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Caution must prevail amid clamour for relief measures in Budget

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Finance Minister Paschal Donohoe will deliver Budget measures two weeks early this year. Photo: Niall Carson

Finance Minister Paschal Donohoe will deliver Budget measures two weeks early this year. Photo: Niall Carson

Finance Minister Paschal Donohoe will deliver Budget measures two weeks early this year. Photo: Niall Carson

It is often complained that inflation tends to make the wealthiest people richer and the masses poorer. Government efforts to offset its sharpness are generally blunted by public expectations.

With the inflation rate running close to 10pc, the Government had to go off-piste somewhat from the normal course.

Moscow’s machinations in Ukraine continue to scupper post-pandemic global spending plans.

So predictably, the Cabinet’s Summer Economic Statement breached its own expenditure limits for outlays. Last year’s cautious Coalition Budget plan included a brake to peg increases in public spending to 5pc a year.

This was necessary to keep in touch with repaying the massive sums borrowed to tackle Covid-19.

As philosophers have been telling us for millennia, we cannot choose our external circumstances, but we can always choose how we respond to them.

And thanks to the surprisingly resilient tax takes, the Government is in the happy position of responding generously.

The fact that it has chosen to do so modestly in the short term may draw ire from both the public and the opposition. It has been under enormous social and political pressure to empty the coffers to help people manage the escalating cost-of-living crisis. Given the scale of both need and anticipation, it was always likely to disappoint.

What should also be borne in mind is that we must not make matters worse. We have been extremely fortunate in the cornucopia of foreign direct investment. It has been the billions in revenue from this sector that has been the buffer zone against the turbulence of the international financial ferment. Corporations generated €3billion, or 53pc, more tax for the State in the first half of this year, compared to the same period last year.

The record number of people at work has also given the Government ample room to shake off constraints in view of the unprecedented pressure families are under. Soaring energy, food and fuel costs are hitting the lowest-paid hardest, and they need all the help they can get.

The challenge remains to tailor measures towards this sector of society. To this end, the bringing forward of the Budget, albeit by two weeks, may be of some comfort.

But many may well have been desperately hoping more relief might come sooner.

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Others have argued the €6.7bn package – €2bn greater than planned – could yet fan inflationary flames. They contend discarding spending limits, even temporarily, is imprudent – especially when the future is so uncertain.

But facing such extreme headwinds, a more expansive approach was understandable, especially with funding on hand to do so.

The speculation about the exact nature of tax change, social welfare and pension payments, to combat the cost-of-living crisis is growing. The clamour for more relief given the stresses so many are under is unsurprising. But the scars of other financial crises are surely still fresh enough to ­justify a degree of caution.


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