The Irish Times view on Budget 2019: delivery and a fair wind needed

Spending budget responds to political pressures but leaves Ireland a laggard on climate change

The decision by Minister for Finance Paschal Donohoe to target a balanced budget for 2019 is welcome, if overdue. Photograph: Dara Mac Donaill

The decision by Minister for Finance Paschal Donohoe to target a balanced budget for 2019 is welcome, if overdue. Photograph: Dara Mac Donaill

 

Budget day is only one part of the story of the State’s financial management – and this is particularly the case this year. The package presented by Minister for Finance Paschal Donohoe needs to be seen in the context of what has already happened and the commitments made before budget day itself for 2019.

Events this year contain a warning signal. Borrowing would have come in above target had it not been for an unexpected largely once-off surge in corporate tax payments due to changes in international tax rules. Although there were other pluses and minuses, a €700 million overspend by the Department of Health would otherwise have pushed borrowing higher than budgeted for.

The Minister’s decision to target a balanced budget for 2019 is welcome, if overdue, as is his commitment to establish a rainy-day fund

This carries key lessons for 2019. If budget day is to mean anything, then the plans outlined have to be credible and – subject to normal swings – they have to be delivered on. We can’t rely on late surges in revenue every year and indeed we are basing significant spending increases on the fruits of growth. If growth slows, then spending plans for the years ahead will have to be adjusted.

A Social Democratic budget?

The Minister’s decision to target a balanced budget for 2019 is welcome, if overdue, as is his commitment to establish a rainy-day fund. The economy has grown strongly in recent years and this may continue in 2019. But there are concerns, notably the risk of the UK leaving the EU without a deal and the economic disruption this would cause next year. And even if this is avoided, Brexit will happen, trade wars and tax changes are threatened, there are concerns in the euro zone and the world economy is likely to slow. We need the scope to respond.

A lot of money was allocated for 2019 before budget day itself. The planned hike in investment spending is welcome but delivery is a major challenge, particularly in the key pressure point of housing. Day-to-day spending is now firmly on the rise. Here again, ensuring service levels reflect higher spending is vital, especially in health.

The tax measures in the budget were something of an afterthought. Small cuts in income tax will not even account for the higher tax take from wage inflation for many. The VAT rise for the hospitality sector was chosen to pay the bills, as opposed to a rise in carbon tax which should have been included given Ireland’s laggardly response to climate change.

The decision to spread the gains widely but thinly has now become common. Talk of helping middle earners through tax cuts has been largely lost in the rush to higher spending.

At its heart this is a spending budget. The Government has responded to the key political and economic pressure points in health and housing. It now needs to deliver in these key areas. And we all need to hope that strong growth seen in recent years continues to allow the bills to be paid.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
GO BACK
Error Image
The account details entered are not currently associated with an Irish Times subscription. Please subscribe to sign in to comment.
Comment Sign In

Forgot password?
The Irish Times Logo
Thank you
You should receive instructions for resetting your password. When you have reset your password, you can Sign In.
The Irish Times Logo
Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.
Screen Name Selection

Hello

Please choose a screen name. This name will appear beside any comments you post. Your screen name should follow the standards set out in our community standards.

The Irish Times Logo
Commenting on The Irish Times has changed. To comment you must now be an Irish Times subscriber.
SUBSCRIBE
Forgot Password
Please enter your email address so we can send you a link to reset your password.

Sign In

Your Comments
We reserve the right to remove any content at any time from this Community, including without limitation if it violates the Community Standards. We ask that you report content that you in good faith believe violates the above rules by clicking the Flag link next to the offending comment or by filling out this form. New comments are only accepted for 3 days from the date of publication.