British Chancellor would love to have delivered such a left-wing Budget

GORDON BROWN and Brian Cowen have a lot in common. They both gave budget statements this week.

When they rose in the House of Commons and Dáil Éireann respectively there was much anticipation about how they would perform not least because both are presumptive heirs to leadership of their parties - indeed it is almost assumed that each will lead government at some point within the next few years.

However, the budget speeches they delivered were very, very different.

Gordon Brown would have given his right arm to be able to make the Budget speech which Brian Cowen was in a position to deliver yesterday.

On Monday in Westminster Gordon Brown was greeted with jeers when he had to announce a halving of his projection for Britain’s economic growth to an acceptable but disappointing 1.75%. By comparison yesterday, Brian Cowen was cheered in Leinster House when he announced that he could budget for a growth rate in Ireland of between 4.5% and 5% next year.

Gordon Brown’s speech on Monday was met with some derision, even from the Labour benches in the House of Commons, because all he could do for pensioners was some miserly improvements in fuel allowances. By comparison Brian Cowen got a round of applause from his backbenchers when he announced that, as well as increasing our equivalent fuel allowance, he was in a position to increase old age pensions by between €14 and e16 per week.

Brian Cowan’s speech was longer than Gordon Browne’s but then he had relatively a lot more money to give away and he did a lot with it.

There was some justifiable criticism of Cowen’s first budget last year for not taking further initiatives on childcare. Cowen has answered those criticisms in his second budget. Guided by the recent report of the National Economic and Social Forum he has adopted a multi-pronged approach.

The social reality is that addressing childcare needs requires different tax and expenditure tools for parents operating at different levels of society and in different areas of the economy.

The political reality is that resources allocated to childcare have to be balanced between those households where both parents go out to work and those where one parent stays at home.

As the Lansdowne Market Research poll published in this newspaper four week ago illustrated, most parents actually turn to informal arrangements to look after their children when they go out to work. That is why, perhaps, the most significant of the initiatives announced by Cowen yesterday was allowing those earning monies from minding children in the informal sector to earn up to €10,000 without paying tax or PRSI on it or without it affecting their social welfare entitlements.

The real importance of this initiative is that parents who are placing their child with a grandmother, an aunt or a neighbour or friend (these carers are almost entirely women) can do so economically. This initiative also supports the choice of a woman who wants to give up work for a period of time to mind her own children because she will be able, if she so chooses, to earn additional monies tax free by minding somebody else’s child as well. This is a significant device to shore up and enhance the supply of childcare in the informal sector.

Cowen was wise not to go the tax relief route on childcare costs and instead has focused resources on increasing Child Benefit as well as the new parallel early childcare supplement for each child under five. As well as being the most direct and equitable route to address childcare costs this is the means which all the economists and social studies argue is the best means of addressing our residual child poverty problem.

Other important grants and capital supports to build more childcare places, which have also been targeted at the lower social and economic sectors are also significant, although of course they will take some time to come on stream. Meanwhile, the most important improvement in childcare supply is the increase in periods of paid and unpaid maternity leave.

ONE of the other criticisms of last year’s budget was that the minister did not do enough to tackle what was then a bubbling sense of public discontent that a small but wealthy collection of persons were evading tax altogether by overindulging on various tax reliefs. That public discontent has got stronger over the last year and, at the end of October in his speech to the Fianna Fáil Ard Fheis, Cowen indicated that he was conscious of the need for what he called “demonstrative equality” in the tax system. Cowen’s decision to cap the capacity of any individual earning more than €250,000 to avail of these reliefs may in reality have little real impact on government revenue.

However, this cap together with the abolition of the stallions’ tax exemption will do a lot for the public sense of justice about the tax system.

Although he had well trailed the budget there was however, despite all these hints, some real surprises and imaginative initiatives in his text. His emphasis on education and fourth level education in particular is very significant particularly in the changing global context. Last year was the first time in living memory where the Dáil rose early on Budget night because there was no vote necessary to introduce emergency measures like increases in excise duties. Last night the house was able to rise early again. Richard Bruton had the most unenviable job in politics and his was harder this year than ever. On one level he could be more prepared for the speech he had to give immediately after Brian Cowen sat down because so much about what was likely to be in this Budget was known in advance.

What made Richard Bruton’s task so difficult, however, was that there is very little if anything in this budget with which he can disagree.

It was a €2.5 billion giveaway budget and we are entitled to judge our Minister for Finance on the choices he has made in this budget and, in particular, on the basis of to whom he chooses to give the additional resources. He gave a lot of it to those who need it most, particularly those on social welfare and those on lower wages. The minister also targeted a lot of his available resources at those with younger children.

Ideally, however, the resources given towards childcare should be more focused at parents on lower incomes. In the long term the most effective and equitable way to do that is to means test or tax Child Benefit and the newly introduced early children supplement. Interestingly none of the parties are prepared to support such a proposal even though it would be a genuinely socially progressive initiative. It would take a dramatic shift in the politics of this country, where the middle classes are dominant, to cause that shift.

Pending that shift Brian Cowen has delivered one of the most left-wing budgets in this country in recent decades. It would have warmed Gordon Brown’s left-of-centre heart to be in a position to do half the things his Irish counterpart did yesterday.