Senior business figures have called on incoming Minister for Finance Paschal Donohoe to increase spending on capital infrastructure and face down public sector unions seeking pay rises for workers.
New Taoiseach Leo Varadkar appointed Mr Donohoe to the role on Wednesday. He replaces Michael Noonan in the portfolio, who said he would step down when Enda Kenny left office. Mr Donohoe will retain his role as Minister for Public Expenditure.
Ibec chief executive Danny McCoy said Mr Donohoe would bring “prudence with a purpose” in his new role. “I think Paschal has great experience coming into it,” he said.
“He’ll be building on the legacy of Michael Noonan and has been with him over the past year anyway. There will be continuity, but with a twist. I think Paschal will be much more ambitious, and more progressive for a modern Ireland. The generational shift is also positive.”
In terms of specifics on policy, Mr McCoy said he expected Mr Donohoe to be “aggressive” on the marginal tax rate. “That needs to come down,” he said. “That’s one way of Brexit-proofing ourselves. We’re out of kilter even with Britain.
“Irish people hit the top rate of income tax a lot faster than they do in the UK. It will be important for him to amend that. The other thing is the ambition on public investment on infrastructure. We need to double the current rate of 2 per cent of GDP to 4 per cent.”
‘Big issue’
Neill McDonnell, chief executive of the Irish Small and Medium Enterprises Association (Isme), said the “big issue” facing the new Minister was to “stop prioritising current expenditure over capital”.
“Recent indicators suggest the priority is the public service rather than the massive infrastructural deficit,” he said. “We are underinvested and should be fixing that as a priority.
"We're being told what to do with the AIB money. I'm not saying we shouldn't be paying off debt, but we think it is logical to spend at least some of that windfall in taking the prices of housing down.
“We have to start looking at the inefficiencies in the labour market. I’m talking about minimum wage. There were real issues around the USC, as well as the interaction between the tax and social welfare systems.”
Mr McDonnell also said Mr Donohoe would have to stand up to unions, as the drive to restore public sector pay was “immoral and socially corrosive”.
“Nobody is able to justify what is going on in the public sector at the moment except public sector unions,” he said. “The Government has to start governing for the two million in the workforce rather than the 300,000 in the public and semi-State services.
“We have found Paschal receptive. He knows our issues. He is one of the very few Ministers who have spoken honestly on the need to restrain public service pay for everyone in society.
“How can you justify the amount of national wealth we are diverting into the 15 per cent of the workforce that are in the public sector when they’re already paid 40 per cent more than the rest of us.
“It’s immoral and it’s socially corrosive. It shouldn’t be happening. We would sincerely hope Paschal Donohoe sticks to his guns.”
‘Real opportunity’
Former secretary general of the Department of Finance John Moran said the "real opportunity" with Mr Donohoe was in bringing the Department of Finance and the Department of Public Expenditure under the control of a single minister.
“A Minister who has been exposed to both sides in the past couple of years will be able to make much more holistic decisions for the economy,” he said.
“Paschal has a very good understanding of infrastructural spending from his time in the Department of Transport particularly. Therefore, he will understand the importance of reinvesting in capital infrastructure as much as current spending on services.
“This gives the new Government a very competent, financially astute Minister who can look at decisions around spending not just in terms of controlling the spending but what’s likely to give the best results for the economy.
“We need to increase capital infrastructure and do that in a way that also improves overall quality of life for people in terms of where they can live and how they get from there into work or to school or to play.”
Joe Gilmore, managing director of Ireland West Airport in Knock, said he hoped Mr Donohoe would engage in regional investment.
“We would like further recognition of the strategic importance of the airport to the western region, as well as further investment into the airport’s development and the route network from an international point of view,” he said.
“We need to complete the infrastructure build out of the airport, and also to invest in marketing in terms of generating new access into mainland Europe and the US.
Challenges
“We believe he was a good minister for transport. He has been to the airport and is very familiar with the challenges we face as a regional airport in the west of Ireland. We’d be hopeful he will look favourably on the issues ahead of us.”
Matthew Thomas, chief executive of the Shannon Group, which operates several companies in the region including Shannon Airport, Shannon Heritage, and Shannon Commercial Properties, said "strong regions make for a strong national economy".
“There is potential for further growth but it will not happen of itself,” he said. “We have to create the environment that will make it happen and allow further investment to flow. This must be done particularly in light of Brexit.
“Policies are urgently required to drive regional development and deal with infrastructural deficits to facilitate growth and employment, and we will be looking to the new Minister for Finance to play an active role.”
