Wednesday 17 January 2018

Economic vision is sacrificed at altar of political expediency

Katherine Zappone: deserving of plaudits for childcare breakthrough. Photo: Doug O’Connor
Katherine Zappone: deserving of plaudits for childcare breakthrough. Photo: Doug O’Connor
Dearbhail McDonald

Dearbhail McDonald

He wasn't the first, nor will he be the last TD to summon the much tortured ghost of William Butler Yeats.

But the invocation (of sorts) of Yeats' 'The Second Coming' by Minister for Public Expenditure and Reform Paschal Donohoe was a stark if poetic reminder that Budget 2017 sacrificed economic vision at the altar of political expedience.

Commending his spending estimates to the Dáil, Mr Donohoe spoke eloquently of how "those of us in the middle ground of politics" - a curious description of the current, disparate minority Government - have a duty to show that co-operation and consensus can work. "To show that things won't just fall apart and the centre can hold - and stay firm," said the near misty-eyed minister.

The remark was truly sublime, as the 'something for everyone in the audience' budget bore all the hallmarks of a government that needed to get some shape of a budget past the post in order for its own fragile centre to hold.

It's not that it didn't try.

And a €1.3bn budget package is not to be sniffed at, even if some €300m was miraculously found in that famed fiscal space at the 11th hour to appease the moans and wails of certain interest groups.

But in trying to please everyone, from pensioners and the self-employed to sheep farmers and first-time buyers, the Government eschewed the opportunity to propel economic growth whilst insulating the recovery from external shocks and future threats.

Brexit is a case in point.

Britain's decision to leave the European Union is arguably the biggest threat facing the Irish economy.

The term Brexit was thrown around the Dáil yesterday like snuff at a wake.

But when it came to the detail of how budgetary resources would be applied to meet the challenges of Brexit - including the deepening currency crisis - details were in incredibly short supply.

In its battle to please everyone and offend no-one, the Government directed the lion's share of its increased spending power to public sector pay and social welfare benefits which will increase across the board by €5 from next year.

That's unless you are under 26 and the boost is a paltry €2.70 - why were the young singled out for discriminatory treatment?

For Finance Minister Michael Noonan, announcing the budget represented the first steps on a new road by a new Government, leaving it to subsequent budgets to travel further down the road.

Prudence is a necessary virtue, especially when managing a fragile recovery in a small, open economy that is due to repay €60bn on its national debt over the next four years.

But the most shocking aspect about this 'don't scare the horses' budget was its stunning lack of vision and ambition.

Capital spending, though increased, was dwarfed by the above-mentioned spend on public sector and social welfare pay, despite the patent risk to the economy if we fail to adequately invest now in large-scale infrastructure projects.

The jury is out on the prospects for the 'Help to Buy' scheme for first-time buyers, which appears to fly in the face of Central Bank rules to prevent another housing boom/bust cycle.

Children's Minister Katherine Zappone deserves some plaudits for securing what women's groups have described as a "breakthrough" on childcare.

But those plans - criticised by some as a high-level subsidy to cover up to €8,000 for low-income families; and by others as a lower universal subsidy of up to €900 for households earning above €47,000 - won't take effect until the eve of Budget 2018, when the minority Government may or may not still be in place.

Other measures require much more detail than that which was presented yesterday.

Take the so called 'vulture' and private equity funds, for example, whose acquisition of distressed Irish property assets has had the country convulsed for months.

Mr Noonan has promised a crackdown on any suspected tax avoidance by S110 and other tax-neutral funds, but the details are scant.

Yet the Government could confidently state that it will claw back €50m next year from those funds: that seems extraordinarily generous when you consider that it intends to impose a €65m tax hike on smokers who will now have to pay €11 a pack.

That the 'vultures' will pay less than the smokers is one of the more amusing outcomes of an otherwise visionless, running-to-stand-still budget show.


Irish Independent

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