Politics eclipses prudence again in Budget 2017

The two main parties, Fianna Fáil and Fine Gael, may not be sharing power but they are holding hands

 

The notion of a prudent Budget appeared threadbare after Michael Noonan announced a package of measures in the Dáil stretching the so-called “fiscal space” to near-destruction. A last-minute discovery by the Finance Minister of up to €300million in spare cash to meet political demands brought to mind the “if I have it, I’ll spend it” approach of Charlie McCreevy. Courting popularity in politics invariably takes precedence over planning for rainy days.

The destructive political competition that led to the last financial crash, with excessive government spending and demands for additional give-aways by opposition parties, is alive and thriving.

With a twist. On this occasion, Fianna Fáil helped to set the Government’s agenda on specific budgetary issues but withheld support for the overall package. A case of influence without formal political liability. Elsewhere, Sinn Féin, the Labour Party and others complained that not enough was being done on the spending front.

Details of the Budget were so widely transmitted during recent weeks that there was little new and nothing to cause a major upset. The primary task facing the Government – to pass its first Budget – was achieved without obvious trauma. But details of tax changes affecting so-called “vulture funds’’ and plans in relation to Brexit were extremely sparse. It amounted to savouring the benefits of a growing economy rather than preparing for a deeply uncertain future.

Mr Noonan emphasised the only tax increase involved cigarettes. Elsewhere, he pursued Fine Gael’s failed election strategy and narrowed the tax base by cutting the universal social charge but made no provision for the cost of public sector pensions. There was, as expected, something for most voters.

Old age pensioners and welfare recipients will receive increases from next March; there will be tax rebates for first-time home buyers and a great deal of money will go to increasing the housing supply. The stand-out benefit, however, involves childcare and the provision of a universal subsidy for pre-school children.

Minister for Public Expenditure Paschal Donohoe provided cash for more teachers, gardaí and nurses and announced that a review of spending in all departments will be completed before 2018. As pressure grows for immediate pay rises, he intends to appoint a public service pay commission to advise on unwinding past pay cuts and replacing the Lansdowne Road Agreement.

Fianna Fáil’s Michael McGrath was both critical and supportive. Critical of a lack of advance planning; supportive of the measures his party advocated. Warning of the dangers posed by Sinn Féin and left-wing groups that advocated major tax increases, he defended Fianna Fáil’s support for the minority Government and insisted “the centre has to hold”. The two main parties may not be sharing power, but they are holding hands.

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