Daniel McConnell: Budget 2022 to reflect remarkable economic recovery

Leaks in recent days have fleshed out just what the dynamic duo of Michael McGrath and Paschal Donohoe have in store for us. Picture: Gareth Chaney/Collins Photos

With 24 hours to go until Budget 2022 is announced, much of what will formally be announced tomorrow is already clear.

Leaks, authorised and not, in recent days have fleshed out just what the dynamic duo of Paschal Donohoe and Michael McGrath have in store for us.

It is not an emergency budget, as last year's one was, but it is not quite a normal budget either.

It is a transition budget where the two finance ministers are seeking to wean the country off the sweeties it has gorged on for the past 18 months.

Well, we know that despite the “dramatic” reduction in this year’s budget deficit from a projected €20bn to €13bn, Mr McGrath is keeping the Budget Day package to €4.7bn.

Considerable optimism

There is considerable optimism within finance circles that the remarkable bounce-back of the economy as the country reopened is a testament to the wisdom of having such supports as the pandemic unemployment payment (PUP) and the wage subsidy scheme in place, despite their huge cost.

The better than expected income tax receipts, they say, show the benefit of the State supporting all those jobs as opposed to letting them go and having to find them again.

That is not an insignificant holding of the line in terms of spending when the temptation would have been to “splurge”, as Mr McGrath described it on Sunday.

We know there will be money for pensions, welfare payments, a major boost in childcare funding, money to help families to avoid fuel poverty, top-ups to the student grants, and money for more gardaí, nurses, and teachers.

There will be tax breaks to keep tens of thousands of workers out of the reach of the top rate of income tax. There will be a new tax on land for those who have residential zoning but don’t use it. There will also be money for tourism businesses affected by Covid and supports to help them back to normality.

And on and on and on it will go.

Already, criticism is being levelled that the money will be spread too thinly in order to try and keep everyone happy and it will end up delivering very little to anyone.

However, Government sources say the extra €100m for childcare is “a step change” in terms of the funding to a sector in real difficulty.

They point to yet another increase of €1bn for the health service to facilitate the transition to universal healthcare as promised under the Sláintecare programme.

Mr McGrath and Mr Donohoe held meetings with the three party leaders in Government on Saturday and yesterday and everything appeared to be “by and large on track”.

Issues outstanding

However, as of last night, a number of issues remained outstanding.

Education Minister Norma Foley was yet to finalise her budget amid wrangling over funding for special needs education and for disadvantaged schools.

Sources indicated that she may require a final day bilateral meeting with Mr McGrath to sign off on her allocation for 2022.

Sources also tell me negotiations with Catherine Martin and her diverse department of culture, arts, tourism, media, and everything else were among the trickiest throughout the whole process.

The sense is that hers has become an economic ministry by default, without having the required skillset within the department. Her sectors were worst affected by the pandemic but she has delivered a €100m package by way of business supports and a spend on foreign advertisements in order to boost the industry.

Roderic O’Gorman’s ambitious childcare plans also necessitated a lot of attention from spending officials in recent weeks.

With an emphasis on recovery and restoring the economy, tomorrow’s budget is one framed in the realm of fightback and growth. From where we were a few short months ago, to even think of such things is not insignificant.