Budget day is always a paradoxical balance between political theatre – as the Government and Opposition trade blows – and more serious stuff. Running through the day, for the Government, is the risk that part of the theatre may cross the divide and become a serious problem. The Opposition, or jilted stakeholder groups, probe for weaknesses, in the hope a big one may emerge – the budget day landmine. Yesterday’s budget was not without weak points: see the flame war between the Government and GP groups, or the ready criticism of a welfare package that contained billions in pay improvements. See also a fairly toothless vacant homes tax and feeble measures to help landlords.
But the front pages of today’s papers tell their own story, with the main focus on the sheer scale of the intervention, rather than its weaknesses. The emerging orthodox take on the budget is probably right: an astonishingly big intervention which may not be enough – time will tell. If it falls flat, the Government may have to go again – or risk the consequences.
The theatrics and the reductive search for the ultimate budget take risks obscuring more troubling, or profound, factors. For that, have a look at the Budget 2023 Economic & Fiscal Outlook, published yesterday. There’s a reason they call economics the dismal science, and this is a reminder, if one were needed, of where we stand. “The key question,” the authors write, “is whether the economy is in line for a period of weaker growth or whether an outright recession is in prospect”. The paper makes several references to an effective paradigm shift comprised largely of changes to the energy market and Central Bank policy: “There are reasonable grounds to believe that a structural change in energy markets is under way – the era of cheap fossil fuels may have ended”, in turn making firms unviable. Of the shift away from the post-financial crisis era of cheap debt and loose monetary policy, they write: “There are solid reasons to believe this is a structural, or permanent, shift, rather than a temporary, or cyclical one”. Managing the immediate crisis against this backdrop, and balancing longer term issues of confounding complexity such as demographic change and the double-edged sword of corporation tax revenues will likely be the key task facing this, and the next, Government.
All of this seemed to land for the Government in the last eight weeks or so, when short term economic indicators deteriorated and energy pressures forced a change in its stance. Again, the outlook makes this more or less explicit: “The third quarter looks like a turning point, with several high-frequency indicators moving into negative territory”. As the sugar high of post-pandemic upswing wore off, the political balance shifted at this point, and it’s clear this will be the prevailing weather for the winter. Time to wrap up.
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Truss’s crisis deepens as drama wears thin
If we weren’t distracted by our own budget, we would most likely be focusing in much greater detail on what is happening in Britain. Sterling continued to ship blows yesterday as the IMF waded in. In a statement it said it is “closely monitoring” the situation in the UK, slating the Truss/Kwarteng mini-budget as Downing Street was forced to talk down rumours of a rift between the residents of numbers 10 and 11. Quite the scene for Liz Truss, who was also confronted with a poll showing Labour a gobsmacking 17 points ahead of her Conservatives – a level of support not seen since 2001. Even for those who predicted Truss’s premiership would be chaotic, who would have wagered things would go this far, this fast? Janan Ganesh on the conceits underpinning recent British developments is, as ever, worth a read.
Meanwhile, Labour leader Keir Starmer delivered a speech promising an end to the cycle of crisis to his party conference in Liverpool. After six years of rollercoaster politics, could Starmer’s winning formula be making politics boring again? Rafael Behr suggests as much in the Guardian.
Best reads
This newsletter remains largely a budget bingefest for the time being. Normal service resumes tomorrow. All our budget coverage can be found here: https://www.irishtimes.com/budget/
Our lead is here: Big Budget giveaway as Coalition braces for difficult winter
The main points of the budget are covered here.
Political Editor Pat Leahy’s analysis.
To break it up a bit, here’s Kathy Sheridan on Giorgia Meloni.
PLAYBOOK
The Budget is still working its way through the system. There are leaders’ speeches on the topic in the Dáil just before lunch, and a Budget debate at teatime. In the morning, Darragh O’Brien takes oral questions before Leaders’ Questions. The Dáil adjourns at 9.24pm.
In the Seanad, the committee stage of the Assisted Decision Making Bill is at 1.30pm, and there’s a Private Members motion at 5pm on the cost of living impact on young people. The Seanad adjourns at 7pm.
Committees swing into action at 9.30am. The Enterprise and Health Committees are discussing low pay and the cost of living and Sláintecare, respectively, in that early slot.
A full schedule of today’s events can be found here.
