Budget 2018: Mixed messages do not augur well

Some creative thinking of a kind that has not been in evidence to date will be needed in the construction of a fair but prudent budget

 

The conflicting signals emanating from senior Government figures in recent days about the priorities for the forthcoming budget do not augur well for the prospects of a coherent package using available resources to best effect.

Speaking on Sunday, Minister for Social Protection Regina Doherty said pensioners would not be prioritised over lone parents and children. This was a welcome change of tack by the Minister, who immediately after taking over the department in June suggested that increasing the pension would be her priority. It seemed that after getting to grips with her brief Doherty had devised a more balanced approach to spending her budget of almost €20 billion to cater for all of the conflicting demands on it.

However, speaking in Canada the following day, Taoiseach Leo Varadkar was back to the line that a pension increase would automatically feature in the budget due to be unveiled in October by Minister for Finance Paschal Donohoe. He said the commitment in the programme for government to increase the pension every year at least in line with inflation would be honoured. Given that inflation is running at minus 0.2 per cent for the past year the question of matching inflation may not arise, but it seems the Taoiseach is committed to a pension increase in any case. That will inevitably limit the room for increasing payments to lone parents and children as Doherty pointed out at the weekend.

One of the key recommendations of the Nyberg report into the financial crash was that administrations should be prepared to abandon programme-for-government commitments if financial circumstances dictate. That advice appears to have fallen on deaf ears. The budget is always a delicate balancing-act and this year it is probably one of the trickiest to face a government for some time. While it doesn’t have to implement the kind of drastic spending cuts that haunted the previous two governments, the Cabinet has a very limited amount to give away at a time of rising expectations.

Last month Donohoe indicated that the scope for spending increases and tax cuts in next year’s budget would be just €300 million. While the official fiscal space for Budget 2018 is €1.2 billion, some €900 million has effectively been spent on the carryover effects of the previous budget and the new public-sector pay deal, which is expected to be ratified by the Irish Congress of Trade Unions. Governments always manage to find some extra room for manoeuvre come budget day but the scope this year will still be limited unless there are significant cuts in some existing programmes to free up extra resources. Some creative thinking of a kind that has not been in evidence to date will be needed in the construction of a fair but prudent budget.

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