Managing high hopes is essential

Budget expectations

Managing high hopes is essential

Just like people shifting in squeaky chairs in a solicitor’s office, trying to avoid eye contact with others in the room while a bachelor uncle’s will — a man imagined far richer than he was — is read out, we seem to be on the verge of hoping for something that may not materialise.

This situation might be made even more stressful if some of the people in the room were utterly reliant on a legacy or, worse again, had borrowed more than they should have in the hope that a bequest might help cover repayments.

The speculation — and the hopes stoked by some who know better — about what might be possible in next month’s budget seems to be gathering a momentum that will, if the hard lessons forced on us since 2008 are to mean anything, end in far more disappointment than satisfaction.

The Coalition may be about to discover that managing the expectations generated by the the best-in-eurozone economic turnaround reported by the CSO last week — 7.7% in GDP terms, 9% in GNP terms in the year to the end of June — may be as challenging as having to impose cuts made unavoidable by recession. These spectacular figures have provoked renewed demands for tax cuts, budget increases for government departments such as health, pay increases, and suggestions that water and property charges may not need to be imposed or at the very least reduced. Essentially these arguments advocate a return to the kind of one-step-forward-two-steps-back economic policies that set the mood music for our dance with catastrophe. Conversely, they make any deal on our huge national debt more difficult to achieve. After all, German taxpayers more used to rates below 1% may be very hard to convince that they should be generous to an economy where a growth rate of between 4.5% and 5% for 2015 has been suggested. As we approach an election, these expectations feed into that narrative too and may mix political and economic objectives in self-destructive, self-delusional ways. Controlling those hopes, keeping them grounded in reality while avoiding political hari-kari, is the task facing Finance Minister Michael Noonan and Expenditure and Reform Minister Brendan Howlin.

There are signs, however, that the lessons may have been learnt. Mr Howlin has disabused cabinet colleagues of the notion that it may be possible to increase spending beyond resources already available. That he was so quickly supported by the Taoiseach suggests a new discipline, a discipline that may yet prove one of the positive legacies of our economic crisis. The area where this discipline may be most severely tested is in health as, just like virtually every government in developed countries, the Coalition faces ever-increasing demands from health service providers.

This is reflected in the fact, that despite a spectacular collapse in tax revenues, our spending on health has remained almost unchanged since this Government took office. It was €14.2bn in 2011 and €14.1b last year, figures that show a consistency that may not be reflected in the services provided. That consistent, steady-as-we-go approach should inform all budget plans too.

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Saturday, January 23, 2021

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