There was one Budget error but at least we’re not like our neighbours
WOW. Never before has there been such a Budget Day package, with an €11billion increase in State spending – €6.9billion in recurring spending and €4.1billion in once-off costof-living measures.
People didn’t need to tune in to the speeches in the Dáil, thanks to the copious leaking beforehand.
No surprises on the big day, then? Well, apart from the 10% levy on concrete blocks and readymix concrete. No leaking of that, because any potential leakers knew it would go down like a lead balloon (or a concrete block).
Bertie Ahern regularly told his front bench in opposition, or his Cabinet in Government, in the hours before a Budget announcement, to watch out for an ‘unforced error’ buried somewhere in the Budget – referring to a measure that would come back to haunt the Government.
Remember how Charlie McCreevy’s bolt from the blue, in the form of decentralisation, took everyone by surprise? And similarly how his ‘tax individualisation’ grabbed all the headlines, causing ructions in the immediate aftermath of Budget 2000?
Euphemism
Older readers might remember the biggest Budget Day disaster of all time: VAT on children’s shoes, announced by John Bruton in 1982. There was such a political upheaval that time that it led to the collapse of the FG/Labour government of the day.
The 10% concrete levy has all the hallmarks of such an own goal by Finance Minister Paschal Donohoe. At a time when there is also a housing crisis, such an imposition on the cost of building a house will be very difficult for prospective home-buyers to take. Construction prices are bad enough, as we are already in an era of rocketing inflation, without any added expense for hardpressed home builders. Estimates of the cost of this levy for a standard house range from €1,600 to €4,000.
Government backbenchers were first to spot this political problem. Fianna Fáil veteran Willie O’Dea, who has his finger on the political pulse, cried foul, asking that this measure be ‘examined further’. That’s a political euphemism for dumping it before it comes into force on April 3 next.
Government ministers are adamant that it has to stand. Environment Minister Eamon Ryan justified the concrete levy by saying it will help ‘to better regulate an industry which hasn’t been properly regulated’ up to now. But surely the concrete industry should already have been properly regulated? Is it not the case that the levy will just be passed on by the industry to the hard-pressed house-builder?
The levy, which is estimated to raise €80million annually, is supposedly designed to offset the estimated cost of €2.7billion mica redress scheme. Therefore it will be a drop in the ocean.
The public might swallow the bitter pill of the levy if they saw more action being taken against those in the industry who used defective components for the concrete, and against their insurance companies.
The taxpayer will pick up the tab yet again for this debacle. When the issue first arose, TDs from all sides lined up, calling for a redress scheme to help those unfortunate people affected. The bill for the redress kept going up and up. The Dáil debate on the legislation setting up the redress scheme, was truncated – to the annoyance of the opposition. Not much attention was paid by anyone on either side of the Dáil during the debate about who would pay for all this. Now we know, from Budget Day. The Government should think again on this one. Ministers should pay heed to the Economic and Social Research Institute. One of its economists said the Government should use a portion of the windfall corporate taxes to pay for it. He was sure that the cost of the levy would most likely fall on people buying or building new houses, instead of on the industry.
It’s hard to justify this levy at a time when the Government is being hammered about the lack of housing and rental supply. Not great politics.
The current debate around this has taken the shine away from the Budget’s all-time high giveaways. Usually, a good barometer as to how a Budget is going down, in its immediate aftermath, is if the opposition is crying blue murder on the night of the announcement. There was none of that. It was relatively subdued. Even the most ardent opponents of the Government were taken aback by the scale of the giveaways.
Sinn Féin did its best by repeating the words ‘housing and health’. On Budget night, and over the next few days, it didn’t make much headway against the avalanche of goodies. But Sinn Féin knows that eaten bread is soon forgotten, and that its best bet is to harp on about housing and health, knowing that, no matter what the Government does, it will not be able to solve those critical issues before the next election.
As inflation stays high, the benefits in the Budget will be eroded.
The Economic and Social Research Institute gave a reasonable thumbs-up to the Government’s efforts to help households. It said the once-off measures will insulate most households from rising prices. Yet it did include a rider to the effect that, in order to prevent ‘real-term cuts’ next year, even more Government spending will be required.
Largesse
So we can expect to hear more from opposition politicians about the dire situations people are living in, despite the largesse in the Budget.
Many ministers also pointed to the fact that, despite the giveaways, the Minister for Finance was able to put money aside into a rainy-day fund, the inference being that this can be tapped into in future if needs be.
Most economists feel that rainy day fund should be ring-fenced for future shocks to our economy, such as any dramatic reduction in our huge corporation tax take. Then there’s the money Ireland will get from the proposed EU windfall tax on excessive profits made by some energy firms.
In the run-up to the Budget, a lot of Government representatives referred to the ‘war-chest’ money available to them because of their handling of our economy. It’s a good point, when we look askance at the debacle occurring across the water. The difference between the two is as night and day.
Whatever some people might say about our current Government, at least we do not have to put up with the type of political incompetence we have witnessed in Westminster.