Finance Minister Paschal Donohoe: ‘If politics is ultimately about choice, those choices were as hard as they can get’
07th Jul 2021
Read time: 15 mins
Finance Minister Paschal Donohoe speaks to IMAGE Business Club about the most demanding period of his life, the potential of “a particularly unjust double whammy” for women following the Covid-19 pandemic and his political diaries that are “too frank” to see the light of day.
There are many similarities between Paschal Donohoe and the late Denis Healey, the former Labour Deputy Leader and Chancellor of the Exchequer who once dominated British politics.
Like Healey, Ireland’s Finance Minister and Eurogroup President is a cultural aesthete whose gruelling workload does not get in the way of his love of the arts, especially music, philosophy, Star Wars, X-men bobbleheads and, of course, books.
Both men held the public purse strings during the some of the worst peacetime crises since the Great Depression. In Healey’s case, it was applying for a humiliating $3.9bn loan from the IMF in 1976, having to turn back at Heathrow airport after abandoning a flight to Hong Kong to soothe market nerves. The headline in The Sun the next day was “Britain’s Shame”.
Ireland’s Finance Minister and Eurogroup President is a cultural aesthete whose gruelling workload does not get in the way of his love of the arts
For Donohoe, it’s a once-in-a-century global health crisis that has led to Ireland borrowing almost €40bn as our national debt is expected to surge to more than €241bn this year.
Neither man became Prime Minister. Well, not yet anyway for Donohoe, who – like Healey – enjoys an extraordinarily rich political hinterland (a term coined by Healey) which seems to imply he gets huge satisfaction in politics, whether or not he ultimately becomes Taoiseach.
And while the Dublin Central TD credits Healey’s bombshell political memoir, The Time of My Life, for his decision to enter politics, Donohoe won’t be following in Healey’s footsteps by spilling any secrets.
“I have started to keep a diary,” reveals Donohoe, IMAGE Business Club’s inaugural, signature interviewee. Momentarily and uncharacteristically stumped when I ask him what he would call his memoirs, Donohoe says he would call them The Time of My Life as a tribute to Healey, whose tome he describes as “the greatest political autobiography I have ever read”.
“That book was the beginning of my journey in politics and to this day is the best book for capturing the demands [of political life], the sense of vocation,” says Donohoe, adding that, aside from the pandemic, his own nascent diaries also capture the “sheer fun” of being involved in politics as well. “I think out of a meagre tribute to that, I’d have to name my book after his book.”
Donohoe was just 15 in 1989 when Healey published a sensational, gripping political memoir that spared nothing and no one in its path. But having raised the prospect of a juicy Irish equivalent, Donohoe – who has just served as a judge in this year’s Dalkey Book Festival Literary Awards – says anyone expecting an autobiography bearing his name will be bitterly disappointed.
I have started to keep a diary.... I’m never going to publish [it]
“I’m never going to publish them,” says the married father of two who is clearly relishing the task of writing his never-to-be-seen memoirs, while politely rebuffing my offer to edit the diaries and track down a really good libel lawyer for us both in the process.
I ask the Minister, the first person to hold the post of Minister for Finance as well as hold the position of Minister for Public Expenditure and Reform, why he would not pierce the veil on what it is like to be “in the room” during what has been a remarkable period of world history.
After all, it’s the kind of book he would pore over and write an in depth review about in a heartbeat. “They are never going to see the light of day because they are too frank,” says Donohoe, who loved Healey’s tome for precisely that reason. “I’m writing down all that happened, but as the consumer of the odd political diary myself, there have to be a few secrets somewhere.”
What Paschal Donohoe is willing to shine a light on is the intense pressures he and others faced when Covid-19, the coronavirus that took hold in Wuhan, China, spread like wildfire across the globe early last year.
As the army were drafted into Bergamo to deal with an overflow of corpses, after the North Italian city became the European epicentre of the disease, the European Union and European Central Bank pivoted to avoid making some of the worst policy mistakes it had self-inflicted on the region in the wake of the global financial crash a decade earlier.
