This Budget was never going to be a magic wand, but it may yet soften the blow of this winter

BUDGET 2023 was always going to be a balancing act. It comes at a time of tremendous uncertainty, one unprecedented since the financial crash of 2008, and likely to spring a few more unwelcome surprises yet.

Across the world, disruptors have upended political norms, claiming electoral victory in the face of defeat, undermining the very institutions on which our democracies rest.

Globally, the pandemic brought challenges unseen for a century, with the attendant consequences for limitless spending on hospitalisations, testing, and vaccination. The cost in human lives left few untouched by bereavement.

Just as we were picking ourselves out of the detritus the pandemic left in its wake, Vladimir Putin’s grotesque invasion of Ukraine saw war return to the European continent, an event unthinkable given all we have learned in the last century.

The ramifications of this conflict are not localised. Instead, it has led to energy insecurity and spiralling prices for gas and electricity. These in turn have fed into higher costs for food, goods, transportation, and services. Families, the older among us, and the vulnerable, are fearful they are facing into a winter in which they have to choose between eating and heating as inflation hits a high unseen for four decades.

Pressures

Finance Minister Paschal Donohoe and Public Expenditure Minister Michael McGrath were presented with an unenviable task. On the one hand, they had to protect us from the worst that might come. On the other, they had to do so in a way that would not fuel inflationary pressures in a constricting economy.

And, since all Budgets essentially are political, they had to do enough – or be seen to do enough – to pave the way for their re-election when that time comes. That is quite a tightrope to have to walk, and for the most part, they pulled it off.

Kicking Tánaiste Leo Varadkar’s ambition for a third rate of income tax down the road for now, we instead saw the threshold for the higher rate of tax increase by €3,200 a year to €40,000, and the entry point for payment of the 2% rate of Universal Social Charge increase to €22,920. For a single earner on €45,000, that means an increase of take-home pay of €831.

For all households, there will be a €600 electricity credit, payable in three tranches between now and early in the new year. There are increases for those in receipt of the fuel allowance, and a one-off payment of €400 before Christmas, a move sure to please older people in the community. There is an extra €12 a week for pensioners, carers, and job-seekers, though arguably this is nowhere near enough to compensate for rising bills.

Families will welcome added supports for childcare costs, the free books schemes at primary level, extra special needs assistants, the expansion of the free school meals programme, the reduction of €1,000 in thirdlevel fees, and the increase in the rate of SUSI grants. Investment in education is, along with investment in health and housing, the greatest responsibility of any government.

On the housing front, which has been the Achilles heel of Fine Gael in particular after 11 years in government, there is a €500 tax credit for renters, backdated to include this year, and the extension of the help-to-buy scheme. These feel like something of a sop, to bolster the illusion that more is being done than actually is the case.

So too does the vacant homes tax applicable to properties occupied for less than 30 days a year, which surely will bring in mere cents, but nonetheless makes for a good headline.

Burden

In health, all in-patient charges will be scrapped. Free GP access will be extended to another 400,000 people, though the impact on staffing has yet to be assessed.

The extension of free contraception to girls and women aged 16-30 is welcome, as is the financial support on offer to those needing IVF to start their families. In the past, this has placed a crippling financial burden on them – abhorrent in a country with a Constitution that values family as the foundation of our society.

And, in another move long overdue, period products and hormonal therapies for the likes of menopause relief will be zerorated for VAT.

From a point of self-interest, we also welcome the reduction of VAT on newspapers from 9% to zero. Information should not be taxed, and Ireland was a European outlier in this regard.

The result will be more money to invest in reporting local news, and also holding the powerful to account, even the very politicians who approved this move.

The measures on motor fuel mean that pump prices will remain static, for now anyway – welcome news as more and more of us leave our kitchen tables and return to the office to work. And while someone always has to suffer, few surely will argue with the 50c increase that brings the price of a pack of cigarettes to €16, the third-most expensive in the world.

Budget 2023 is a very comprehensive package, and an adroit one. In many European countries, most recently Italy this week, disaffection with governments has put the wind behind the back of right-wing populism. In Ireland, it is the parties of the left that have cleverly floated populist policies over economic prudence for years now.

Populism

They still have argued that the Budget did not go far enough to address their concerns, and there is some undeniable truth in that. So while the Government did not exactly steal Sinn Féin’s clothes, it certainly has left its wardrobe looking a little more threadbare.

The danger with populism is that the only way to combat it actually is to steal and adapt some of its policies, and that can lead to a certain recklessness born of survival instinct rather than of shrewd judgement.

In this respect, the two ministers found a middle ground, giving supports to businesses, families and individuals that just might prove enough without overheating the economy.

Yesterday morning, all over Ireland, hundreds of thousands woke with the gnawing feeling that this winter would prove the economically harshest in living memory, worse even than in the fallout from the financial crash.

The consequence of that seismic event was the longest period of low interest rates and low inflation in European history, and it perhaps insulated many from the realities previous generations faced.

With the prospect of rising food costs, of soaring electricity, gas, oil and fuel prices, of back-toschool and child-minding costs, and – the elephant in the room – mortgage interest rate rises that largely have yet to kick in, the next few months looked bleak.

Budget 2023 will not assuage those genuine worries. It is not a magic wand that will waft the problems away. But, in a judicious way, it at least softens the blow. It is undeniably political as well as economic, but that is to be expected.

It seems certain that any extra money in our purses and wallets will not stay there for long – too many external factors beyond the Government’s control are conspiring to pilfer it with the nimbleness of a backstreet pickpocket.

But at least the road ahead has been smoothed. If Budget 2023 achieves anything, we only can hope it is maintaining the status quo. We may end up no better off, but there will be some consolation if we end up no worse off either, when the dust has finally settled.