In 10 days’ time, “all going to plan”, Leo Varadkar will depart the Tánaiste’s office and move upstairs to fill the Taoiseach chair currently occupied by Micheál Martin as part of the Coalition agreement with Fianna Fáil and the Green Party. It will bring to an end his 2½ years as Minister for Enterprise.
In recent weeks he has been dealing with a technology sector retrenching as numerous firms cut staff. Figures from the Central Statistics Office show that some 11,000 jobs were shed in the sector in the third quarter and there have been lay-offs implemented recently by high-profile companies such as Twitter and Stripe.
Varadkar expects more job losses as the sector continues to downsize. “[It’s] more likely to be thousands than hundreds,” he says, “but bear in mind that’s in the context of about 158,000 people working in the sector. What we’re generally seeing is companies scaling back by 5-15 per cent, with a few exceptions. But there are a few still recruiting, Microsoft being one example. And there are one or two new potential job announcements in the tech sector for the new year.
“Life sciences is looking very strong still, and pharma and medtech. It won’t be all about job losses and career breaks.”
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One of his final acts as Minister will be to seek Cabinet approval on Wednesday for a White Paper on enterprise, which he describes as a “strategy statement” that will help shape Government’s industrial policy out to 2030 and identify “any problems” that might be holding the State back in terms of trade and investment.
“Ireland is a very small country of five million people in a world of eight thousand million people. We don’t make the waves, we have to try and ride them the best we can,” he says, adding that it will be an “evolution rather than revolution” in our industrial policy.
‘We have crossed the Rubicon in terms of the level of Government intervention in terms of supporting industry and supporting jobs’
The paper will set out seven policy objectives, and notably “flags up net zero and climate action” as an economic opportunity.
“We shouldn’t see it as a cost or an obligation or a target to be met,” he says.
Varadkar cites the “potential” for renewable energies to provide more than 80 per cent of the State’s needs and ultimately the potential to export it to other countries.
The paper will also seek to cement our position in terms of the digital economy, where Ireland is already a major regional hub for big tech companies. “There’s going to be a huge development of robotics and artificial intelligence, augmented and virtual reality. Whatever contraction [in the tech sector] is happening now is temporary and we need to prepare for the next level of expansion in the digital tech sector,” he says.
The paper also focuses on research and development. “What we’re trying to set now is a pathway to achieving much more investment in R&D because, despite all that’s going on in Ireland, whether it’s tech or pharmaceuticals or medical devices, not all that much of it is actually designed and developed here and that’s a vulnerability that’s very much identified.”
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His 30 months as Minister for Enterprise coincided with the pandemic, war in Ukraine, soaring inflation and a cost-of-living crisis, not to mention Brexit, which “hasn’t gone away”.
He cites the pandemic as the toughest period, with the “restrictions being turned on and off” – it was Varadkar, then taoiseach, who imposed the first lockdown here in March 2020. “I was very much concerned about businesses surviving and people’s jobs still being there for them when the restrictions were eased.”
A “permanent scarring” of the economy was avoided by the Government providing billions of euro in pandemic supports and wage subsidies during the worst of Covid-19, with employment levels now exceeding pre-pandemic times.
“We have crossed the Rubicon in terms of the level of Government intervention in terms of supporting industry and supporting jobs. You can see that now with TBESS [the Temporary Business Energy Support Scheme] in terms of helping businesses with their energy costs. We are going to see a more interventionist role by Government in the economy.
“I often wonder had a different approach been taken 12 or 14 years ago when the financial crash happened would we be in a better place now. That wasn’t possible of course because the shots were being called from outside and we lost our sovereignty. So many jobs were lost at that time, so many businesses closed and, in areas like construction and banking, they never really fully recovered.
“It has certainly brought me around to the view that, on balance, a more interventionist approach from government would have been better.”
Varadkar was part of the Fine Gael-Labour Party coalition that was elected in March 2011 to sort out the financial mess, with the Dublin West TD appointed as minister for transport. “By March ‘11, the die was already largely cast,” he says.
‘We will have to examine between now at the end of February what we can do to help people because I don’t believe that energy prices will have fallen dramatically by then’
The pandemic has passed to be replaced by runaway inflation, rising interest rates and a cost-of-living crisis. Varadkar says the Government can help this time with energy subsidies, a planned new loan scheme to help businesses with working capital needs, along with the new Small Company Administration Recue Process (Scarp), a cheaper version of examinership for viable SMEs to restructure their debts.
“Very few have used it [Scarp] but some have used it successfully to restructure, companies that would otherwise have failed, and the fact it exists helps.”
However, the Government has decided not to extend the special 9 per cent VAT rate for the hospitality sector beyond next February, which has irked the industry. And the introduction of sick pay and a new public holiday has not gone down well with many SMEs that see these measures as merely adding to their costs at a time of high inflation and staffing issues.
Changes to EU VAT rules would allow the Government to increase the rate for hotel bedrooms while retaining the 9 per cent level for cafes or restaurants. “That’s an option that the Government could look at,” he says.
But Varadkar notes that “VAT9″ for electricity and gas bills, the TBESS scheme and reductions in excise on petrol and diesel are also due to expire at the end of February. “I don’t think it will be possible to continue all of those beyond the end of February. The public finances and the economic picture won’t allow us to extend them all.
“We will have to examine between now at the end of February what we can do to help people because I don’t believe that energy prices will have fallen dramatically by then ... and households and businesses will be facing very high costs that weren’t there before. We’ll have to look at that in the round and see if there are some of those measures that we can extend, or other ways to help businesses and households with their bills.”
He’ll do that as the next Taoiseach.