“I can remember like it was yesterday, the meeting which we had, in which myself and a number of officials sat down and we said ‘we are now about to close down our country’” says Donohoe.
He and his officials gathered in a meeting room in the Department of Finance to map out how the Exchequer could meet what Donohoe describes as “that higher level of obligation” when asking employers to shut down businesses and telling employees and citizens not to leave their homes.
“I vividly remember and I will probably never forget the discussions we had around that and those awful days when we realised that within a couple of weeks we were going to have six or seven hundred thousand people without a job,” says Donohoe, adding that it was citizens and citizenry that was foremost in his mind.
“When you are thinking about these issues, you’re not thinking about consumers, you’re not thinking about labour market participants, you’re not thinking about employees, you’re thinking about citizens. And the level of obligation you have in those circumstances is so high.”
I can remember like it was yesterday, the meeting which we had, in which myself and a number of officials sat down and we said ‘we are now about to close down our country’
Donohoe says the last 18 months have been “the most demanding experience of my life”.
“But as deep and searing as the demands were, I never lost a sense of privilege for being able to make those decisions. And a sense that at least economically, that much had been getting ready for [this point] to happen.”
The weeks in March, April and May of last year  and then the period from the end of December to the middle of February of this year – our third and deadliest wave to date – were, for Donohoe, “as hard as they can get”.
Up to that point, he had been thinking about trade-offs in terms of investing money in education or in health, in spending or deficit reduction, in spending or tax reform.
The next set of decisions would be about life and death.
“The trade-offs that I had been involved in, while incredibly demanding – and they are on the way back – were trade-offs that were within certain parameters,” he explains.
“But to then be making decisions that were about the trade-offs about lives and livelihoods, about making decisions, the consequences of which would exist for generations to come.
“And most searingly, for people who wouldn’t have the chance to be in the generations to come because of the decisions that we were making. These were decisions of the most morally exacting nature. And, if politics is ultimately about choice, those choices were as hard as they can get.”
Looking back, Donohoe wishes that Ireland had had a pre-existing wage subsidy scheme on its books, with experience of activating and implementing one quickly, before the pandemic hit.
“While we only lost a couple of weeks because of how hard we worked across that [initial] fortnight, it was a still a couple of weeks in which, if had we had had it in place, we could have reduced the harm.”
The lack of such a scheme and the social and economic impact on those worst hit by the lockdown clearly weighs heavily on Donohoe, who has been a TD for Dublin Central since 2011. “The harm was so big, if we had just reduced the harm by a little bit, it would have been so valuable,” he says soberly.
“Economically, that is an abiding regret. That is why – while hopefully we can phase out the subsidy scheme in its entirety at the right point – it needs to be there in the background for the moment that black swan comes into your sky again.”
“The harm was so big, if we had just reduced the harm by a little bit, it would have been so valuable”
The scale of suffering and death, and the ability of the State to respond to the initial waves, has also taken an emotional toll. “From a health point of view, we are not alone in wishing that we had widespread testing and tracing capacity available within our country. So that in those early weeks of it, we would have been far more informed and far more agile about the spread and the infectiousness of the disease and our ability to try and contain it.”
Donohoe says that as well as being an incredibly demanding period of his personal and political life, he also experienced “great appreciation and humility” because he had a seat at the table in the first place. “My experience in life and in politics got me to the point that I could try and help make good decisions,” he says, before adding quietly “but it was as tough as it can get.”
If politics is ultimately about choice, those choices were as hard as they can get.
A gendered recession
The scale of Ireland’s borrowing, some €38bn in less than two years, was and remains staggering – running at a monthly cost of some €1bn according to the latest Exchequer data.
But Donohoe says that as well as having no other choice, he felt confident that Ireland could ultimately weather the looming economic storm.
“We had to do it and we were able to do it. Because, despite our many challenges and critiques of the time, we went into the crisis in very good economic condition, and we had the support of the Central Bank who realised the need to act differently.”
