Noel Whelan: Budget underlines the insanity of a November election

The most interesting and surprising thing about the reaction to the budget this week is actually how muted it has been.

Michael Noonan and Brendan Howlin managed to chart a careful course between a politically successful and an economically prudent approach. For their troubles they got a modestly positive reaction to a modestly positive budget.

Despite the efforts of the Opposition to paint it otherwise this budget has gone down well with most people.

It was met with mild acknowledgement from the majority of voters: a kind of “thanks for that”.

If the reaction to the budget was underwhelming its not so much because it was so widely flagged and leaked in advance but because the public quietly feel they are entitled to a little reprieve.

The majority of household benefit from this week’s changes in tax and expenditure and they are grateful for it but they see no need to jump up and down about it.

They modest tax reductions given to those at work, and the very modest increases given to those on social welfare, managed to create a sense not of exuberance but of reassurance.

It offered reassurance that austerity is over, that the recovery is real, that even better times may be on the way.

In performing this reassurance function the budget served a useful political purpose. Its one thing for people to read and hear about a recovery, it is a different think for people to actually feel it in their pockets even if in small increases.

It will be January before those on social welfare get the budget increases into their hand, but in December they will feel the restoration of most of the Christmas bonus.

In January public sector workers will, in addition to the cuts in the universal social charge, get significant pay increases arising from the Lansdowne agreement.

In the new year lower paid workers will benefit when the statutory increases in the minimum wage are implemented. Those who are parents will benefit from the restoration of some of the cuts in child benefit.

The weekly or monthly amounts involved in these changes are small but the impact is a little larger. It marks in a practical way in each household the turning of a corner. There is still real hardship for many but for most there is a growing sense that the recovery is real and may be sustainable.

Grand incentives

On one level it might have been surprising that since this was the first post-austerity budget it was not a radical, reforming or restructuring budget. There were no great shifts in the tax base or new grand incentives. Instead there were just some small innovations or tweakings to remove impediments to employment growth.

Above all else this week’s statements from the Ministers for Finance and Public Expenditure have to be seen in the context of being a pre-election budget. It was carefully calibrated to its political objective. Giving away too much might have been political counter-productive to voters tuned to the suggestion that they were being bought. The budget gave away just enough.

There have, of course, been some significant criticisms of the budget.

The Fiscal Advisory Council criticised the budget and the supplemental estimates announced for several government departments as being unnecessarily expansionary.

Social Justice Ireland criticised the budget as regressive because the tax reductions it gave to higher paid workers were twice those of the lower paid.

However, the Government view appears to be that it could wear some criticism from economists and social justice commentators providing everyone else in the audience felt there was something for each of them in the budget announcement.

There are, of course, some gaps in the budget. The inability of the coalition partners to agree a proposal for rent restraint before last Tuesday is telling and may suggest an indifference to or incompetence around tackling the housing and homelessness crisis. Overall, however, the budget has worked for the Government.

Messy handling

The Government did its credibility some damage last week by its messy handling of speculation about whether there would be a November election. It was an inside the beltway story, but it did them harm none the less.

The Taoiseach was wise last Sunday to return to being unequivocal about the fact that there will be no election until next spring.

The idea of a November election would have been insane. As an incumbent government, with an economy growing at at least half a per cent per month, the best approach for this Government is to present an image of competence and cohesion. It needs to communicate the sense of a real recovery and an orderly wind down to the end of its term and then a calm application for a renewal of its mandate.

This week’s budget set the right tone for this purpose.