Analysis: An election Budget in search of an election
Fine Gael and Labour must hope the good news will not be forgotten in 2016
In early 2007, then-taoiseach Bertie Ahern stood up at a Fianna Fáil ardfheis and read out what was essentially his party’s economic manifesto for the general election later that year. There were more goodies and giveaways than the Late Late Christmas Show.
Listening to Michael Noonan and Brendan Howlin’s double budget speech on Tuesday, you were struck by the similarities.
The singular piece of bad news was for smokers, who face a 50 cent hike in the price of 20 cigarettes.
For everybody else, there was a more than a little sprinkle of manna coming down from the heavens. A little like Pirandello’s Six Characters in Search of an Author, this was an Election Budget in search of an election.
As it happens, events have conspired to ensure the election does not happen until the spring. So Fine Gael and Labour must fervently hope that the undoubted boost the parties will get from this budget will not be forgotten by February, long after the magic dust has settled.
Every year we have had extensive leaks in the run-up to the budget, but the Ministerial class really excelled themselves this year.
Most years, Noonan has managed to keep something up his sleeve, to allow him have an arresting plot twist towards the end of his speech.
On Tuesday afternoon, however, there was none bar a few small things. It was a bit of a surprise the Government is forging ahead with the knowledge development box and the ambition to cajole Nama into providing 20,000 houses by 2020 was also new. But neither of those are certainties.
All the things that were certain were comprehensively pre-announced.
Noonan has claimed the claim of an “excessively expansionary budget is well off the mark”.
Not that well of the mark, although the base data is really impressive and harks back to those McCreevy and Cowen budgets of a decade ago.
For one, significantly, Noonan announced to all intents and purposes that austerity has come to an end. “We are in a strong position and we will exit the corrective arm of the Stability and Growth Pact this year,” he said.
Growth this year is well ahead of forecasts at 6.2 per cent, with further growth of 4.3 per cent forecast for next year.
The unemployment rate will nearly halve, from almost 15 per cent to 8 per cent by the end of next year, with the forecast deficit of 2.1 per cent well ahead of the original target.
Echoing Enda Kenny’s sentence, and a growing meme for Fine Gael, Noonan said: “This Government has consigned to the history books the days of boom and bust and the attitude of ‘if I have it, I’ll spend it’.”
There are nods to underlying risks, the volatile global economic outlook as well as the high level of Ireland’s overall debt – though that is also on the way down.
But from there on, the measures, though not massive, all come gift-wrapped for the voter.
The universal social charge is disliked because it came on top of rising taxes and stretched the tolerance of taxpayers. Now it is being slowly dismantled. There are falls in the three rates for those earning under €70,000 as well as an increase in the entry threshold from €12,000 to €13,000.
There are new tax credits for the self-employed and farmers, an increase in the CAT tax-free threshold, a deferral of any increase in local property tax until 2019 (this could have been a nasty little shock, given the increase in property values especially in Dublin).
Howlin announced an increase in the minimum wage; child benefit increases of €5; restoration of the respite care grant; an increase of €3 in the old age pension; and €8m more for education to reduce the pupil teacher ration to 27:1 in primary schools.
Childcare now is only €10 shy of its maximum levels of €150 per month in 2008. And in education, an additional 2,260 teaching posts in 2016 will help fill some of those yawning gaps that have become apparent over the past seven years. There is also a demographic imperative with a big spike in children of primary school-going age. The Christmas bonus in social welfare is also clawing back towards its pre-recession levels.
Free GP care for under 12s will be introduced in 2016, also making headway on another key Labour Party promise.
In a direct appeal to Labour’s core public service vote, Howlin also signalled an “orderly unwinding” of the financial emergency cuts.
“As economic growth returns, and private sector wages increase, it is only right that our nurses, gardaí and teachers see their take home pay improve.”
The Minister for Public Expenditure got the biggest cheers because, for the first time since coming into Government, he had more good news to announce than bad news. Given the combative nature of the Wexford TD, he wasn’t shy in coming forward with it.
There are a number of slightly discordant notes and discrepancies. Minister for the Environment Alan Kelly lost his battle with Noonan on capping rent increases.
The housing initiative for Nama sounds impressive, but it’s an aspiration rather than a solid certainty. Sure Nama will stump up €4.5 billion, which the agency will hope to recoup, but only time will tell if that ambitious target of 20,000 new housing units by 2020 will be met by the agency.
The knowledge development box sounds, on the face of it, like a neat “best in class” solution to ending the kind of international tax arrangements that allowed multinationals pay tiny amounts of tax.
What is knowledge development when it’s at home? That’s the first problem. It can be very loosely defined, and you’ll see all manner of information thrown in there, to benefit from an extremely generous 6.5 per cent rate.
Secondly, the European Commission isn’t crazy about the Government thinking outside (or is it inside) the box. It has already challenged similar efforts by the Dutch and British authorities. The Government seems optimistic it can kick off this new regime in 2016.
We will wait and see.
Howlin was even emboldened to take a dig at Sinn Féin and its “easy alternatives” when he proclaimed with relish: “Who speaks of Syriza now?”
The two Ministers uttered words like “prudent”, “responsible”, “sensible”.
What they were really, really saying was: “There’s one for everybody in the audience.”