What does it all mean for the future? “These were emergency measures for a health emergency,” he says. “From a State point of view, we cannot indefinitely continue,” adds Donohoe, who last July was elected as President of the 19-strong Eurogroup of Eurozone Finance Ministers. The election gave Ireland, dealing with the twin threats of Brexit and Coivid-19, a major, influential platform as the European Union debates how to handle the fallout of the pandemic and as the region renegotiates its relationship with the United Kingdom.
Donohoe, who last September called for unprecedented European solutions to match the equally unprecedented challenges Europe faces in the Covid-19 pandemic, prevailed over Spanish candidate Nadia Calvino, who had been favoured by big hitters, France and Germany, for the coveted role.
Finding the right moment to scale back emergency support measures in Ireland and Europe will be a delicate task, and will have a significant bearing on our capacity to return to anything resembling a budgetary and fiscal normality.
Donohoe is mindful that the greatest global recession since the 1930’s is very much a gendered one and that women in Ireland, particularly our frontline workers, have fallen victim to the “she-cession”. This is, after all, the first economic crisis since 1949 where female unemployment rose faster than male unemployment.
“I unfortunately believe that the potential is there for it to be a setback on the progress that I think was being made towards gender equality and better recognising the role of women in society and in our economy, and making progress on issues such as pay equality, such as the role of women in different areas of decision making and representation within our economy and in our society,” says Donohoe.
“That risk is there. If you look at the data, the hard figures – and they are hard to look at – about what has happened both in Ireland and in Europe,” says Donohoe.
I unfortunately believe that the potential is there for it to be a setback on the progress that I think was being made towards gender equality
Donohoe is not alone in fearing that the Covid-19 crisis and the unintended consequences of lockdown measures might jeopardise decades of gains achieved in gender equality.
Last December, the European Foundation for the Improvement of Living and Working Conditions, warned that Covid-19 could roll back hard fought for gains for labour market participation for women, noting the “tangible risks of women disengaging from the labour market and of developments reinforcing gender roles”.
Others, such as Ibec in Ireland, have captured similar fears.
And yesterday (July 6th), Rethink Ireland’s Mná na hÉireann (Women of Ireland) fund published a report which confirmed that women’s economic prospects have suffered a significant setback due to the Covid-19 pandemic.
Respondents stated that increased caring responsibilities because of pandemic restrictions had limited their personal and professional development.
Rethink Ireland says that the pandemic has “revealed and compounded” the economic and social inequalities faced by women, particularly those from minority groups and disadvantaged communities.
Indeed, the pandemic has thrown up something of a paradox for women in the workforce. Never before have we relied so much on women, who make up 85 per cent of the global healthcare workforce. Women are literally on the frontline.
Yet, at the same time, women have been side-lined as we are more likely to lose our jobs or leave the workforce as a result of the Covid-19 crisis.
Donohoe is mulling this paradox in his mind, noting the decline in the labour market participation rate for women during the pandemic across Europe, the fact that women took on more of the unpaid care burden as well as the fact that women were more likely to work in sectors hardest hit by the pandemic.
“The potential is there for a particularly unjust double whammy where you see women who have been genuinely in the frontline [working] in some of the hardest roles within our society,” says Donohoe.
“The aftermath of that is a potential setback in the progress that we have to make towards a truly more equal and truly more diverse world, Europe and Ireland.
“When I think about the future of the politics of the centre in Ireland and Europe, when I think about the imperative that we have to deliver a different economy and a different society versus that which we left, a really critical quality for me in all of that is where we end up with the role and the recognition of our mothers, sisters and daughters in our economy and in our society.
“The potential is there for a particularly unjust double whammy where you see women who have been genuinely in the frontline [working] in some of the hardest roles within our society,”
So, while I wouldn’t fully agree with the view of this as being a setback, I do regrettably recognise that the risk for that setback occurring is really significant”.
So, how do we offset that risk? How can Covid-19 become a key opportunity to reassess the role of women in the workplace as well as society? As we emerge from the pandemic, Rethink Ireland has called for a diverse representation of women to be “present at all tables where decisions regarding social and economic policy” are made, adding that gender and equality budgeting should be embedded in all economic decision making.
