History suggests the Government will struggle with inflation

• Published date: 24 June 2022

Historically, Irish governments grappling with cost-of-living dilemmas have rarely been thanked by the electorate either for spending restraint in the interests of the national balance sheet, or for increases in welfare to take the edge off spiralling costs. Austere budgets were deemed necessary by Cumann na nGaedheal during the period 1922-31, including a reduction of public-sector salaries in 1931. In 1932 it gambled on an election approach that stressed the red scare and law and order, but Fianna Fáil focused largely on social and economic issues, promising increased expenditure on social services

As leader of the new government from 1932, Éamon de Valera also cut ministerial salaries, declaring: "If there are to be hair shirts at all, it will be hair shirts all round. Ultimately, I hope the day will come when the hair shirt will give way to the silk shirt all round." That did not happen, and the shirt fabrics remained decidedly mixed, though Fianna Fáil managed to expand the State's welfare remit and find a way of satisfying enough of the different shirt wearers to build a long-term appeal.

The coalition government that eventually replaced Fianna Fáil in 1948 is often remembered for the controversy over attempts to expand the State's role in healthcare, but ultimately it was the price of milk that ended that government when three rural TDs withdrew their support over that issue. The subsequent Fianna Fáil government's finance minister, Seán MacEntee, was determined to pursue a deflationary policy, raising income tax and imposing price increases on essentials to try to eliminate the balance of payments deficit.

Historian Joe Lee has argued that MacEntee pursued a policy that was "honest and courageous" but also suggests his budgetary decisions were misguided, "in personal, party and national terms". By 1954, independent TDs on whom the government was dependent withdrew their support due to the impact of these austerity measures.

Impossible dilemma

At a later stage, the nature of the impossible inflation dilemma was spikily captured by Frank Cluskey of the Labour Party after the Fine Gael/Labour coalition lost the general election of 1977. When, after the election, he spoke to the Fine Gael minister for finance in that government, Richie Ryan, Cluskey said: "Jayzus Richie, you were right. You always said we'd get no f***ing thanks for all the welfare increases."...