The spectre of a no-deal Brexit is forcing Minister Paschal Donohoe to resist the urge to spread the cash before an election next year. This implies there is some silver lining to a no-deal Brexit.
The Irish economy does not need additional stimulus from a give-away pre-election budget. This should be a cautious, counter-cyclical budget because that is appropriate for our stage in the economic cycle; not because the UK cannot be saved from itself.
The Irish economy is growing steadily this year. We are close to full employment. Wages are rising by close to 3% annually. However, at the same time, our national debt to GNI (Gross National Income) ratio is 100%. This is the equivalent of just over €40,000 per capita or nearly €90,000 per worker.
We need to take the decisions now that will make it less difficult to cope with the next slowdown in economic activity. The prudence in this budget should be motivated by the need to act counter-cyclically rather than the threat of Brexit.
The Irish budgetary position, in recent years, has been helped by continued low-interest rates on our debt and windfall corporation tax receipts. Neither of these can be relied on in the coming years.
This budget doesn’t help us plan for the uncertain future, and there is little evidence in the budget that we have learned the lessons of the crisis. While this budget is cautious, it is also lacking in imagination. The Minister said that climate disruption is the defining challenge of our generation.
It’s clear from Budget 2020 that we do not value the climate and the Government does not share the sense of urgency demonstrated by our young people during the climate strikes.
This budget is the equivalent of a patronising pat on the head for those young people. A carbon tax is an integral element of our transition away from fossil fuel reliance. A €6 increase is tokenism. There is no commitment to future rises in the carbon tax to reach the levels recommended by the Climate Action Group.
The new health surcharge on new and imported cars will have no impact on the demand decision to purchase lower emission, including electric cars. Worryingly, this budget demonstrates that this Government either doesn’t consider climate change as a problem they need to address, or doesn’t care.
- Declan Jordan is a senior lecturer in economics at Cork University Business School