It is worth remembering just how bad budget day was in times past and we’re not talking about donkey’s years ago either. In 2008 we had the first of an absolutely hideous sequence of austerity budgets. That came weeks after the blanket bank guarantee and laid bare the scale of the crisis we were facing. The then minister for finance Brian Lenihan’s budget sought to raise an extra €2 billion in taxation and cut public spending by €1 billion. The following April we had an emergency budget which saw tax hikes raise a further €1.8 billion while spending was slashed by €1.5 billion. The Troika Boys were watching closely as another austerity budget came later in 2009. That saw €4 billion in spending cuts but we were told “we have turned the corner”. Close to €15 billion of additional cuts were rolled out over four more grim years before we actually turned the corner. So, if there is any cause for optimism this week it’s that at least things aren’t bad as they were then.
In case you are wondering – and we appreciate there is a chance you are not – the word budget as we use it today was most likely coined in a satirical cartoon of the then British prime minister and chancellor of the exchequer Robert Walpole in 1733. After he published details of Britain’s finances, a cartoon in a satirical magazine featured him opening a bag of snake oils under the not entirely hilarious caption: “The Budget Opened”. And what was a budget? Well, in middle English and old French a budge was a small suitcase – it is part of the reason ministers still carry a briefcase into the Dáil on budget day despite the fact that all that is likely to be in it is Paschal’s lunch.
The cost of childcare is crippling for many parents and will have to feature prominently in the budget. The Government has promised to offer more support to the parents of young children, and based on what the Minister for Children Roderic O’Gorman has said we can expect costs to fall by around €200 next year, with a similar sized reduction planned for 2024.
The man with the big briefcase, all eyes will be on him as details of the budget are announced/confirmed. He has had the job since 2017 but almost as soon as he sits down in the Dáil chamber on Tuesday afternoon after delivering his address to the nation, attention will turn to whether or not he will still have the top money job this time next year. With the Cabinet to be shaken up like never before in December, his destination is still up in the air.
It will be interesting to see what can be done for Ireland’s schools this week. Like homes and businesses all over the country they will need additional support to keep the lights on and the classrooms warm (ish) between now and next spring. While they will presumably get additional funding to cover spiralling energy bills it seems unlikely that the relatively small amount needed to make schoolbooks free and voluntary contributions unnecessary – Barnardos has previously put that at not much more than €100 million – will once more not be forthcoming and parents will be left to pick up the tab for our – supposedly – free education system.
The cost of heating and lighting our homes and the supply of energy throughout the country over the dark months ahead of us is likely be front and centre in all budget discussions this week. Expect more utility bill credits for starters. The first one was rolled out earlier this year so the mechanisms are in place to expedite more of them. It remains to be seen exactly what scale of credits people will be offered, but there has been talk of three credits of €200 between now and next summer. While such a step will be welcomed, it will have to be seen in the context of savage price hikes which will see most Irish households worst off by in excess of €2,000 a year because of the spiralling cost of heating and lighting our homes.
Is this party just unlucky or does it bring misfortune on itself? We are not going to even try to answer that question, but we do know that every time they get into office the wheels come off. The first time the party started pulling some of the levers of power in 2007, the economy crashed and the good times that had rolled for many years came to a shuddering halt. As a result the party missed out on the boomiest of times. This time round the Green Party’s time in office has coincided with a global pandemic, a war in Europe and a cost-of-living crisis. Yes, it might be able to give more away then it did during the austerity years, but whatever we get we are still going to be worse off than we were.
Were it not for the cost-of-living crisis it is likely the housing crisis would be the focus of budget season. The fact that it isn’t front and centre does not mean the housing problem has miraculously been fixed. Rents and house prices are still climbing fast and supply has dried up leaving renters and would-be buyers in a virtually impossible position. The Government will most likely reintroduce a rental tax credit that will be worth in the region of €1400 per year to many people, and while the money will be welcomed it is a reflection of our times that it will be quickly swallowed up by spiralling prices and rents which appear out of control in many places.
If someone had told Paschal Donohoe this time last year that he would have to contend with double-digit inflation and price increases not seen since the wild days of the late 1970s he would probably have called the guards. Yet here we are where we are, and for the first time in more than four decades a Minister for Finance has had to prepare a financial statement with inflation touching 10 per cent and no real sign on the horizon that things are going to get any better any time soon.
One bright spot on the horizon that Ministers of times past did not have is the rate of employment in Ireland. According to the most recent data, unemployment stood at 4.3 per cent, a two-decade low. The number of people at work in the State has risen to a new high of 2.55 million, with most sectors of the economy exhibiting strong employment growth over the past 12 months, according to figures from the Central Statistics Office.
The flying of kites is one of the more tiresome – but probably necessary – pre-budget rituals we all have to endure. A Minister or their spokesperson will have a quiet word with a reporter about a plan they might have – slashing the pension, say – then the reporter will splash with the news that the Government is planning to slash then pension, say. The public will either react with fury – in which case the kite will be quickly lowered – or with a shrug of the collective shoulders and the kite will stay in the air, possibly becoming a policy.
