Assessing 2023 in Irish politics – a half-year recap

28 July 2023

The Return of War to Europe Forces a Reckoning on Ireland’s Defence Policy

By Daniel O’Dowd – Account Manager

The return of war to the European continent has forced European States to reckon with their respective defence policies and the complacent attitudes towards the threat of war’s return to the Old World. Ireland is no exception, with this government being faced with a robust debate on neutrality and a Defence Forces in need of reform and resourcing. 

However, our own national debate on security is mired by contradictions. According to the government, Ireland is militarily – but not politically – neutral. Yet, it was revealed this year that Ireland has had a covert agreement of sorts with Britain since 1952, to safeguard Ireland’s airspace from violation by rogue actors. Furthermore, there has been the long-standing usage of Shannon Airport by the US military to transport troops. Ireland also continues to integrate more and more within the growing defence apparatus of the EU. Quite simply, neutrality is being eroded by the exigencies of our times as a matter of necessity.

Beyond the neutrality debate, there is the decline of our capacity to defend our State and infrastructure. In February of this year, troop levels plummeted to 7,987 – a historic new low. The Naval Service has a mere four vessels to perform operational duties. The Reserve Defence Force Representative Association (RDFRA) has warned unless drastic action is taken, the reserves will cease to exist by 2026. Despite the high concentration of MNCs within the domestic economy, Ireland’s cybersecurity infrastructure is severely lacking according to international indexes.

In the face of a turbulent geopolitical landscape and the aggression of authoritarian powers like China, Iran and Russia, defence policy in terms of alignment, military capacity and cybersecurity are to the forefront of the European political agenda. These same debates are happening in Ireland, through the Consultative Forum on International Security Policy. It may prove to be the lasting legacy of this government to charter a security policy reflecting of the dangers of the modern age.

The effects of the Cabinet reshuffle were small, but not insignificant

By Robert O’Donnell – Account Executive

The changes to the Cabinet and Junior Minister ranks after Fianna Fáil leader Michael Martin and Fine Gael leader Leo Varadkar switched roles in December 2022 as part of a rotating Taoiseach deal, were small, but not insignificant. But which Ministers are performing strongly in the role and having an impact?

Michael McGrath takes his role as “guardian of the public purse” very seriously. He has led calls for the state to put more money away for a rainy day and has handled loud calls for tax cuts amid surging corporate tax receipts well. Minister McGrath is expected to deliver a balanced budget in October that will help address key issues in the economy, such as housing and the cost of living, but also commit to increased spending on public infrastructure and putting more money away into a rainy day fund. He just might be able to keep everyone happy in some shape or form.

Simon Coveney has settled into his new role well where he is engaging enthusiastically with industry. He has already led trade missions to the US, Germany and France and presided over a string of IDA-supported jobs announcements totalling thousands of jobs – at Dexcom in Galway, Annalog Devices and Eli Lilly in Limerick, and Boston Scientific in Tipperary. He has also filled a noticeable void in government in advocating for closer US-EU cooperation, especially in areas he is responsible for such as trade and the digital economy.

Kieran O’Donnell was arguably given the toughest job in the December reshuffle as Minister of State for Local Government and Planning. Industry figures are impressed with his knowledge of housing and planning and in his short time in the role, Minister O’Donnell has helped drive forward legislation aimed at modernising the Irish planning system; resuscitated An Bord Pleanála and gained government approval for the election of a directly-elected mayor for Limerick. 

Ireland’s first national Hydrogen Strategy will form a crucial part of our transition to a net-zero economy

By Josh Byrne – Account Executive

On July 13, the much anticipated National Hydrogen Strategy was published. This is the first ever such strategy that has been developed in Ireland and will form a crucial part of our transition to a net-zero economy. The Strategy deserves much credit for its ambition, with the ultimate objective being Ireland’s long-term energy independence, as well as the possibility of becoming a net exporter. The Strategy emphasises hydrogen’s utility in hard to abate sectors, such as transportation. Renewable hydrogen will play a central role, in particular, in the decarbonisation of the aviation and maritime sectors. While Minister Ryan and the Department ought to be applauded for their diligence in putting together the Strategy, there are certain measures that must be prioritised in order to ensure effective implementation. 

Firstly, funding the development of renewable hydrogen projects will be critical. There has been a significant shift globally towards government subsidies for industries of particular strategic importance, most conspicuously in the US Inflation Reduction Act. The EU has relaxed state said rules as a result of this, with Member States investing huge amounts in renewable technology projects. Ireland must keep pace with other countries in this regard so that our indigenous sector can be competitive internationally. In addition, the process for availing of funding must be well signposted and free from dissuasive bureaucracy. 

Secondly, the requisite skills must be available domestically to support the green transition. The report on Skills for Zero Carbon estimated that by the end of 2030, an additional 552 wind-turbine technicians and over 1,300 crewmen and officers will be required for ships serving off-shore wind farms alone. The report also estimates that more than 1,700 electrical engineers, over 100 ecologists, and various other green-skilled workers will be needed if the State hopes to meet its binding commitments. The increased focus on apprenticeships within the Department of Further and Higher Education, Research, Innovation and Science has been encouraging. However, at the current rate of training, Ireland is still predicted to fall short of the number of skilled workers required. 

Assessing the Government’s long-term savings vehicle

By Evan Henry – Graduate Trainee

When it comes to making an impact on the long-term fiscal future of Ireland, no policy in the last six months comes close to the Government’s long-term savings vehicle. The two ministers responsible for fiscal policy, Michael McGrath and Paschal Donohoe, published a scoping paper in May addressing the topic. 

The first benefit is that the fund will prevent today’s incredibly strong but temporary corporation tax receipts – which amounted to 25% of all tax collected in 2022 – from being used as grounds to introduce permanent increases in future spending. In other words, its creation is a recognition that the Exchequer is excessively reliant on uncertain tax receipts, but the Government has not exploited this fact for politically expedient reasons. This is evidencing sound management of the public finances and long-term thinking, and voters should be weary of any attempt to use the country’s current fiscal condition as justification for permanent increases in spending. The Irish Fiscal Advisory Council (Ifac) has endlessly warned about the Government’s overreliance on corporation tax receipts, so the creation of this fund is a welcome step. 

The second benefit is that the fund can be used to meet known future costs that the State will encounter. The most immediate of these will likely relate to demographic change, climate change adaptation, Slaintecare, and defence spending. Take demographic change, which probably presents the largest future known cost to the taxpayer. The future of pensions in Ireland has been described as a timebomb by many, with the Department of Finance forecasting that annual age-related expenditure to be €7-8 billion higher by 2030 than it was at the start of the decade, and up to €17 billion higher per annum by 2050. If €12 billion (Ireland’s predicted windfall corporation tax receipts for 2023) is invested in the fund annually, a large proportion of future age-related expenditure will be covered by the fund. The effectiveness of the fund in covering these future costs will depend on specifics decided by the Department of Finance, which should be closely monitored.