Irish Examiner view: We must be prudent with tax windfall

A ‘giveaway’ budget this year will be no surprise, even if Finance Minister Michael McGrath
and Public Expenditure Minister Paschal Donohoe have urged caution on such measures. Picture: PA

It is 43 years ago since the then-taoiseach, Charles J Haughey, went on television to address the nation with his famous “we are living away beyond our means” speech.

Haughey was later pilloried for having urged people to tighten their belts at a time when his own tax contributions were minimal and his wallet was getting fatter on the back of personal contributions by loyal supporters. This was a fact noted by a disbelieving people, many of whom were aware the economic difficulties of the day were, in fact, created by a succession of Fianna Fáil governments.

Today we are at the opposite end of the scale, and the announcement this week by Finance Minister Michael McGrath that there will be a budgetary surplus this year in the region of €10bn, rising perhaps to €16bn next year, was music to many ears.

Last year’s budget splashed out some €11bn in conventional spending increases alongside once-off extraordinary measure to offset sudden and unexpected cost-of-living increases. And it looks like the budget announced later this year will also feature Government largesse.

‘Giveaway’ budget

As we are now in an election cycle — with the next one expected late next year or early in 2025 — politicians will be politicians, and a ‘giveaway’ budget this year will be no surprise, even if Mr McGrath and his colleague, Public Expenditure Minister Paschal Donohoe, have urged caution on such measures.

They cited the unreliable ‘windfall’ nature of corporation tax receipts, which contributed greatly to the budget surplus, as they could potentially disappear in the coming years, as well as the fact that core inflation could be more durable than anticipated.

While history tells us that Haughey’s speech was largely true and the country was living beyond its means, it was a situation created by government incompetence. Haughey was lining his own pockets while preaching financial rectitude, something Irish people recall vividly.

Right now, this country has many, many problems which we know will not be solved by simply having money thrown at them. It may be that the temptation to spend big will entice the current administration this autumn, but if it were to do so, the consequences could be every bit as destabilising as they were over 40 years ago when we had no money.