There will be no ‘show time’ on Budget Day, Taoiseach Enda Kenny told a dinner gathering of business folk.
Really? I doubt it. ‘Show time’ walks hand in hand with ‘Election Day.’ This is one couple that cannot easily be separated.
When you have a date with the voters, it is time to pull fat rabbits out of big hats and the time to do it is on Budget Day. This is when our Minister for Finance, Michael Noonan, gets to go to the Prom.
The attention is all on him and on the contents of that magical speech (we have yet to have a ‘her’ in this job.)
This is his moment, or ‘their’ moment, for we now have two ministers of finance, working in harness, like old dray horses, dragging along the huge national debt behind them.
One of them, Mr Noonan, is the foreign traveller, who gets to go to Berlin and Brussels; the other, Brendan Howlin, is the careful housekeeper, the guy who watches out for raids on the national pantry. Noonan and Howlin, a successful enough double act.
Their five-year term is almost up. Dray horses need a rest. They will want to go out with a flourish, for this is surely their last, big outing together.
Noonan is also the wily old Coyote of Irish politics. He first served in Cabinet 35 years ago. He knows his history.
He will recall Ernest Blythe, the nation’s first minister for finance, lynchpin of the Cumann na nGaedheal government under WT Cosgrave. The State was banjaxed, financially, following the Civil War.
Blythe’s officials persuaded him that it would be a good idea to cut pension payments. The ten-bob-a-week pension was a legacy of the British Liberals, who had ruled Ireland before Independence.
The guys in Merrion Street pointed out that there were more old people in Ireland, as a proportion of the population, than in Britain.
They wanted to cut pensions by two bob, to eight shillings a week, as Professor Ronan Fanning recalled in his history book, The Irish Department of Finance.
The Cabinet agreed to the smaller cut and saddled the ruling party, and its successor, Fine Gael, with the reputation of being political skinflints.
Other ministers of finance have been shrewder. Charles Haughey may be remembered for Charvet shirts and for financially hookery, but he had the common touch.
Presenting his first budget in April, 1967, he introduced free electricity allowances and free travel for pensioners and the blind.
The ‘free travel’ scheme still operates. As the writer, Micheal Ó Nuallain put it, it was “the greatest thing since fried bread, or the sliced pan.” It is arguably the best rabbit ever pulled out of the budgetary hat.
Mr Noonan and Mr Howlin will have to cook up something special, with the assistance of their cabinet colleagues and officials, for their hungry backbenchers and for the voters who may be about to snatch away their restaurant gold stars.
The room for manoeuvre is limited. The national debt has fallen back to close to 100% of national output, but is still way too high, as the Fiscal Council has observed.
Ireland remains vulnerable to either a sharp slowdown in global activity, further problems in Europe, or an increase in world borrowing rates (driven as much by a downturn in recycled Asian savings as by central banks.) The demands on the holders of the purse are there for all to see.
A large chunk must be handed back to public employees, in the form of ‘pay restoration.’
This is a given. It is underwritten in law. The pay cuts were designed for a financial emergency, and not beyond. Even if resources were not tight, the recovering economy must not be allowed to overheat.
The Fiscal Council has warned that “the degree of slack in the economy is likely to diminish rapidly.”
In layman’s terms, wages are rising and prices in certain areas (such as accommodation) are surging. Ireland is like a hungry man who has finally been offered a few decent meals. Now is not the time to start gorging.
We will get cuts in the hated universal social charge, so we are being told.
There will be a package for childcare, another for public housing, and for roads. Attempts will be made to plug all the biggest gaps, the usual suspects. Smokers will get throttled again.
Mr Noonan will want to surprise. Now 73, he may wish to crown a distinguished career with measures that hark back to his days as a young follower of the Garret FitzGerald wing of his party.
He could burnish the Government’s image, while doing real long-term good, with an unexpectedly generous package for family carers.
Carers save the taxpayer a fortune in institutional expenditure, yet have been treated poorly since the onset of the recession.
Such a package would send a message that a re-elected government, having sorted out the national finances (sort of), will now start addressing the social wounds that have been allowed to fester since 2008.
It would also allow for the creation of jobs for thousands of care support workers.
Mr Noonan produced a home-renovation package which has yielded real results. However, the upper stories in the centres of our towns and cities are under-utilised by European standards.
Time for a scheme to coax owners into converting this often neglected space into accommodation for the many out there who need it.
In the process, the appearance and activity levels of our urban centres can only be boosted.
Since 2009, inheritance tax has jumped. The tax-free threshold for the transfer of wealth to a son or daughter fell from €434,000 to €225,000.
A group that has been particularly hard hit are siblings. Brothers and sisters can now only inherit €30,150 from their sibling.
Where siblings share a family home, this can lead to hardship.
A jacking-up in the threshold for such sharer siblings would remove an anomaly at a modest cost.
The minister might also consider a scheme that links bonus payments for public servants to the implementation of successful cost-saving projects in the organisation where they work, or in activities covered by it.
The opposition naturally is tackling the Government on both flanks, screaming for more spending, yet, in Fianna Fáil’s case, warning about ‘giveaways.’
Others agree with the latter point. Says economist Alan McQuaid, of Merrion Capital: “Santa Claus politics worries me.. it’s a case of: ‘I’ll give you two X-Boxes if you vote for me’.”
Mr McQuaid believes (perhaps optimistically) that the bankers have finally learned the lessons from the boom-bust years, but that the politicians still cannot be trusted.
He may well be right, but before one loses hope, it might be worthwhile learning about the case of Norway, which discovered huge oil reserves in the late 1960s.
After the discovery, Norway suffered from what was known as the ‘Dutch disease’, with soaring spending and a credit bubble.
When Holland discovered huge gas reserves, it poured money into social welfare. The country lost competitiveness. Manufacturing jobs disappeared.
Most energy producers have been crippled by the disease, but the Norwegians broke out of the trap in 1990 by setting up a petroleum fund, with all of the funds invested abroad in a mix of equities and fixed income securities.
Today, it is the wealthiest sovereign fund in the world, amounting to one and a half times national output.
Just occasionally, the politicians do get it right, big time.
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