In other times the 2023 budget would be about winners and all the talk in the days after it was revealed would be about how much better off people are going to be when all the measures are implemented. But the cost-of-living crisis has meant that no matter what the Government does this week, we are all going to lose out. By how much will depend on your circumstances, but if you consider that food, fuel and energy prices have climbed by a combined total of close to €4,000 since this time last year, there will be few people celebrating their good fortune by the time the sun sets on budget day.
Expect to hear confirmation that the minimum wage will climb by 80 cent an hour to €11.30 from the start of next year. The increase will add €1,664 to the annual pay of someone working 40 hours a week on minimum wage.
Safe to say it isn’t great. As well as the economic turmoil we are all dealing with two years of pandemic anxiety and the uncertainty of not really knowing how bad things are likely to get in the months ahead.
In the late 1940s the then British chancellor of the exchequer Hugh Dalton was forced out of office after making a casual remark about his budget plans to a journalist which then found its way into the evening papers minutes before he delivered his speech to the House of Commons. Can you imagine if the same rules applied today? There’d not be a minister left in Dáil Éireann by the dawn of budget day. There was a time when the budget plans of the Minister for Finance was as tightly guarded a secret as the Third Secret of Fatima. Leaks were a sackable offence. Then Fianna Fáil started releasing – slightly secretly – the top lines of the budget to the evening newspapers on the day of publication. It slowly became a free-for-all and these days virtually every line in the budget is flagged well advance. The only thing we don’t know about today’s budget is what colour shirt will Paschal wear, although sources close to the Minister have suggested it will be blue.
This is likely to be a key phrase in this budget as the Government looks to offset the worst impacts of the cost-of-living increases without committing to long-term changes. That means we can expect a lot of one-off measures such as energy credits, extra child benefit payments, additional social welfare payments and more.
This could be another easy win for the Government this week – and a win which will see many people benefit. Earlier this year the cost of public transport was reduced by 20 per cent. It seems like the discount will be extended and may even be expanded.
This year many of the measures that will be introduced to ameliorate the cost-of-living increases will have to come into effect as soon as possible or else they will be deemed worthless – or as good as – by the voting public.
There was a time when the old reliables were made up of booze, fags and petrol. In recent years, however, the old reliables have become the Old Reliable, with tobacco the only one of the cash-cow trio hit by higher taxes. It looks like it will be the same again this year as it would take a very brave Minister to increase the price of fuel or a bottle of wine this week.
If there had been kites to fly in the early 1980s the Fine Gael-led government headed by Garret FitzGerald might not have collapsed in the immediate aftermath of a harsh budget and the then minister for finance and subsequent taoiseach John Bruton might not have secured his place in Irish budgetary history for all the wrong reasons. In the spring of 1982, Bruton announced that an 18 per cent VAT rate would apply to clothes for all ages. Independent TDs Sean Dublin Bay Loftus and Jim Kemmy voted against the government, which immediately collapsed. Years later it emerged that the tax on children’s shoes which made John Bruton infamous was not even his idea but the idea of a senior civil servant in his department. “In the lead-up to the budget, the instincts of the minister and his political advisers were to restrict the imposition of 18 per cent VAT to adult clothing and footwear and to have an exclusion for children,” wrote Maurice O’Connell who had been secretary in the department of finance at the time. “Fortified by advice from colleagues from Britain, who had first-hand experience of this, the Department of Finance recommended in trenchant terms, under my signature, that the exclusion for children would probably be unworkable and wide open to abuse.” In the posthumously published memoir No Complaints he said neither he nor anyone else was prepared for the “instant explosion of opposition to the proposal”.
Whatever about all the other measures rolled out in a budget, taxes couldn’t be more central to the picture that emerges. This year we will see reductions to income taxes and the USC as well as increases in tax credits. In the best case scenarios someone earning €45,000 might have to pay around €1,000 less in tax in 2023 than they did in 2022.
A September budget is unheard of in Ireland, but timings have been all over the shop in recent times. In the 1980s budget day usually fell in February, and while things were bad at least the days were getting brighter. Then it got moved to December. That was grand when every budget was a giveaway one but it became a lot less grand when times got tough and the bad news tended to be quite the downer in what was supposed to be the season to be jolly. So the budget got moved to October and now September, a reflection of the need for things to happen sooner rather than later.
Eyes will be on the tourism sector this week. Will it retain the favourably low rate of 9 per cent – a rate applied to the hospitality sector to help it recover from the nightmare that was Covid – or will the rate increase in light of the sky-high prices and tourism bounce many in the sector have seen since the start of the summer.
This is where much focus will be. The fuel allowance is likely to climb by around €5, while social welfare payments and pensions could increase by between €10 and €15 a week, with an additional social welfare payment being considered ahead of Christmas to help people cope with the rising cost of living.
We’re not even going to pretend we can find a word beginning with this letter that we can shoehorn on to the page.
Given that many young people are struggle on low wages, high rents and a lack of accommodation options, it remains to be seen what can be done to support them and whether or not it will be enough or even close to enough.
What many people’s bank balances are likely to say when pay days approach in the months ahead no matter what the budget does.