Eerie echoes of current crisis in 1983 budget files
A ballooning deficit and a crushing debt burden put fragile coalition to the test
Alan Dukes on budget day 1983 He had told colleagues: “The real burden of taxation has increased substantially and real take-home pay has been cut sharply in recent years.” Photograph: Jack McManus/The Irish Times
The budget files for 1983, released by the National Archives, have a “back to the future” feel about them. Then, as now, the main preoccupation was controlling government borrowing through reductions in the public service pay and welfare bill.
One of the big news stories of January 1983 was the declaration by Labour leader and tánaiste Dick Spring that he would not accept the target adopted by minister for finance Alan Dukes of reducing the current budget deficit to £750 million in the budget to be unveiled in February. Instead, he suggested a figure closer to £900 million.
In his memoirs published in 1989, the then taoiseach Garret FitzGerald revealed that he independently had come to the same view as Spring and had even consulted Henry Kissinger about whether Ireland’s financial reputation would suffer if a £750 million target could not be met.
Dukes was forced into a public climbdown for his first budget, which had been well in train when he took office in December 1982 but, curiously, there does not appear to be any reference in the files to the entire episode.
More curious still is that in the budget deliberations for 1984, which started in the spring of 1983, the figure of £750 million resurfaces as the maximum possible deficit for 1984 and nobody around the cabinet table appeared to quibble with it.
The first item in a key file entitled “Budget 1984” is a note to the taoiseach from the then cabinet secretary Dermot Nally dated February 11th.
“Decisions on the 1983 estimate have done little or nothing to ameliorate the position which will face the government when they are dealing with the 1984 estimate. It would be highly desirable that the Minister for Finance should be asked to bring before the government soon an indication of just how serious the 1984 position will be and an indication of what sort of expenditure cuts are possible.
“These are above all else necessary if order is to be restored to the public finances and levels of taxation made possible which will enable the country to be competitive in international trade,” wrote Nally. He focused on the cost of borrowing, the cost of social welfare, simply to maintain the existing rates through 1984, and the potential cost of the public service pay bill.
“These figures are of orders of magnitude. They will be counterbalanced to some extent by the higher full year yield from this year’s tax increases but the size of the gap, even at this stage, and from these limited statistics, is such, I think, as to make it essential that work start now on examining current public expenditure root and branch.”