It was Simon Harris’s first budget this week. He and his wife, Caoimhe, also welcomed their third child the previous weekend. The joke around Leinster House was that the poor child didn’t get much sleep, as it was kept up all night with the Minister for Finance.
The budget was delivered on Tuesday. As Patrick Freyne wrote in his colour piece, all the references to millions and billions of euro make it all sound like Monopoly money.
The acceleration in State spending is extraordinary. Some €125 billion will be spent in 2027. We’re quickly moving towards a situation in which the State will be spending twice as much at the end of the decade as it was at the beginning, before Covid came along.
Of course, Covid can be blamed for the increase in State spending, along with the huge lump of debt that most European countries have accumulated. France, in particular, has a huge debt burden at the moment. Recent studies there show that the purchasing power of families has decreased by as much as €1,200 over the past two years alone.
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Most European countries, of course, don’t have the levers to deal with the huge changes that have occurred, including inflation, the spike in energy prices and the increase in the cost of living.
Ireland does. It has been handed the golden beans that allow the magic beanstalk to grow. But, of course, anybody who has read the fairy tale will know that there is a price to pay.
Corporation tax receipts allow Ireland’s national debt to remain low compared with that of other European countries, and they have given the Government the latitude in its budgets that other states do not have.
That’s why diesel is 20 cent cheaper in Ireland than in most other European countries. It’s also why the Minister for Finance was able to publish a generous income tax package that will benefit lower- and middle-income households to the tune of €1,500.
The Greek chorus
It’s difficult to be in Opposition because you have to criticise the macroeconomic aspects of the budget while also calling for more spending. Politicians on both sides of the Dáil will tell you that a budget is about choices and priorities, but it seems that the choice they make is to spend even more.
The responsibility on the Opposition is less onerous, as it does not have to balance the books.
Nevertheless, as you would expect, the two institutions on the State side that critique the Government’s economic and fiscal policy were not impressed by the budget.
The Irish Fiscal Advisory Council and its straight-talking chair, Seamus Coffey, said the budget had put the economy on a worse trajectory. He spoke about the Government’s failure to adhere to its own spending limits, which is true, and again referred to the over-reliance on corporation tax.
You sometimes wonder whether, instead of being a blessing, corporation tax is a curse. If there is a precipitous fall in receipts any time soon, it will have very worrying consequences for the Irish economy.
In relation to spending, the signs for 2026 and 2027 are not encouraging.
Overall, spending is projected to increase by 6 per cent in 2027, provided the State stays within its own self-imposed limits. If recent years are anything to go by, however, that is unlikely to happen.
State spending was meant to be limited to either 5 per cent or 6 per cent each year from 2020 onwards, but in most years the increase was in double digits.
At a press conference after the budget, Minister for Health Jennifer Carroll MacNeill said four of the six HSE regions were already eating into their 2027 budgets.
She also referred to the fact that the maximum number of new staff recruitments had been exceeded. The figure was supposed to be 3,300 but it had already reached 3,600. She argued that the requisite savings in agency staffing costs and improvements in productivity, which were expected in return, had not been achieved.
Jack Chambers has set out his stall, however, as a public expenditure hawk. His negotiations with line ministers was described as tough and one, Patrick O’Donovan, ended a meeting with Chambers after eight minutes.
He has set up a new public spending efficiency taskforce with a focus on cutting costs and seems determined to make sure that State spending, for once, stays within limits.
O’Donovan opens up two new battle fronts
The non-appearance of the culture cards for teenagers in the budget was an own-goal for O’Donovan. He had flagged it in the run-up to the budget and when it didn’t materialise the unavoidable optics whereas that he had lost out in his battle with Chambers.
[ Chambers and O’Donovan at odds over ‘culture card’ ideaOpens in new window ]
To compound matters, he found himself on the back foot again over another bit of budget news that seemed to catch everybody by surprise, including Government leaders.
O’Donovan announced he was withdrawing €20 million from the €260 million committed to RTÉ for 2027 because of what he set out as a suboptimal performance by the broadcaster in fulfilling its part of the deal, particularly its voluntary redundancy programme.
It sparked an immediate row with RTÉ, with its director general Kevin Bakhurst responding immediately and forcibly.
Our own reporting this week showed O’Donovan had written to leaders on Saturday saying that among other things that would have to be “reneged” on, if extra money was not forthcoming for his department, would be the funding agreement with RTÉ.
Other Ministers were of the impression that that issue was resolved in the run-up to the budget. Obviously not. Was it connected with the row Chambers had with O’Donovan over the culture card? Possibly? In any event, a clear-the-air meeting between Bakhurst and O’Donovan gave the first indication that the funding may be restored.
Blink first to avoid a strike
It’s hard to know who’s going to blink first, the Government or the public sector unions. One is saying that everything is being discussed. The others (the unions) are saying that pay has to be dealt with first, and then other things can be agreed.
The rationale from the union side is that it could take months before the talks come to an end. That at a time when its members are really feeling the pressure of cost-of-living increases.
From the Government perspective, if it concedes and confines negotiations to pay, the unions, having got what they want, will not have any incentive to negotiate on the other aspects of the talks – efficiencies, reforms and working hours – and will string them along.
Chambers in his budget speech said he had set aside €1.2 billion as a contingency for pay awards for public servants. Problem is, the unions say that is not enough, that at least €2 billion will be required.
Meanwhile, there is a one-day strike on Wednesday that will affect nearly everything everywhere. Besides schools, universities, public offices, it also looks like the Dáil will not be sitting, as the civil servants who work in Leinster House will be on strike and it will not be possible for any proceedings to happen in the chamber.
Something for the weekend
Pat Leahy and Jack Horgan-Jones have done a big read on the background to the budget and the various horse-trading and rows (and there were some) that took place before Harris and Chambers rose to their feet in the Dáil on Tuesday. See The Irish Times this weekend.
And don’t forget our Inside Politics Wrap of the Week podcast which you can find here.
