Jennifer Carroll MacNeill is a junior minister at the Department of Finance with special responsibility for financial services, credit unions, and insurance.

Martin Heydon is a Minister of State at the Department of Agriculture, while Peter Burke is a Minister of State for European Affairs and Defence, working out of the Department of the Taoiseach. All three are members of Fine Gael, politically ambitious, and not prone to misguided solo runs.

That is what makes their intervention last week all the more worrying. Writing a joint opinion piece in The Irish Independent, the three politicians made several proposals for how the government should spend the projected budgetary surpluses for the years ahead. The trio made lots of noises about investing for the future, driving capital projects, and developing national reserves. However, the main proposal was a €1,000 tax relief for middle-income workers.

“A thriving economy means more resources for the Exchequer at every budget, which will also allow us to put more money back in people’s pockets to help with the cost-of-living crisis and give the squeezed middle a break,” according to Carroll MacNeill, Burke, and Heydon.

Budgetary kite flying is nothing new. It is part of the process. However, this kite was flown before the Dail’s summer recess and was authored by three high-ranking members of a government party, including a junior minister in the Department of Finance itself.

Various Fine Gael ministers said it merely reflected the party’s policy of putting money back into people’s policies, and that it was not an attempt to force the hand of Fianna Fáil. For his part, Michael McGrath, who will deliver his first budget as finance minister later this year, branded it unhelpful.

And it was hard to disagree. “Leo is trying to assert FG dominance at the price of government cohesion,” one senior government aide told me. “It will end badly.”

Certainly, it is hard to fathom that the article had not been vetted by the party itself. That is why it has rankled Fianna Fáilso so much.

But, leaving aside the political tensions, do the proposals make any sense?

Certainly, there is enough money to make it happen. This year, the government’s budget surplus is expected to be almost €10 billion. Next year, it will rise to €16 billion.  

The primary surplus is estimated by the Department of Finance based on the likely growth of the economy over the medium term at or around €65 billion. As the department’s forecasts are typically quite conservative, it is likely if current conditions prevail this amount could be larger. 

Given the sums involved, and given the electoral arithmetic, it is hardly surprising that the government parties are looking at ways to allocate it.

You might have noticed that Stephen did not write a column last week. This is because he was giving expert testimony to the Committee on Budgetary Oversight about how to best invest potential surpluses.

In his presentation to the committee, Stephen set out the broad choices that are available to the government in the allocation of these unprecedented surpluses:

1.     Increase current spending by increasing public sector pay or transfers to businesses and households, that is, investing in improving conditions today;

2.     Decreasing current taxes, that is, investing in consumption, investment to improve conditions today, and hoping private sector innovation creates growth tomorrow; 

3.     Increase capital spending to produce more housing, roads, and hospitals, that is, investing in physical assets to be used tomorrow;

4.     Investing the surplus into longer term financial assets using a sovereign wealth fund, that is, investing in financial assets, returns of which are to be used tomorrow;

5.     Paying down the stock of sovereign debt which stands at around €240 billion.

The government of the day will, of course, choose a combination of options 1, 2, 3, and 4. Option 5 is less likely. Tax cuts are more popular than reducing the national debt. That is why the Fine Gael junior ministers proposed it.

The trouble, of course, is the fragile composition of the surpluses. We have written at length in The Currency about the glut of corporation tax receipts flowing into the coffers. This year, the number is expected to top €24 billion. But much of it is classified as “windfall” – in other words, potentially temporary. Late last year, the government put the windfall figure at €10 billion after a surge in receipts. In its recent Stability Programme Update, the number was put at €12 billion.

Without such windfalls, Ireland would be still in a land of deficits.

I asked Paschal Donohoe about this early this month. He does not believe that corporation tax will fall back to 2016 levels but he remains worried that they will fall. “Just because it has not happened yet should not give us a false sense of confidence that it will not happen. And the reason why I believe it will happen is that if you look at the speed with which the tax has gone up, it’s very reasonable to make the case that if something can grow quickly, it can decline quickly,” he told me.

McGrath and Donohoe have made it clear that they want to put the excess corporation tax to use in the area of capital spending and in the establishment of long terms buffers such as the National Reserve Fund or the proposed Sovereign Wealth Fund, as opposed to the sort of tax breaks outlined by the three Fine Gael ministers.

And they are right. Our income tax policies can’t be based on the performance of a small number of multinationals in the pharma and tech sectors. We built a model around property taxes in the past, and we know how that worked out.

Look at the last week alone. Ireland was battling in Europe over its historic tax relationship with Apple. Meta was fined €1.2 billion in relation to its data policies in Ireland, changes to which the company said “would clearly have a devastating impact on [Meta Platform Ireland, formerly known as Facebook Ireland Ltd]’s business, revenue and employees.”

Days later, as part of a global restructure, the Facebook owner said that around 490 jobs are expected to be cut at its Irish operation. The redundancies will apply to people in roles across Meta’s business, including Facebook, Instagram, and WhatsApp. This comes months after it shed another 350 jobs here.

The surge in corporation tax receipts provides Ireland a chance to invest in its creaking infrastructure and provide some insurance for the future. It should not be used as an election pledge, or a bargaining chip among government parties. Yes, everyone wants some extra money in their pockets. But the source of that money needs to be sustainable. 

*****

Elsewhere last week, we spoke to Natasha Durling. When lockdown hit, many businesses struggled to stay afloat. But for the Irish entrepreneur, it sparked the beginning of a second business and a multi-million opportunity. Durling talked about building Lockdown Liquor from scratch.

US-headquartered legal giant Squire Patton Boggs has landed in Dublin with M&A specialist Dennis Agnew at the helm. The new managing partner talked to Francesca about the state of play in private equity and his enduring love of the deal.

Last year, Revenue focused on construction and retail in its audits and investigations. But what other sectors has it been targeting, and which sector coughed up the largest yield? Rosanna had the detail.

Ireland will become the first country in the world to mandate health labels on alcoholic drinks. The move is being lambasted across the EU and the drinks industry is frothing. So how did a small team in Ireland make it happen? We caught up with Sheila Gilehany, the chief executive of Alcohol Action Ireland. 

Paul Coulson has built a global packaging giant from the ground up. Sean told the story of how his Ardagh Group — one of Ireland’s most aggressively-levered companies — is navigating the world of sharply higher interest rates.