Should the Irish government establish a Gender Policy Council (GPC) along the lines of that established by US President Joseph Biden to advance gender equity and equality in both domestic and foreign policy? And should, I venture, Paschal Donohoe, as Minister for Finance, take lead responsibility for such a whole-of-government initiative?
Donohoe pauses and folds his arms, and then looks skywards as he considers his response.
He is rarely lost for words and he is not now. It’s just, he explains, a “valuable proposal” that he hasn’t considered before.
“I can see merits and demerits of it,” he replies, carefully. “The undoubted merit that I can see is that if you do make something a whole-of-government approach, it has the driving force of the Taoiseach behind it, and his department and ultimately the economic departments – when they come together – really make things happen within the Irish Government and within our state and our country as we have [done] with regard to the two crises you have mentioned.”
But he can also see a number of demerits too. “The first is that in order for us to accelerate the progress I believe we were making – but to accelerate it, because it still wasn’t quick enough and sufficient enough – it requires ownership and delivery by all.
“Sometimes the whole-of-government approach is really efficient in driving execution, but it doesn’t always deliver the long-standing ownership that I believe the agenda we are discussing here will demand and require. With that approach, this is something that we all need to own and we all need to deliver. It requires more inclusive ownership by all.”
We turn, inevitably, to childcare, arguably the single most important solution to resolving many of the challenges faced by women in the workforce. The creation of affordable and accessible childcare, formed one of the key recommendations (there were 45 in all) of the final report of the Citizens’ Assembly on Gender Equality.
Chaired by Catherine Day, the formidable former Secretary General of the European Commission – the first woman to hold the post – the assembly urged a move to a publicly funded, accessible and regulated model of childcare over the next decade.
It also recommended that the State share of GDP spent on childcare be increased from the current 0.37pc of GDP to at least 1 per cent by no later than 2030.
“Childcare is already publicly funded, it’s just not fully publicly funded,” says Donohoe, before highlighting a range of measures including the new National Childcare Scheme (NCS), the first ever statutory entitlement to financial support for childcare, as well as measures such as the Early Childhood Care and Education Scheme (ECCE) and what he describes as “very extensive” and much needed subsidies for our childcare sector.
For too many, the State’s investment, welcome as it is, is still just a mere drop in the ocean. This is not least because many parents are now facing increased creche fees as they return to work. For their part, childcare providers are contending with increased insurance and a shortage of trained workers aggravated by the Covid-19 crisis.
Childcare is already publicly funded, it’s just not fully publicly funded
For many parents, the cost of childcare is prohibitive and acts as a brake for many women who want to join, re-join or increase their participation on the workforce.
For Donohoe, childcare provision is not simply an issue of cost.
“While I make the case that the public purse makes a contribution to the funding, I would still also equally acknowledge that we have a long way to go yet in how we can ensure that we are regularly meeting the standards that our families demand of us in terms of both affordability, quality and consistency of availability. We have progress that we have to make on that.”
Given the demands on the Exchequer, and headwinds in respect of potential changes in respect of global tax reforms, I ask where is the scope to reach that totemic 1 per cent mark by 2030?
“Those [corporate tax] changes are coming,” says Donohoe. “But there are always opportunities to make progress on priorities that we really value if we do it in a steady, consistent and focussed way for a number of years.
“I always view this [childcare] not just in terms of what the funding is, it is the output that we want to get from it.”
Minister Donohoe wants to reframe the childcare debate, arguing that if we want to reconcile progress on any or all of the recommendations of the Citizens’ Assembly – we need to move away from defining success purely in terms of the amount of money that is poured in to state investment in areas such as childcare.
“We need to think more of it in terms of what we want to achieve from that funding and what is the quality of service we support and the public service that mothers and fathers and families need.”
One area where he thinks the Citizens’ Assembly did not go far enough is its recommendation on closing the gender pay gap. The assembly urged the Government to set targets in legislation to reduce the hourly gender pay gap to 9 per cent by 2025 and to 4 per cent by 2030 with a view to eliminating it altogether by 2035.
“I don’t believe the 2035 target set by the assembly is ambitious enough, I would like to see us make progress on it before then.” he declares.
