Monday 14 October 2019

John Downing: 'Prudence and an election win do not always coexist happily'


Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins
Finance Minister Paschal Donohoe. Photo: Gareth Chaney/Collins
John Downing

John Downing

Paschal 'Prudence' Donohoe will today give us a flavour of his two Budget Day plans as he outlines his Summer Economic Statement.

The man actually needs to be inspired by the Holy Spirit to prepare for what is coming as the spectre of a no-deal Brexit hangs over everything.

Budget Day itself is fixed for October 8, that's nine days before a crucial EU leaders' summit due on October 17 and 18, which will tell us a heck of a lot about where things are headed, as the clock ticks down to the deadline of October 31.

Brexit could somehow have resolved itself into some form of orderly conclusion by October. In that event things might be reasonably OK.

We would only have to deal with the annual health spending over-run, the continued housing problems, worries of an international slowdown, and fallout from President Trump's sparring with China on trade issues. Nothing out of the ordinary.

Or, we could be facing a calamitous crash-out Brexit which would bring a deal of chaos and economic confusion in its wake. The political fallout from that would be interesting.

Leo Varadkar and company would have a fight on their hands to explain that they were not to blame. But it is a fight they could probably win.

People would be so shell-shocked at the prospect of the economy going backwards again so soon after we just got things back between the ditches. Politics just might take a back seat - or in the absence of real evidence of Government culpability, voters might just stick with the status quo, as they tend to do in times of trouble.

The point we are getting to here is that the October 8 Budget will definitely be the last one before the next general election. It will also be the first in many years which will see the Irish economy in the black and running a very small surplus.

That general election could still happen before this year ends. Or, it could roll towards mid-2020. There is not much difference in the few months involved at all events.

Last November, at a Fine Gael ard fheis which now seems to belong to a lifetime ago, Leo Varadkar stirred the pot considerably by promising hefty tax cuts to voters if re-elected. Elections are, wherever possible, occasions for political leaders to bear gifts, or bribe the punters with their own hard-earned money, depending on your point of view. Could Paschal Donohoe find some hundreds of euro for a very modest tax cut? He has been shown any number of yellow cards on this one from the watchdog Fiscal Advisory Council and more recently in a quieter form by the ESRI.

But provision of a modest tax cut as a taster for the future just might sneak into his more upbeat plan. Plan B - the gloomy Brexit result one - will only bear grief. The Taoiseach insists setbacks will be temporary. We can only hope that proves right.

Irish Independent

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