Budget’s blend of austerity and stimulus no surprise
Stephen Collins: Good dollop of luck every bit as important as various elements of package
For a start, the special 9 per cent VAT rate for the hospitality sector has been extended for another year. The cost, at €350 million, is significant, but the measure has worked and should provide further dividends in the year ahead.
A range of other stimulus measures, including tax relief for home improvements costing between €5,000 and €30,000, brings the total value of the stimulus package to €500 million - and the Government claims the net effect will be the creation of 50,000 extra jobs.
The announcement that more than 1,000 new teachers will be hired in the next year, as well as a range of relatively modest capital-spending measures, should also boost the economy.
Stimulus measures such as these may very well result in the creation of all the jobs forecast, but they will not have the same public impact as the cuts immediately felt in citizens’ pockets.
Both Noonan and Howlin sought to neutralise the criticism from the main Opposition party, opening their respective speeches by pointing the finger at Fianna Fáil as the source of the country’s travails. “Reckless policies were pursued by the Fianna Fáil-led government,” said Noonan at the start of his speech, while Howlin said “Fianna Fáil in government drove the economy into the ground and led us beholden, like the famine victims of old, to seek relief outside this country.”
Getting their retaliation in first did not dampen the criticism from the Opposition benches. Fianna Fáil launched attacks on all the significant spending cuts and revenue-raising measures. Sinn Féin and the small parties and Independents also attacked the Coalition on all fronts.
Both Coalition parties can point to achievements in the budget. Fine Gael got a stimulus package for the private sector and avoided raising taxes, at least directly. Labour managed to moderate the social welfare cuts to less than planned for the third year in a row, while the free GP care for children is another of the party’s cherished objectives.
The question for the Coalition is whether they got the balance right in terms of making the budget adjustment strong enough to keep the country on the path back to financial health while easing the pressure enough to give a boost to the economy.
Ultimately, everything hinges on whether the economy begins to grow at a reasonable rate in order to make our massive debt more manageable. That will largely depend on what happens in the outside world, so a good dollop of luck will be every bit as important as the various elements of the package.