Paschal Donohoe: ‘I’m a long way away yet from having to make the case about my legacy’

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It is over two years since I last did a sit-down interview with Paschal Donohoe, who has been finance minister since 2017.

After the poor election for Fine Gael in 2020, for which he was Director of Elections, he stopped doing them. Then Covid-19 happened, which meant he couldn’t.

Donohoe’s role in the 2020 General Election has damaged his standing among his party colleagues.

Whereas once he was seen as a natural successor to Leo Varadkar, that is no longer the position. His reduced standing internally, combined with his Eurogroup experiences, has fuelled talk within Fine Gael that he is heading for the exit door.

Donohoe scotches such rumours. Insisting he has unfinished business in Irish politics, he says: “So I’m a long way away yet from having to make the case about my legacy.”

As a constituent of his in Dublin Central he tells me: “When you walk into your ballot box in your local polling station, my face and name will be on the paper. I want to run again. There’s so much more than I want to do in Irish politics. I’m determined to do the best possible job that I can in Government. And I am equally determined to make a difference to my party.”

Amid all the controversy around Varadkar still being subject to a criminal investigation over the alleged leaking of the GP contract to a friend, there is increased talk of who will replace the Tánaiste as Fine Gael leader.

Donohoe is clear, it will not be him, ruling himself out.

“It’s not an ambition that I have. My focus has always been on the jobs that I have,” he states bluntly.

During the pandemic, Donohoe has been in the engine room driving the Government’s economic response to the pandemic. On top of that he has been also juggling the job of President of the Eurogroup of finance ministers.

Much of that effort has been centred on devising a suite of emergency supports, such as the pandemic unemployment payment, which was devised in three days, the wage subsidy scheme, and many others.

Such new measures, although massively expensive, circa €32bn, have been instrumental, as he says, in the quick bounce back in the economy since the easing of restrictions.

Paschal Donohoe:
Paschal Donohoe: “Tackling the Government’s part in energy costs, increasing welfare benefits, and making changes to the tax code are the key items now under consideration.”

Despite our ballooning national debt, in cash terms at €240bn, it is now three times what it was when Fine Gael took office in 2011, Donohoe argues the large sums of money borrowed during Covid were not only justified but saved thousands of jobs.

“One year after the darkest days of a pandemic, our debt as a share of our national income will begin to fall again, And I’d make the case that when I had to do an awful lot of borrowing, which I did over two years, I borrowed to save jobs, and that’s worked,” he argues.

He also says as the minister who delivered a balanced budget, Ireland’s stock of debt as a percentage of national income is also falling.

“Where your issue becomes very real,” he tells me “is that for new borrowing that the country will engage with in the future. And even though that low borrowing will be a low share of our overall debts, if you continue with higher levels of borrowing, it quickly rocks up.”

The cost of living has quickly emerged as the biggest issue facing the Government post the peak of the Covid-19 pandemic.

While the Government has already moved to give every house in the country a €100 credit off their electricity bills, many feel this will not be enough.

As for what the Government can do, Donohoe sets out the stall pretty clearly.

He says tackling the Government’s part in energy costs, increasing welfare benefits, and making changes to the tax code are the key items now under consideration.

“So what can you do? The levers are there. It is what you do with the price of energy and what the state adds to the cost of energy through the PSO (Public Service Obligation levy) and how you can reduce it, as we’re going to do in this quarter,” he says.

“And then it is what you do when your tax code and your social welfare code. There are a number of levers that can make a big difference. But in using those levers, the cost of it is high,” he adds.

Under pressure in October, Donohoe continued with his planned increase in carbon taxes despite the spike in energy costs. He did this so Ireland can meet its targets on reducing emissions by 2030 and net zero emissions by 2050.

I ask him are the commitments set out in climate change affordable?

“Yes, if we continue to stand by the increases that we have in place in carbon taxation. That is the direct answer to that,” he replies bluntly.

“I know this is a difficult case to make at a moment, in which we are seeing the rising price of energy. But if you look at the need that we have to move to net  lower carbon and then net zero, we clearly need not only more money from the private sector, but we need higher levels of capital investment from the Government,” he says.

“And this is why carbon taxes are so important. It was… a difficult decision to make in October when the price of energy was going up. But the win for that is the win you get year by year by year. When you increase that tax, it generates a lot of money to reinvest back then into the national development plan. So I believe it is affordable, it is going to be demanding, but that’s why the carbon tax is so important,” he says.

I ask if there will be no pause in the planned further carbon price increases in October’s budget. “It is not being considered at the moment and it’s already legislated. Things are locked up budget by budget and it is legislated for,” he states clearly.

Of the latest rise in the salary of Secretary-General of the Department of Public Expenditure and Reform, Robert Watt, Mr Donohue says: If you want people doing very demanding roles in our public service, there are a small number of roles that do merit being paid differently.
Of the latest rise in the salary of Secretary-General of the Department of Public Expenditure and Reform, Robert Watt, Mr Donohue says: If you want people doing very demanding roles in our public service, there are a small number of roles that do merit being paid differently.”

On the other big current political controversy, Donohoe strongly defends the awarding of the increased salary of nearly €298,000 a year to Secretary General at the Department of Health Robert Watt, who was once his top official in the Department of Public Expenditure and Reform.

“If you want people doing very demanding roles in our public service, there are a small number of roles that do merit being paid differently,” he states.

“While I understand you raising this on behalf of your readers, I would argue in a very limited number of roles within our public service, having the right people in those roles can make a difference to the delivery of very important issues,” he says.

“For me, the defence of this role is in the importance of the Department of Health and having a leader within it,” he adds.

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