Leadership calls for good fortune, as well as good judgment, says Ian Guider, who assesses the challenges and opportunities for Ireland’s new Taoiseach
This article was first published in the September 2017 Ireland edition of Accounting and Business magazine.
Some leaders get very lucky and Emmanuel Macron, the 39-year-old French president, is one of them. Not only did he come from nowhere to win the presidency, his barely 18-month-old party stormed to take nearly two-thirds of the seats in the National Assembly.
Theresa May is proving to be an unlucky leader. Her government’s policy on the defining issue of her premiership – Brexit – has been shaky. She has failed to win a mandate from the electorate. Her leadership is now in question.
What type or leader will the Irish Taoiseach, Leo Varadkar, be? Will he be lucky or unlucky? The portents are looking somewhat better for Varadkar and Ireland in the weeks since he replaced Enda Kenny.
At the start of the year I would have been nervous about the prospects for the economy. What wasn’t there to be fearful of? The most immediate danger was that of a hard Brexit, with customs patrols on the border, and of wild currency movements devastating exports. The US president-elect, Donald Trump, was promising to bring back jobs from abroad and cut America’s tax rates so that corporations would repatriate their trillions of dollars of profit stashed overseas. On top of that, the domestic economy – though growing – was not generating the forecasted tax revenue to keep up with the spending demands.
Yet, the mood globally has changed since January, and mostly certainly since the beginning of summer. The prospect of outside forces derailing the Irish economy has eased. The two most dangerous of these, Brexit and policy change in the US, are receding, while the global economy is looking healthier. Added to that is the prospect of Europe, with its leadership rejuvenated by Macron and the likely re-election of Angela Merkel, reversing some of its austerity policies.
That is the positive external environment. How does Varadkar take advantage of those tailwinds?
As he has indicated, infrastructure investment is something he is targeting. I’ve written here recently about how Ireland has been starved of capital investment in projects that have lasting economic benefits. The Taoiseach has said he will scrap the so-called rainy day fund and divert the money. If the €3.4bn from the sale of 28% of taxpayers’ shares in AIB is barred from going to anything other than repaying debt, then the state should look at borrowing to increase the spending on capital.
There also needs to be an emphasis on reducing the tax burden further. The points at which employees fall into the upper bands of income tax and the universal social charge need to be looked at in the context of an economy that requires workers to come here to service multinational companies, and is competing for financial services firms leaving the UK as a result of Brexit.
Varadkar has been dealt, by fortune or circumstances, a pretty decent hand of cards. The economic constraints placed on his predecessor are not in play. The big headwinds are no longer there. Will he prove to be a lucky leader? Part of the answer is in his hands.
Ian Guider is markets editor of The Sunday Business Post
"The economic constraints placed on Varadkar’s predecessor are not in play. The big headwinds are no longer there"