Stephen Collins: Noonan had no choice but to deliver an election budget
Coalition promises further tax cuts if returned to office
Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin delivered an election budget. Photograph: Dara Mac Dónaill/The Irish Times
It was a budget with something for everybody and to cap it all was still comfortably within the disciplines demanded by the EU Fiscal Treaty.
There were tax cuts for all income earners, modest across the board increases in welfare and pensions, a new deal for the self-employed, free preschool for all children over three, free GP care for all children up to the age of 12, concessions for farmers, home owners and hauliers, and much more.
As Howlin wrapped up the good news announcements Fianna Fáil TDs accused him of producing an election budget and taunted him with jibes about why the Coalition was afraid to go to the country now.
And just to reinforce the point that the forthcoming election is now the all-consuming issue in the minds of TDs, Noonan finished his speech with a series of pledges about what the Coalition will do if it is returned to office.
It was a thinly disguised election manifesto that included the progressive abolition of the Universal Social Charge (USC), complete tax equalisation for the self-employed, increased public spending and the defence of the country’s corporate tax regime.
At the end of his speech Howlin also struck an electioneering note, lashing Fianna Fáil for its profligacy during the boom and turning scornfully on Sinn Féin and the hard left by asking “Who speaks of Syriza now?”
The theme that ran through the speeches of both Ministers was about the Coalition’s record in underpinning the recovery and the need for stability in the years ahead to ensure that it continues.
Howlin pointed out that between 2000 and 2008 the last Fianna Fáil government increased gross spending by 139 per cent and that in the two years before the 2007 election it went up by 25 per cent.
“Now that’s an election budget for you,” he said in response to Fianna Fáil hecklers who were accusing him of just that sin.
He said that by comparison public expenditure in 2016 will be just 4 per cent higher than in 2014 while tax revenue is forecast to grow by over 14 per cent.
Something to cheer about
The key objective of the budget was to give individuals and families on all income levels something to cheer about. It was particularly aimed at middle income earners on salaries of between €35,000 and €70,000 a year.
While people can be bamboozled by a plethora of figures Noonan summed up the Government’s message nearly in an unscripted line pointing out that it would mean an extra week’s wages at all points on the income scale. That is something that can be easily grasped.
It was also easy to grasp the welfare increases unveiled by Howlin. They involved €3 a week for all pensioners, the first increase since 2009, and the restoration of 75 per cent of the Christmas bonus to all social welfare recipients.
There were also a range of changes affecting smaller groups. The unfair levy on private sector pensions was finally put to rest having played it part in enabling the Coalition to cut VAT on the hospitality industry and in the process boost tourism and job creation.
There was the beginning of tax equalisation for the self-employed who despite their much vaunted contribution to the recovery are discriminated against in the tax code and even more in the welfare code.
There were also beneficial measures for public servants, for farmers, hauliers, and a range of families in different tax and welfare situations.
The announcement that the local property tax will not go up between 2016 and 2019 was a clear nod to a substantial segment of the electorate as was the increase in the inheritance tax thresholds from €225,000 to €280,000 per child in the light of the increase in house values.
Although many of the gains are modest the clear objective is to spread the benefits across as many people and interest groups as possible in order to maximise the political impact on election-day, whenever that happens.
While last year’s budget marked the turning point from retrenchment to a very modest expansion Tuesday’s package marked the real turning point after the six years of savage retrenchment between 2009 and 2014.
The Coalition appears to have got the maximum bang for its buck with the €1.5 billion extra it had to play around it and is clearly hoping that the electorate will respond with thanks come election day.
The ability to deliver largesse was aided significantly by a bit of sharp accounting procedure last weekend when an extra €1.5 billion was added in for supplementary spending this year in order to cover the massive over spend in Health and smaller overruns in other departments.
Some extra money was also found through the continuation of the €150 million annual bank levy for another five years and an increase in the price of cigarettes by a whopping 50 cent a packet. It was the only tax increase in the budget.
The failure of the budget to come up with a radical plan to deal with the housing crisis was a disappointment and it appears Fine Gael and Labour are locked in an ideological battle over the best way of dealing with it.
That problem aside the two parties were agreed that a modestly expansionary budget was appropriate even though the recovery is steaming ahead, faster than any other in Europe.
While a number of economists have expressed alarm, the political reality is that the Coalition has to deliver some payback to the electorate for the success achieved by the strict budgetary discipline of the past seven years if it is to have any chance of a second term.