GERARD HOWLIN: #Budget19 keeps strategic options open as date at polls looms large

Raising expectation ahead of delivery, and way ahead of what should be delivered at all, is taking a toll, writes Gerard Howlin.

TIMES change but stock phrases in budget speeches don’t. Years go by and they meld together. The scale of what happened yesterday was small. Culturally, its significance will ultimately be larger. There hasn’t been a budget speech I can remember that didn’t aspire to “responsible budgetary policy”, “responsible but ambitious policies for the future of our country”, or similar sentiments. These are just words and their value exists only as aspiration.

Next year will see a balanced budget and we will run surpluses for the future. So far, so good. But this brings me back to words. Admittedly, they don’t have the elasticity of numbers, but they do have transferable values. During the noughties the most unsustainable budgets in Irish economic history were balanced, in surplus, and prudent. They were full of ambition too, but it was hubris.

There was a break in the use of engorged language after 2008. Restraint, in the appropriate use of words, largely continued until the evening of Sunday, December 15, 2013. That night, taoiseach Enda Kenny gave a state-of-the-nation address from his office in Government Buildings. Marking the exit of the troika, he claimed victory prematurely: “Tomorrow morning Ireland will again stand as a full member of the eurozone — with the same rules, obligations, supports, and opportunities as all other member states.” The impact of “more jobs”, he promised, “will also improve our public finances and help to bring the era of tough budgets to an end”.

To the credit of his government and this one, more jobs have been delivered at a phenomenal pace. As Finance Minister Paschal Donohoe repeated yesterday, we have 380,000 more at work than in 2011, and the lowest unemployment rate in a decade. It is an achievement to be proud of. Regrettably, it is not a licence for the insidiously increased pace of budgetary backsliding since.

Kenny’s proverbial throwing of the reins onto the horse’s neck as the troika walked out the door contributed almost immediately to an electoral setback. He lost 105 seats in local elections the following June. His tánaiste, Eamon Gilmore, was politically decapitated. It presaged the debacle of Fine Gael’s general elections campaign in 2016. In ratcheting up expectation, governing became more difficult, because the government couldn’t keep up with expectations it fostered prematurely.

In truth, the story since Christmas 2013 is more complicated, but raising expectation ahead of delivery, and way ahead of what should be delivered at all, is taking a toll.

Talk of a rainy-day fund is fine. Our levels of debt are dangerous, however. Relative to what is possible and prudent, debt is being sidelined for politically pleasing spending. Next year, all going well, we will still be above 100% of gross national income. That’s a newish measure that irons out the leprechaun economics of our foreign direct investment sector. It doesn’t take account of private debt at all.

The real budget giveaways were not the passing back of our money to ourselves, it was the giveaway in the use of language. In a claim for prudence, we are assured that current spending will rise by less next year than the projected rate of economic growth. The Fiscal Advisory Council makes the point that, in recent years, the State has spent the economic return of the recovery. We are firing on all cylinders, and spending it as fast as it comes in.

Just look at Health. Donohoe said yesterday that we are the fifth highest spenders per capita out of the EU28, but we lag far behind in a badly led, dysfunctional system. Instead of the flame of reform, and I acknowledge Sláintecare sitting in a corner, increases in Health over two years will be 15%, and that’s just on the basis of what is projected now. It’s a race to the top on health spending. Only by moving the goal posts can you score a verbal point.

What matters most is not what is in the budget, it is small on the scale of things. It matters because of what it is for politically. Its purpose is a general election in early December if the Taoiseach wishes and circumstances allow. Clues were certainly in spending decisions. Bigger ones are in what is absent.

Donohoe avoided change in the property tax and action on a carbon charge. They are for another day now. His job yesterday, and at a cost to his own eventual reputation he did it superbly, was to enable his leader call an election after the Brexit summit in mid-November. Next week’s summit, if successful, sets up some sort of agreement on the backstop in November. If that happens, and if the Taoiseach chooses, the runway is now clear for take-off. That is what yesterday was about. It was tactically intended to ensure that strategic options are kept open.

Ducking the carbon charge is important. Refusing to countenance it is where rural Fine Gael meets Right2Water, and takes its revenge by imitating it exactly. An urban minority that organised superbly and was highly vocal saw off the water charge. When it comes to organisation, they are only apprentices compared to the highly honed ways of rural Ireland in wielding power, however.

And the Fine Gael backbenchers have an inbuilt advantage. As poor as the 2016 election was for them, the party did well in Dublin. Potential seat gains for Fine Gael are in rural constituencies as disproportionately affected by a carbon charge as urban ones are by a water charge.

The principle of widening the tax base is essential in both instances. The need for charges to influence behaviour is the same and as true. But the differential is political. It is politics, not economics, and less still cultural change that runs through this budget. It is as good an example of business as usual as I have seen in years.

If there is an election, and it’s only a maybe, don’t think there is a choice. I see no hope of either Fianna Fáil or Sinn Féin leading the charge on carbon. In fact, I haven’t a clue where they are on it, which is a compliment to their political skill. Public servants now clearly have the lion’s share of public sources over the provision of public services. They get more than half the increase in public spending in our recovering economy.

As the Government proudly boasts that unemployment tumbled by more than two thirds on its watch, the social protection budget is stable at peak levels. Of course, it’s not stable at all. It and long-delayed capital projects not yet begun will be the first things run down in a downturn. We know the script because we have all acted in the play.

Yesterday’s budget matters may matter politically over the coming weeks. In the longer term, its importance is cultural. Regrettably that is not a compliment.

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