Donohoe says that when he looks across his own department, the Office of the Revenue Commissioners and other parts of the economy he engages with most – activities such as law, accounting, banking and financial services – he sees progress being made in respect of the increased participation of women.
“If I see a genuine progress that I believe is being made in the participation and role of women in many layers of those organisations, but not quite enough at the top yet. If we can do that in participation, why can’t we do that with wages?”.
I don’t believe the 2035 target set by the assembly is ambitious enough, I would like to see us make progress on it before then.
If there is one priority that trumps childcare and pay equality, and will determine the make-up of future governments, it is housing. Years of undersupply, latent demand and a surge in household savings are just some of the factors fuelling widespread public grievances, with fears of a locked out generation.
The figures are stark. The average age of a first time buyer is 34, with many young people living at home with their parents until they are 28.
The median age for joint purchasers has also risen in three years from 35 to 38, according to a new report from the Central Statistics Office (CSO).
It’s even worse for single people who are, on average, eight years older when buying homes or apartments than they were in 2010. The median age for a sole purchaser increased from 34 years in 2010 to 42 in 2019, the CSO found.
It’s not just house prices which are hurtling towards Celtic Tiger era peaks. Rents are already a third higher than those heady days, agitating the public and leading to increased calls for a referendum to ensure a constitutional right to housing.
Donohoe acknowledges that housing is a core mission that the Government has to deliver.
“Even it is an overhang from our last crisis and it is a consequence from where we were a decade ago, it doesn’t take away from the immediacy of it,” he says.
“I believe we were on the verge of making really significant progress about where we were with housing supply, the supply of homes and its affordability just before the pandemic. And even though that progress was not satisfactory or not enough, I believe that we were on the way to delivering the progress that many needed.”
Donohoe says Ireland has taken “a really big step back” because of the pandemic, exacerbated by the twin effects of long standing supply constraints and an increase in savings.
I believe we were on the verge of making really significant progress about where we were with housing supply
“We are working really hard at the moment to see if we can rebuild supply more quickly than would otherwise be the case, but do that in a way to try to make a quicker impact. The challenge is affordability from a rental and also a purchase point of view. I am really aware of how important it is that we make progress on that from the point of view of our society, let alone our economy.”
One analyst, Davy Stockbrokers, estimates that the State may need to build as many as 200,000 new homes over the next three years to resolve the housing crisis – last year the State built 21,000, with a similar number expected this year.
How can we close the gap? And how we can we avoid the decade long tail from the pandemic that we experienced with the global financial crisis?
Donohoe says that the risk of a similar setback exists, but believes that important lessons have been learned from the spectacular collapse of the Celtic Tiger and banking sector that gives him hope about Ireland’s ability to navigate such risks.
“The first lesson we have learned is that you have to prioritise the continual building of homes regardless of the demand for those homes in any given year,” he says. “A feature of the global financial crisis is that, for many years, we stopped building homes from both the State and from the private sector.
“During that time, we had ghost estates, we had a crash in the value of homes and in many ways saw a significant decline in housing stock right across that period, which was understandable at that point in time. A huge consequence of that is we were unable to meet the needs that follow right afterwards.
Donohoe says that as a result of the last crisis, the government has prioritised continually building homes, during the pandemic, both through the State and by enabling delivery through the private sector.
“That’s the first difference,” says Donohoe. “The second point of difference is, thank God, we didn’t go into this pandemic with a dangerous amount of borrowing and credit within our economy. And the absence of that, then, in turn, should help rebuild more quickly. So, there are definitely similarities with where we were a decade ago, but two important differences.”
Thank God, we didn’t go into this pandemic with a dangerous amount of borrowing and credit within our economy
On social insurance
It remains to be seen whether voters will be convinced that enough is being done to resolve the housing crisis. Where the public may give the Government some credit is for the unprecedented supports for workers and businesses forced to shut down or seriously curtail their operations during the pandemic.
They include supports such as the Pandemic Unemployment Payment (PUP), which have fallen from a peak this year of 481,000 in February to 245,000 as of June 21st.
