first-time minister at the time, he said to me ‘wealth goes where it wants to and stays where it’s treated well’.
“And if we were to stop treating multinationals well and stop treating business well, whether it’s big or small, money and jobs and trade will go elsewhere.”
At Thursday’s event at its City Quay offices, Grant Thornton Ireland announced that it was ahead of its planned growth targets.
The firm said turnover will hit 300 million euro by the end of the year, while its workforce has grown to 3,000, with half of those roles created in the past two years.