Friday 23 March 2018

We are a nation with expectations on this Budget day - it could end badly

Public Expenditure Minister, Brendan Howlin
Public Expenditure Minister, Brendan Howlin

John Downing, Analysis

An election beckons, so politics and not economics dictate what will happen today. It must be an exercise in giving. The economists have warned us not to 'juice up' an economic machine which is already threshing. But such admonitions do not win elections.

Time was when people only wanted to know what the Finance Minister was doing to the fags, petrol and diesel, the pint and half-one, and mortgage-interest relief.

We were sceptical about the swings of PAYE changes fearing, often enough correctly, that any gains would be gonged on the PRSI roundabaouts.

The past eight years - Michael Noonan's deviated into poetry to call it the "lost decade" - have been all about punishing and taking. Last year there was a semblance of giving. Today we are a nation with expectations and it is all so highly strung that it could end in tears.

Politically, it is somehow easier to share out the misery. Once the extent of the crash became clear in 2008, people braced themselves.

Unemployment, emigration, and cuts in spending on services were deeply unpleasant - but not unexpected.

Fine Gael's Finance Minister, Michael Noonan, and his Labour partner as Public Expenditure Minister, Brendan Howlin, have soldiered exceptionally well together. There was never a hint of a cross word amidst the undoubted coalition attrition elsewhere between other ministers in Labour and Fine Gael.

The duo operated together, stoically and clinically. Now they will be tested in the give-away stakes. That is something they have not done since taking office in March 2011. In fact the last time that pair were in government, in the Rainbow Coalition from December 1994 until June 1997, they were not in giving mode either, as the economy was only beginning to pick up.

The bulk of us expect something that we will see in our pay-packets in January and February. Now that a November election has been pretty well ruled out, both Fine Gael and Labour are hanging their re-election hopes largely on this pay packet pick-up.

Budget 2016 will be replete with promises stretching into 2017 and the succeeding years. A sort of "re-elect us and we will deliver great goodies into the future".

Happily, the EU spending police are on the case trying to keep an eye on deficits and long-term debt. But signs last night were that the €1.5bn leeway may in practice be doubled. Such a stratagem means the deficit may be 2.1pc rather than the projected 1.7pc. Brussels could live with that, and life would go on.

We should be aiming for lower deficits and putting a dent in longer-term debt. But name me a political party elected on promises of dealing with the national debt.

In the longer-term, that would be a "giving exercise" - but it is not tradeable at election time.

Watch the wildly unpopular Universal Social Charge (USC). On Sunday, as he recanted hints of a November general election, the Taoiseach, Enda Kenny, also hinted that he wanted to phase it out.

Later we learned that this may happen between now and 2020 - provided we re-elect Fine Gael to head the next government. But voters want to see the colour of the money today, not in 2020.

Irish Independent

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