The total value of payments made to-date under the Government’s three main support schemes – the PUP, EWSS (TWSS) and the CRSS is over €14.5 billion, of which over €5 billion has been spent this year so far.
Donohoe, who now faces the daunting task of rolling back those supports, says the pandemic will be a catalyst for the radical re-ordering of elements of our economy and society, including once marginalised ideas such as a Universal Basic Income, which are now more mainstream.
“Is a feature of post pandemic theorists, that societies do think differently about wages, and they do think differently about living conditions,” says Donohoe.
“This pandemic will be an absolute catalyst for two things. It will be thinking about the future of our social insurance systems, how we create and execute a social contract, with what we know now. And it will also be also be a catalyst to how we think about levels of wages in our economy and how we recognise different forms of work.”
“The future of our social insurance system is a debate that’s only beginning now because we are still in the immediate, sharp aftermath of very difficult and dark days. But it is a debate that’s absolutely going to begin.”
Donohoe, who has convened a Commission on Taxation and Welfare to take a long-term, strategic view of the taxation and welfare framework necessary for Ireland as we move past the Covid recovery and beyond, knows that is going to be a challenging debate.
“Our social insurance systems are based on the principles of contribution and reciprocity. And social insurance systems, by their nature, do depend on not only the expectations that we have for what we can get from them, but it also does depend on our willingness to contribute to them in the first place.
“The two debates have to go hand in hand. If, for example, we are talking about how we change, for example, sick pay availability. As we look at the level and duration of sick pay, it ultimately does require an equal conversation regarding how we pay for that, which, of course, is a really live debate among our SME community at the moment.
“So yes, I believe that debate will begin and accelerate. But, in parallel to that, that debate will only be credible if we’re equally honest with each other regarding how we fund it.”
The future of our social insurance system is a debate that's only beginning now
Amongst its 45 recommendations, the Citizens’ Assembly on Gender Equality urged the government to adopt a fully individualised social protection system to reflect the diversity of today’s lives and to promote an equal division of paid work and care.
The commission also called for the government to improve the terms and conditions for those in paid employment as carers, including access to pensions.
Donohoe knows an incredible debt and recognition is due to carers and others who performed invaluable, if less visible front line roles during the pandemic.
“To move this recognition forward in an inclusive way, we will need to recognise that there is a broad range of our citizens that helped us and stood by us at a very dark time,” he says. “And we need to have a discussion about how all of that is recognised. The recognition will have many strands. It will be in the pay that employers make available to their citizens. It will include our social insurance systems and how we think about them in the future. It will also include a discussion regarding where and how we all work.”
But, he cautions, in order for that recognition to be meaningful, we have to acknowledge the trade-offs in it, the consequences of it and the funding of it as well.
As the world economy seeks to wean itself off extraordinary supports and cultivate a new sense of normality, Donohoe believes that Ireland and Europe rose to the economic challenge of the Covid-19 crisis. “We realised what was at stake for our societies, we realised what was at stake for the future of the [European] Union,” he says. “Paradigms were changed and they were executed with absolute speed and at huge scale.
“But the challenge we face is so big, that while I hope I could credibly make the case for what we have done and what we have done differently, that is not and cannot equal complacency about what is yet to come.”
Donohoe likens the pandemic to the risks associated with personal injury, and is steeling the country for considerable aftershocks.
We realised what was at stake for our societies, we realised what was at stake for the future of the [European] Union
“Sometimes the shock from the injury and the effect on your health from the injury happens after the acute moment of the injury. And that is why I make the case for what we have done, I equally make the case for saying that we still have much more we have to do.
“We are, I believe, even with the risks we still have, on the verge of a rebound economically for Europe and for Ireland, but that rebound isn’t the same as a recovery. You need a rebound to begin a recovery, but a rebound doesn’t equal a recovery. That is the kind of thinking we are going to need for the coming years.
For now, Donohoe is contemplating new trade-offs and capturing all the dilemmas in his still secret diaries. My offer to edit them still stands. And why shouldn’t he? Who knows, that maybe, like Healey Donohoe could inspire future politicians if he shares that rich hinterland with us as well.
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