Enjoy the moment, it might not last...

BUOYED by a fortunate convergence of strong exports, low interest rates, resurgent domestic growth and a weak euro, the Government used yesterday’s budget as its best chance to renew its lease on power.

The Coalition shrugged off the dire warnings of the International Monetary Fund about the likelihood of another global recession and ignored the advice of the ESRI to further reduce debt. With a cornucopia of tax receipts that would have enabled the Exchequer, had it so chosen, to reduce the deficit to a mere 1 per cent of GDP this year, the conservative fiscal philosophy of the last four years has been abandoned in favour of a decision to further inflate the economy, and a blatantly preelection budget was delivered.

Tax has been cut in the form of reductions to the highly unpopular Universal Social Charge. Spending increases have been announced for the Family Income Supplement, the Respite Care Grant, the old-age pension, the social welfare Christmas bonus, the fuel allowance and the community childcare scheme among others. Commendably, the Budget even introduced statutory paid paternity leave of two weeks, starting next September. It seems that in a bid to win the next election, the extra cash, every cent of which will have to be borrowed, was thrown as widely as possible.

Few could have foreseen this development. Two years ago Dr Pippa Malmgren, once an adviser on international economic issues to former president George W. Bush, came to Dublin with a stark message. She said that Ireland, struggling under a huge debt burden, with zero growth and no consumer confidence, could not escape from this downward spiral unless it left the euro and devalued the punt. We were facing into 20 years of no growth, she said.

Nobel Prize-winner Paul Krugman, and a number of other naysayers, many Irelandbased, were broadly on the same page. Ireland could never grow its way out of its current crisis given its inability to devalue, they said.

THEY were wrong. Since 2013, the Irish economy has made huge strides and is now in an almost unrecognisably different place than it was two years ago. It is a remarkable story by any yardstick, in which economic serendipity has played a significant role. And yet, in the heady moment of apparent victory, danger lurks.

A degree in political science is not needed to identify the sectors of our society that need root-and-branch reform. Despite the claims of Minister Brendan Howlin yesterday, the efficiency of the public service remains highly questionable, as any member of the public who has dealings with it will confirm.

A far more wide-reaching and effective response to crime in rural areas than was heard yesterday is required. Especially in the week that a brave garda was shot dead, a detailed strategy is needed. Although yesterday’s budget pledges to recruit an extra 600 gardaí next year, nothing more specific was revealed. In this modern age of instant communication, surely it is possible to police rural areas with effective response technology? Why not airborne drones? Why not expand security surveillance by mounting cameras on drones that can record and analyse the number plates on suspicious cars from a height of several thousand feet and lead to an immediate

and effective Garda response? The minister does not have to see herself as Homeland’s Carrie Mathison to consider ideas like these.

Neither was there much if any innovation revealed to solve the housing crisis. Tasking NAMA to build 20,000 new homes by 2020 sounds more aspirational than a nuts-and-bolts plan. What is needed to deliver housing is an imaginative strategy that will incentivise builders and first-time buyers, free up mortgage cash and cut through the mountains of bureaucracy that lie between someone’s wish to build a house and the ability to achieve that wish.

Yesterday’s budget statements were short, too, on specifics for educational spending. Pupil-teacher ratios will fall, we were told. But it would also have been welcome news to hear that specific funds had been earmarked for providing children in schools with computers. It is as if the choice has been to throw short-term money at feel-good projects with a view to getting re-elected. Although the main budget was delivered yesterday, Michael Noonan’s statement was simply another stage in the fiscal roadshow that kicked off two weeks ago with the publication of the Government’s € 27billion capital plan.

The centrepiece of that plan is the €2.4billion Dublin city centre to airport rail link, due to be finalised by 2026. This is more or less exactly the same project that was shelved in 2011 but which it is now claimed will cost €1billion less than it was costed at back then. The latest overall transport plan, relying on one of western Europe’s last diesel locomotive rail networks, bottled it completely when faced with the basic no-brainer of rail travel in Ireland – the vitally needed Metro connection between Heuston and Connolly stations.

Just as the two original Luas lines failed to interconnect – a mistake that is now finally being addressed – the two main rail networks of the country, north and south, are hopelessly adrift of one another, like separated twins. A more far-seeing government would have joined them up by Metro, maybe as part of a publicprivate-partnership (PPP).

There is also the lack of any specific plan to meaningfully extend the motorway network. One of the few accolades that can be fairly given to the last Fianna Fáil government is that it had the foresight, despite the recession, to complete the basic motorways we now have. Capital expenditure on motorway infrastructure, which invariably involves PPPs, has little or no impact on the economics of the day-to-day running of the economy, but is amortised over decades through long-term debt. Construction of such motorways gives considerable employment, and the running of them is very profitable, and will remain so, with low oil prices set to continue and car numbers set to greatly increase.

On the same day as the capital spending plan was announced, the Comptroller and Auditor General’s Report was published. If it was hoped that the spending plan would overshadow the C&AG Report into our national financial follies and inefficiencies, then that hope was not realised. One can only sigh when one reads that the decision to pay the bondholders of IBRC cost nearly €1billion, while the interest we pay for the bank bailout costs €1.7billion a year.

Sighing may not suffice, however, when it comes to looking at the cost overrun of Eircode. This tin-pot project, to give Ireland a postal code like every other modern economy, is an all-too-familiar reversion to the sticky-fingered Ireland of old. In 2009, the estimated cost of this project was €18million, with a forecast completion date of 18 months.

SIX years and €38million later, Eircode is up and r unning. The C& AG’s report on the attempt to produce a formula of letters and numbers to deliver the post, details sad lists of consultants, hangers- on, retired public and civil servants, and basically anyone who could get dibs on this honey pot. It’s dismaying beyond belief. You could buy in the region of 70,000 iPads and give them to Irish schoolchildren for the cost of this shambles. Lack of regulatory oversight, the chief disease of the bank collapse, is by no means a thing of the past.

The confirmation yesterday of a new corporate tax rate of 6.5 per cent on profits made by so-called knowledge based companies, is to be welcomed. The chief threats to our future prosperity, apart from official incompetence, are external events that could upend the Government’s underlying prediction that nearly 50,000 new jobs will be created here next year, many of them in the technology industry.

Fifty thousand new jobs would give a further, massive boost to tax revenues, but are vulnerable from any threat to our low corporate tax rate. This tax rate infuriates two sets of people: bureaucrats in Washington, who see Ireland as providing a legal means to the likes of Google and Apple to locate the bulk of their profits here; and the European Commission, whose Commissioner for Financial and Economic Affairs, Pierre Moscovici, has made tax harmonisation in the EU one of his primary ambitions. Either way, to lose this competitive edge could quickly make the recent economic rebound a memory.

Meanwhile, the enjoyment to be had from yesterday’s budget is likely to be a short-term event. The next coalition, very possibly made up of Fine Gael and Fianna Fáil, is likely to consolidate the right- of- centre principles of both those parties, and, freed from the correcting hand of Labour, revert to further years of fiscal restraint.

That may be no bad thing if it means salting money away for a rainy day. But for the moment, we are in an election bubble of happy days.