Labour helps bring in changes it warned against

The elderly, who have largely been exempted from the impact of the economic crisis, have taken a bit of a hit this time. Although their pensions have not been touched and they retain higher income tax allowances than apply to the working population, the lower rate of USC for the over-70s has been abolished. They have also been hit with cuts in their homecare package of telephone, electricity and gas allowances.

One of the features of the Budget was a change in the ratio of spending cuts to tax increases, with higher taxes and fewer cuts than originally planned in the programme agreed with the troika.

Both health and social welfare had to come up with €150 million less in cuts than originally planned. That has not saved either department from having to come up with a range of savings in various programmes, but it has lightened their load to some extent.

In terms of the politics of the Budget, there had been much focus on the Labour Party in the run-up to yesterday. This was natural given that the party has lost four TDs from the parliamentary party since taking power early last year.

On the basis of the Budget decisions, as distinct from speculation, there is no great reason for Labour TDs to rebel. The Budget is clearly progressive in that the higher income earners are taking the brunt of the tax increases and cuts. If anybody should feel disgruntled it is Fine Gael TDs, whose constituents will be hit by the property tax and a range of other measures.

The problem for Labour is that the party made so many promises in the run-up to the last election. In particular the party produced a poster suggesting that many of the items in yesterday’s Budget, including a cut in child benefit, higher prescription charges, increased student fees and even a rise in the price of a bottle of wine would come to pass if Fine Gael won an overall majority.

Instead the two parties went into government with the biggest majority in the history of the State, and most of the things Labour accused Fine Gael of wanting to do have now been done by the two parties in government.

That said, yesterday’s Budget continues to protect the most vulnerable from the worst of the cuts. It is always difficult for a party to convince the electorate that worse might have happened if it were not there, but that is a recurring problem for Labour.

Whatever the difficulties, the signs are that the Budget has managed to keep both sets of backbenchers reasonably happy. Both have their difficulties but at this stage the stability of the Coalition is not under threat.

In the longer run a more potent threat will arise if the relatively optimistic growth forecast of 1.5 per cent does not materialise. That would throw the Budget arithmetic off target and require even deeper cuts next year. It is something nobody dares to contemplate.