The Irish Times view on Budget 2024: the Government needs to focus its efforts

As the business of government gets back into full swing, decisions on the budget will fall to be taken. With the package to be delivered in mid-October, the big calls will have to be made quickly enough. After the Covid-19 lockdowns and the inflationary surge following the Russian invasion of Ukraine, it will be the first budget in four years to be delivered in somewhat calmer economic circumstances, notwithstanding the ongoing war.

Emergency times required emergency measures and the Government deserves credit in particular for its handling of the national finances during the pandemic and policies put in place to assist households and businesses. Likewise, the special payments to support living standards over the past 18 months have helped to shelter households to some extent from the cost-of-living crisis.

As more normal budgeting resumes, the Government faces difficult decisions. To what extent is it justified to continue special, once-off measures and if so, what should they be? And as part of this it needs to consider that the longer temporary measures continue, the more they become semi-permanent.

Central to its considerations will be the ongoing high price of energy. Wholesale energy prices have fallen sharply – the latest Central Statistics Office data shows wholesale energy prices down 64 per cent on this time last year. In turn this means retail costs should fall and some cuts are expected shortly. However, with wholesale prices remaining well above the levels we had become used to, retail prices are not going to return any time soon to pre-crisis levels – and perhaps never will.

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Grocery inflation, meanwhile, has fallen back to 12.8 per cent on an annual basis and while it may now fall sharply further, actual price levels for many products look set to remain high.

In responding to this, the Government needs to focus on those who need help. The temptation, with the Exchequer flush with cash, will be to repeat supports to all households. But doing so risks two things – helping those who do not need it, and creating an expectation that such supports will now be repeated annually, like the – entirely justified – Christmas double welfare payments.

Instead, the Government needs to consider the possibility that the impact of the cost-of-living crisis could last for a few years and act accordingly. This requires focusing assistance on households that really need it.

In policy terms this can be difficult. Many less well-off households can be reached via welfare measures, but some cannot. Once-off measures may still have a role, given the uncertain outlook, but in some cases permanent changes are justified. Budgets are always about trying to find the right balance. The key question for the Coalition this year will be how to concentrate its fire.