Budget process not fit for purpose
Noonan should abandon hoopla and tell it like it is
Minister for Finance Michael Noonan: As some of the power has seeped back to Dublin, the transition has elicited another form of instability: narrow sectional interests flex their muscles for the first time in what seems an age
The way in which we formulate and implement fiscal policy is not fit for purpose. The run-up to each budget has become a lobbyist’s paradise; political grandstanding dominates parliamentary debate, vested interests shout louder and louder, making more and more outlandish claims.
Decisions over taxes and spending have become pure power grabs.
When the troika held the whip hand Jean-Claude Trichet raised our taxes and cut our spending to save the European banking system.
As some of that power has seeped back to Dublin, the transition has elicited another form of instability: narrow sectional interests flex their muscles for the first time in what seems an age.
Like adolescents, they see how far they can push, they search for the new boundaries. It is long past time to call a halt to this nonsense. There has to be a better way. What should the Minister say instead?
“Today, I will deliver the shortest budget speech in Irish history. Our own forecasts – I prefer to call them educated guesses – confirm what credible independent agencies like the ESRI and the Central Bank of Ireland have been saying recently. The sacrifices made by the Irish people and the tough decisions made by this Government are bearing fruit. Rapid economic growth has been restored, we are generating jobs to the extent that full employment is being talked about as a feasible outcome over the medium term. The ESRI, for example, thinks we will get there by the end of the next government’s term of office – provided we stay the course, provided we are that government.
“Sustainable job-growth can only come about if we continue to support the right environment for business. Above all, that means stability: offering business the best possible circumstances for planning, for investment and growth.
“Many of the economic policy levers open to previous finance ministers have been rendered inoperative by the adoption of the euro. Given the mess previous governments made of policy, that loss of sovereignty may be no bad thing. But there are still things we can do, albeit of a very limited micro nature.
No changes“Today I will be making no changes to existing tax and spending plans. That’s the stability we can now deliver: the current configuration of tax rates and levels of Government spending is clearly consistent with rapid economic growth. It’s working, so the right question to ask in these circumstances is ‘why change?’
“The upshot of a no-change budget will mean further rapid progress in the elimination of our budget deficit. It will be well below 3 per cent of GDP next year, perhaps below 2 per cent. That is a sustainable level of borrowing, although it still leaves an uncomfortable level of debt, which is still being added to.
“We remain very exposed to external shocks, events over which we have no control. We need to have insurance against another euro area crisis, particularly as the growth outlook for Europe is deteriorating. Our bond yields will definitely not stay this low forever. Allowing the deficit to fall as the economy grows is the best insurance that we can offer.
“Against this background we need to strengthen our defences in anticipation of the external environment taking a turn for the worse. We must hope for the best but plan for problems. For as long as current favourable circumstances persist, businesses in Ireland must be encouraged to take every opportunity to grow.
“Government plays its part with the stability of fiscal policy that we can now offer and, more generally, by simply getting out of the way.
“I have asked my Cabinet colleagues to join me in committing to eliminating unnecessary business regulation and bureaucracy. I have appointed an expert group with a mandate to report back to me before the end of the year on how we can simplify the corporate tax code, doing what we can to get ready ahead of inevitable global changes to corporate taxation.
“I have increased the budget of the Fiscal Advisory Council, broadening its mandate to include regular evidence-based benchmarking of Irish tax and spending policies in terms of global best practice.
“I commend this budget for growth and stability to the House. I now invite members of the Opposition to tell us how they will dismantle all of the hard-won achievements of the past few years.”