Critics of Ireland’s approach to annual budgets argue that it is a crude and reductive way to manage the public finances, rewarding political short-termism at the expense of strategic vision.
They have a point. The leaks, the “something for everyone” giveaways, the once-off measures, the pro-cyclical spending and the chronic overruns flagged by the Irish Fiscal Advisory Council (Ifac) are all at their worst in the autumn ritual in which final numbers are hashed out.
It need not be this way. Better-managed countries such as Sweden settle these questions years in advance through a multi-annual process, a more sensible approach for a complex modern economy.
The system’s shortcomings have been laid bare by the absurd contortions over next year’s funding for RTÉ. The previous government agreed a three-year arrangement, contingent on restructuring at the broadcaster. Three hours before Tuesday’s budget speeches, RTÉ learned it would receive ¤20 million less than agreed.
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Against total spending of ¤125 billion, the sum is tiny. But how it was reached is telling. Internal correspondence reveals a gulf between the departments of Media and Public Expenditure, with Minister for Media Patrick O’Donovan warning of reputational damage to the Government if cultural and sporting bodies lost out. This suggests a dispute over departmental funding produced the RTÉ shortfall. Yet O’Donovan blamed slow reform at the broadcaster, before appearing to row back.
None of this reflects well on O’Donovan. It also shows how easily a multi-year commitment can unravel in the annual scramble for money.
The RTÉ arrangement was itself a fudge. The last government rejected its own Future of Media Commission’s recommendation to replace the licence fee with direct State funding, opting for an interim hybrid that runs until the end of 2027. A lasting solution remains to be found.
Budget reform seems even more remote. But what Budget Day does offer is a measure of the government of the day, its priorities and its divisions. This Government knows Ifac is right about its reliance on windfall revenues from a handful of multinationals, yet finds it politically impossible to act. The strains in Cabinet over Jack Chambers’s attempt to slow spending growth prove that. It is, however, well attuned to pressure from sectoral interests. Last year hospitality won a VAT cut. This year it was the turn of the hauliers and farmers whose fuel protests caused such disruption in April.
Simon Harris framed his speech around Ireland’s economic health relative to its European neighbours. But what is lacking is any plan for the day the corporate tax windfall dries up, or any sense of where the country is heading.
