Varadkar is squandering more than FG's legacy
Here we go again, down the reckless populist path from boom to bust.
We've just marked the 10th anniversary of the bank bailout, but all those solemn assurances about learning lessons are starting to have a tin echo.
The scars of austerity and painful memories of boom-to-bust economics were commemorated.
But that's as far as it went. Political amnesia is back. The past 10 days represent the worst period of fiscal irresponsibility in a decade.
Budget 2019 and the out-turn of the public finances for this year amount to the weakest type of populism. Witness the reckless abandonment of budgetary prudence.
It started last Friday. The Department of Health overspend is a record €767m - and counting. No proper explanation was provided either by the ministers for finance or health. No attempt, with still months of the year remaining, to stop the runaway train of health care mismanagement.
Instead, we offset €1bn of extra corporation tax receipts (CPT) to balance off the overall State annual accounts.
We are still bereft of an explanation as to the failures of the Revenue Commissioners/Finance Department to accurately forecast CPT yields from multinationals.
Over the past three years, even before the latest billion miscalculation, the equivalent of 26 years of Ryanair profits has been completely missed.
One tech giant accounted for €700m of the windfall CPT bonus.
The likelihood of this becoming a sustainable revenue flow is remote to say the least. The Government has budgeted for permanent fixed health spending against a one-off mega-windfall.
It's all reminiscent of the early Haughey budgets in 1980-81 (having just taken over from Jack Lynch). Haughey was desperate to secure his first general election mandate - there were massive supplementary estimates, promises to all.
Annual receipts from CPT have risen from €4bn to €9.5bn. Something extraordinary is happening with the international warehousing of intellectual property (IP) into Ireland; 40pc of the CPT take last year of €7.4bn came from just 10 companies.
The Irish CPT regime provides tax deductions for the capital cost of acquiring specified intangible assets which are used for the purposes of the company's trade.
These intangible assets include patents, copyrights, trademarks, licenses, computer software, brands, know-how and goodwill directly attributable to any of these assets. These are treated in the same way as plant, machinery and buildings, whereby tech companies can claim tax deductions of up to 80pc of their income over a 15-year period through accounting impairment or amortisation.
Further special stamp duty exemptions apply for the acquisition of IP by an Irish-registered company. Through the 'Knowledge Development Box', 50pc relief means a 6.25pc rate of tax applies to profits earned on patented inventions and copyright software for an Irish company. Research and development tax credits also applies to 25pc of that expenditure. Other concessions apply to dividends and withholding tax on royalties.
These incentives have attracted, on a globally unprecedented scale, warehousing of intellectual property assets onto Irish corporate balance sheets. They have become a world magnet. But this lucrative game, yielding bonanza Exchequer returns, can't continue indefinitely.
Restrictions on such write-offs are on the way even before Emmanuel Macron, Angela Merkel and Donald Trump declare war on our tax haven.
It's unsustainable to plan multi-annual budgets on the basis of this gold rush. Seamus Coffey, chairman of the Irish Fiscal Advisory Council and author of our CPT bible, says the Government's budget balancing isn't credible. He's absolutely right.
Leo Varadkar tweeted that this Budget would "balance the books" and was "Brexit-proofed". In reality, it marks a return to fictional finances.
Paschal Donohoe has lost significant authority. By allowing so many co-authors to write his budget, he's been reduced from minister to committee rapporteur.
Every syllable was comprehensively leaked. Fianna Fáil, Independent Alliance and ministers rushed to claim credit for each spending wheeze/tax concession at the expense of his credibility.
Total (capital and current) increases in voted public expenditure relative to Budget 2018 are €5.6bn.
It signifies a return to political promiscuity - on an industrial scale. Vested interest groups procured spending concessions relative to minimalist €291m income tax amendments.
A ratio not of 2:1 but an incredible 19:1. That's not even counting consumers coughing up an extra €466m at restaurants and hairdressers.
The spendthrift politics of this budget are extremely short-sighted for Fine Gael. It has lost its ace card.
Leo famously promised to look after those "who get up early in the morning" - namely 1.7 million private sector workers. The same workers who saved this country from bankruptcy, paying €21bn or an extra €11bn in income tax since 2008.
Ordinary taxpayers aren't the talking heads we hear from in the media. You don't hear any special pleading.
They're too busy surviving in the squeezed middle - paying for everything, carrying the nation's national debt burden.
Fianna Fáil, Sinn Féin and the left are optimal "caring and sharing" parties, always preferring more spending over tax reforms. FG, implementing its policies, will get little credit.
Simply throwing more at health (€2.25bn) and housing (€2.3bn) won't overcome hospital mismanagement nor regulatory straitjackets of red tape from departmental planning, density, and procurement guidelines that prevent housing construction from attaining viability.
Leo now looks more like a slick salesman, rather than a sombre statesman. And what exactly has he bought?
If the central plank of his re-election platform is built on soft promises, he will sink. He'll easily be outbid in the election auction as reason goes out the window.
Expect more fiscal weakness like the U-turn on carbon taxes through massive discounts on the Local Property Tax revenue base.
It's strategically smarter for FG to act responsibly, maintain steady economic growth through budget surpluses - even at the risk of a Dáil defeat. The slow building of a character rooted in prudence would give the party the armour to take on all comers on the hustings from the economic high moral ground.
They have risked credibility over seven years of sound macro-economic management to please pressure groups and windy backbenchers.
The fundamental fiscal failure of the Bertie Ahern era was to believe tax revenues from constructing 110,000 houses a year (VAT/stamp duty windfalls) were sustainable to finance benchmarking, tax cuts, wholesale welfare hikes and expanded public services.
A similar mistake - believing momentary multinational accounting practices will yield perennial CPT cash to fund populist politics - is the fundamental flaw of Budget 2019.