Emergency Budget or just a bit of bud-nipping?
The British chancellor of the Exchequer Alasdair Darling gave the most spine-chilling quote of the year last Saturday when he said that Britain was facing its worst crisis in 60 years.
Tonight Finance Minister Brian Lenihan was asked his opinion on it at a briefing for political correspondents. He dismissed it but did accept that from a financial and fiscal perspective it’s the biggest challenge the Government has faced since Ray MacSharry was in ‘Mac the Knife’ mode back in 1987.
Fiscally, moving the Budget forward by seven weeks will not make all that much of a difference. It’s Budget 2009 and the Finance Bill that implements its measures also says 2009. That means that the fiscal measures can’t be introduced until January2009.
Granted, any increases in excise duties will come into effect immediately but they won’t really affect the overall financial performance for 2008.
Which is disastrous, not to put too fine a point on it. Taxes €5bn lower than expected (and maybe €6bn). A full-on property slump.
So why the need to shift everything forward for seven weeks?
Well, the decision is political. It is an unprecedented move and is probably designed to show that the Government is doing something, is taking action, is ready to make the tough choices that will have to be made.
Lenihan gave no indication of what measures he will take. He attributed the dramatic downtrun to property but also to the international credit crunch. His focus on the liquidity problem where banks won’t lend to banks gave rise to some speculation that the Government might intervene and back-up or guarantee loans for homebuyers. There are economists like the excellent Alan Ahearne in NUI, Galway who say that there should be no intervention, that the property market needs to be left alone to correct itself, no matter how painful that is.
A few other hints? Lenihan referred to every 1 per cent rise in public sector pay costing €180 million. That’s a no-brainer. Wage restraint/freezes will be the order of the day.
Otherwise we’ll wait.
Today Dermot Ahern called for cooperation from the opposition parties.
Will they cooperate?
For the answer to that, see the response that Michael Bailey gave to Jim Gogarty when he asked whether they should ask Ray Burke for a receipt for the £30,000 bungs they gave him.