Pre-Budget kite-flying

 

Pre-Budget skirmishing has broken out between Fine Gael and Labour Party ministers as they seek to minimise cutbacks within their Departments, raise revenue and invest in job creation. At the heart of that rolling maul is the question of whether windfall savings of € 1 billion on Ireland’s promissory note can be spent. Under the bailout programme, the Government is committed to achieving a further € 3.1 billion in cuts and tax hikes in the coming October Budget. With € 1billion in hand, however, Labour ministers have begun to talk about giving people “breathing room” and of scaling back public spending cuts. Some Fine Gael ministers agree, while others wish to increase capital spending or reduce income tax charges on average earnings.

This confused contribution to public discourse reflects the exclusion of most ministers from key economic and budgetary decision-making within Cabinet. On taking office, it was agreed that ultimate power should vest in an Economic Council composed of Taoiseach Enda Kenny, Tánaiste Eamon Gilmore, Minister for Finance Michael Noonan and Minister for Public Expenditure and Reform Brendan Howlin. The arrangement has been effective in reducing inter-party tensions, but at a cost. Ministerial frustration over being excluded boiled over at Cabinet last week. It was agreed that Departments will have a greater input in future.

Greater involvement by ministers at Cabinet on economic and social matters will, hopefully, contribute towards improved cohesion in Government and a reduction in the incidence of pre-Budget kite-flying. As Ireland prepares to exit its bailout programme at the end of the year, ministers are being asked to devise a medium term economic strategy, 2014-2020. It will include employment and growth targets. In that exercise, many will have to recognise a broader picture. With annual borrowings exceeding 7 per cent of GDP, Ireland’s recovery is heavily dependent on international developments.