OF COURSE IT WAS POLITICS — IT COULD BE SUICIDAL IF IT WASN’T

YESTERDAY’S Budget was about politics, not economics. Aren’t they all, you might say? Not really. At least not since this century’s great economic depression hit. Since 2008 a succession of budgets has been all about economics and finance, tempered only by some political realities. The enormous negative gap between revenues and expenditure, and the government’s restricted ability to borrow to fill that, necessitated major tax increases and massive spending cuts.

It was all overseen by our lenders, in particular the hated Troika, who wanted to be sure that our government could pay back the money.

Last year, but particularly this, has seen a return of a Government being able to court votes by cutting taxes and increasing its spending.

That’s the main gripe doleful economists have with yesterday’s Budget. It is not economically necessary – and indeed may well prove to detrimental in the medium term – to cut taxes and increase spending at a time when the economy is growing strongly.

They have pointed out that this approach results in the borrowing of the €1.5billion needed to fund the Government’s promises. In other words, we are adding to the national debt at a time when the economy is growing strongly, something that makes little or no sense.

If you were overborrowed, would you add to your debt?

Countries are run differently of course. Government measures the size of its debts by reference to the size of the economy. As the latter is rising fast the ratio by which the Government debt is measured is falling and promises to be back to the EU average soon. This is remarkable considering where we were as recently as five years ago, unable to raise loans on the international markets without special assistance.

IF the Government was acting solely on what is best according to economic measures it would have done largely nothing yesterday: it would have allowed the economy to continue on its own trajectory. The economy grew by 5 per cent last year, is expected to grow by 6 per cent this and possibly by as much again next year.

After a series of woeful misfortunes, Ireland has had some dumb luck: the euro has weakened to make our exports to non-EU countries more valuable, the shortfall in energy costs has reduced business and household costs dramatically and the Government’s interest bill on borrowings has slumped to far lower levels than were expected.

Tax revenues for 2015 have run so far ahead of last year’s budget expectation that the Government has had €1.5billion extra available to add to its spending. Which is good to have, especially in health spending, but it raises questions about the original budgeting for expenditure on public services. Indeed, if this money had not been needed to plug gaps in the 2015 Budget it could have paid for all of the Budget 2016 measures.

Statistics can sometimes be misleading, especially due to Ireland’s almost unique trading relationship with the outside world, enjoying membership of the euro while sending about half of our exports to Brit- ain and the United States. The key statistics are not that our growth rate is up but that total employment has increased by almost 90,000 over the last two years and by over 130,000 since 2012. Unemployment is down to 9.4 per cent, from over 14 per cent in 2012 and may fall below 8 per cent within a couple of years if the trend is continued. That means more people at work paying taxes and fewer people claiming social welfare at the expense of the State.

That is all undeniably good news, but voters – did you know that a general election is due? – need to know more than that the public finances are being restored to good order. They want something tangible for themselves, considering the drop in the standard of living.

It would have been incredible – and politically suicidal – for the Government not to have offered the electorate goodies in yesterday’s Budget. It would have been tantamount to negligence because it would have opened the door to the election of the various opposition parties who – as this Government would see it – might be tempted to promise things that could be very damaging electorally. You know the things people say to win elections.

It is one thing, as Michael Noonan emphasised, to talk of recovery (his most used word yesterday both in his Budget speech and subsequent efforts), stability, rewarding work, enterprise and innovation, and certainty, and to take the credit for it, but it would mean nothing if it didn’t put more money in the pockets of voters.

It would be useless for Labour to boast of protecting the most vulnerable if it had not managed to increase the minimum wage, child benefit and old age pensions, and not to increase the numbers of nurses, teachers and gardaí providing essential public services.

Money had to be spent and economists who told this Government not to do so are not living in the real world. Opposition politicians who bemoaned the Government’s opportunism in taking advantage of an improvement in economic circumstances are being, well, hypocritically opportunist.

YESTERDAY’S Budget may not have been particularly generous by the standards of the past, but it is a Godsend after year after year after year of taking more money from people by way of extra taxes.

The focus on reducing the hated Universal Social Charge is politically sensitive but it is easily explained and understood. Everyone is better off and the Government – despite charges from the opposition and lobby groups – can argue that this is actually a progressive budget in that the lower and middle income people do proportionately better than high income earners, who get more in absolute terms but less in relative.

The opinion polls have not shown any reward to the Government to date for overseeing the economic recovery. It may have broken explicit and implicit promises made before the last election, it may have made many mistakes, but suddenly yesterday’s Budget, modest as it is, on top of beneficial international economic events over which it has had no control, may have improved its chance of securing re-election.

The next opinion polls, taken in the wake of this Budget, may be interesting for once.