The budget will be harsh — and Enda can’t deny it
In doing so, he was reiterating a pledge in the Programme for Government that the Fine Gael-Labour coalition would “maintain the current rates of income tax, together with bands and credits”.
To the media, it seemed like a fairly routine PR stunt to ensure positive headlines about the first 100 days.
But one Government adviser revealed there was more substance — borne out of necessity — to it than that.
A week prior to the press conference, Finance Minister Michael Noonan had been quizzed in the Dáil about the prospect of tax increases in the budget and, in keeping with long-standing Department of Finance policy, he refused to rule anything in or out.
In normal times, such a refusal to declare his intentions wouldn’t have been regarded as problematic, as the maxim has always been that budgets are not written in the summer.
But at a time of economic crisis, with consumer confidence on the floor, Mr Noonan’s failure to rule out tax increases was a problem.
According to the Government adviser, the Coalition realised within days that the uncertainty on the issue would depress consumer confidence even further.
And so, Mr Kenny took the step of bluntly declaring at the 100-day press conference that the election promise would be kept — no income tax increases.
In explaining this, the adviser indicated that it was crucial to the economy that fears about the budget be assuaged and that people with money be encouraged to spend.
Exaggerated fears about the budget’s content — fuelled by constant media focus on the issue — would serve only to keep consumer confidence on the floor and make recovery tougher.
Mr Noonan himself attempted to issue a public version of this message when encouraging people to spend.
“Look, the economy is growing again… and you know, if you’re there with a clapped-out fridge, or a washing machine that doesn’t complete the cycle, now is the time to start thinking about spending some of your savings and doing the kind of the things you would normally do as somebody in work,” he said at the end of last month.
But that message is going to prove very tough to sell. And the reason? Mr Noonan himself as well as his ministerial colleagues are undermining it.
Mr Noonan has spoken of the savings in the December budget possibly being closer to €4 billion than the €3.6bn originally intended.
And his junior minister at finance, Brian Hayes, has suggested cutting as much as possible.
“It may well be sensible to have larger targets on the basis of communicating a strong signal to the markets about our commitment to reducing the deficit,” he was quoted as saying in the Sunday Times. “If you owe money, the sooner you pay it back, the better. It’s basic housekeeping.”
Basic housekeeping or not, that language will do nothing to soothe fears. It will only fuel them further.
A harsh budget is on the way, and judging by the public utterances of Mr Noonan and Mr Hayes, it could be even harsher yet.
With such indications being given, it will surely hinder any parallel efforts to encourage people to part with more of their very hard-earned money.
