Giveaway budget not right move - Noonan’s dilemma

FOR the first time in seven years, the Government has some real money to give away in the budget. The current indications are that it can afford to spend about €1.2bn, split on a 2:1 basis between spending increases and tax cuts.

Those expected to benefit most are pensioners and first-time home buyers. Mr Noonan has already outlined a strategy to the Cabinet that includes a reduction in the much-hated USC. Even though it is arguably our fairest tax, in that it requires everyone to make some contribution, no matter how small, it has become almost as toxic as the water charges. As a realist, Mr Noonan knows its political limitations.

Despite having so much to spend, Budget 2017 is likely to be his toughest to date. Tough on him, at least. That is mostly because of the motley make-up of the current administration, its daily dependence on the main opposition and the number of vociferous ‘spend, spend, spend’ campaigners in the Dáil.

On top of that, austerity fatigue is propelling a growing avalanche of pay restoration demands within the public service. There is also the genuine need to tackle the crisis in the health service, invest in education in order to reduce the pupil-teacher ratio to acceptable levels, and to make more inroads into unemployment.

And, then, of course, there is Brexit, with the growing likelihood that it will be a hard rather than a soft one.

Mr Noonan knows that there is no point in presenting a budget that will not have Fianna Fáil’s endorsement and secure general approval in the Dáil. Tomorrow’s budget will be a test not just of his skills but also of the Government’s ability to survive.

Putting more money in people’s pocket must form a central plank in the budget strategy because it makes economic, as well as political, sense. Austerity has its place in the short-term but it has devastating effects. As a result of successive austerity budgets from 2008 to 2013, the country’s deficit has fallen from almost 9%to just over 2%, but at a very high cost. According to a survey conducted in 2013 by Economic and Social Research Institute, austerity was directly responsible for the loss of 65,000 jobs.

It doesn’t take a financial expert to see why. Spending cuts suppress the economy and reduce consumer spending, resulting in the Government taking in less money through taxes and having to pay more in unemployment benefits.

Nevertheless, the days of giveaway budgets are probably over — and that it is a good thing because they were partly responsible for getting us into trouble in the first place.

Mr Noonan is a very experienced and astute politician. It is likely that his strategy will be to help extend the recovery to more while exercising prudence and restraint. He knows that, in any event, there is little demand, let alone expectation of a budget bonanza.

Above all, when Mr Noonan rises to deliver his speech to the Dáil tomorrow, he must, for the sake of this and future generations, deliver the budget we need rather than the one we want.