Noonan battled hard against the adversity of last five years with considerable success
Published 14/10/2015 | 02:30
It will take a few more years before the legacy of Michael Noonan's five budgets in charge of the nation's purse strings becomes really clear.
His stewardship of the exchequer has been a game of two unequal halves - three budgets under the whip of the troika, and two in which he had a lot more choice.
As Mr Noonan sat down in the Dáil yesterday after announcing details of a €1.5bn budget giveaway, the circumstances could not have been more different to when he stood up in the Dáil in December 2011 to deliver his first budget made up of €3.5bn in tax hikes and cuts.
Within the confines of the troika agreement Noonan and public expenditure minister Brendan Howlin announced tax hikes and spending cuts totalling €7.6bn in their first three budgets to get the exchequer back on track. The last two have seen giveaways totalling around €2.5bn.
With his hands tied behind his back in 2011, Noonan left income taxes alone at the start.
The hated USC had been imposed and Noonan felt it was better to look elsewhere to raise more cash.
In the shadow of the troika, he gave us the household charge and later the Local Property Tax.
He hosed down everyone; savers, those who inherit property, those putting money aside for pensions, and those gaining from the stock market. He raised hundreds of millions by hiking VAT, motor tax, cigarettes and alcohol.
From the outset Noonan wanted to use targeted measures to meet specific economic aims. He cut VAT to 9pc for the tourism sector. He introduced measures to bolster agriculture and farming. While closing down some tax reliefs, he encouraged investors to buy Irish property by making their gains on the sale of those properties tax-free.
It was politically difficult to give property investors a tax break with one hand, while cutting single-parent family allowances with another.
At least Noonan had the sense to end the investor-property incentives when the market recovered, instead of letting them go on for a decade.
Critics have accused Noonan of protecting high earners while attacking the lower paid. This doesn't necessarily ring true. After last year's budget the top 1pc of earners ended up paying 20pc of all income tax, up from 19pc.
He has also taken close to half-a-million low earners out of the income tax net entirely, bringing the total to around 700,000.
Income inequality probably has not grown that much but asset inequality has.
The most controversial of Noonan's budgets are his last two. The troika was gone.
In October, 2014, he defied advice from the IMF, the EC, and his own Fiscal Advisory Council by avoiding a scheduled €2bn austerity budget.
He gambled that the Irish economic recovery would continue. He delivered €1bn in tax cuts and increased spending. The gamble paid off as the economy is growing at nearly 6pc this year, and tax revenues this year are around €2bn more than originally expected.
Delivering €2.5bn of budget stimulus over the last two years, combined with another €1.5bn of extra spending in 2015, will be fine, as long as the wider economic environment stays benign.
On a superficial level the headline figures that form the backdrop of Noonan's five years should ensure a lasting, positive legacy. Unemployment fell from 15pc in 2012 to the current 9.4pc. Over 120,000 more people are working. The budget deficit was 32pc of GDP in 2010 but will be under 3pc next year.
The turnaround has been extraordinary and swift, but it has only been possible through the financial and personal sacrifices of people around the country, from cuts in public services to emigration.
We will still borrow the additional €1.5bn needed to fund yesterday's budget stimulus.
Noonan has made many smart calls in the last five years. He has also been lucky.
The Irish economy grew in four of the last five years, as much due to external factors as any policy decisions. Low interest rates, a cheap euro, and falling oil prices have all given the economy a massive boost that has nothing to do with government policy.
The negative legacy issues of the last five years are very real for many people, including exorbitant rent rises which have already cancelled out Noonan's tax cuts.
This is a direct transfer of income from the exchequer to a relatively small number of landlords. Major problems and supply issues remain throughout the housing sector.
The personal insolvency regime is a mess and tens of thousands are in limbo with their banks on mortgage issues.
The state has yet to get back any of the €20bn that went into AIB.
The crisis was an opportunity for reform - for example, ensuring child benefit goes to those who need it - and that just hasn't happened.
Noonan has battled hard against the adversity of the last five years with considerable success in many areas despite difficult circumstances.
The performance of the global economy in the next three years will test the economic wisdom of the decisions he has made since the troika left.