Spend all you like... but you may not get the credit
IN HIS opening speech yesterday, the Minister for Finance, Paschal Donohoe, made no apologies for proclaiming that it had to be a cost-of-living Budget focused on helping individuals, families, and businesses to deal with rising prices. This was a Budget which had one aim and that was, in effect, to neutralise the soaring cost of living.
In essence this was a Budget of survival for both the Government and the people. If budgets are as much about feelings as they are about economics, the overriding sense is that the vast amounts of money spent will temper the worst ravages of the winter. The message from the Government parties is, stick with us and we will see you through into the bright new dawn of the spring.
All government parties want to take credit for budgets that spend lots of money, no matter how difficult the wider circumstances. But credit-taking becomes all the more difficult in coalition governments.
In November 1989, Charlie McCreevy, then a backbench TD, wrote to Taoiseach Charles Haughey to argue that, if they gave major concessions in the budget,
‘Haughey sensed they’d be rewarded’
the political credit would reflect not on Fianna Fáil but on the PDs. He urged Mr Haughey not to be swayed from his swingeing expenditure cuts across all departments.
The same month, the Berlin Wall fell, communism collapsed (although a few Irish politicians are still in thrall to it), and Europe was thrown into turmoil. A few months earlier, Mr Haughey had told all his ministers that the country’s economic woes were not over and that any departure from a disciplined approach to expenditure would be disastrous. Both Mr Haughey and Mr McCreevy sensed that, if they stayed the course on spending cuts, they would be rewarded electorally.
Over 30 years later, the Minister for Finance has announced a massive budgetary package of over €11billion as Europe is once again in turmoil and energy prices run amok owing largely to Russia’s illegal and ruinous war in Ukraine.
A total of €4billion of this gargantuan public spending is on once-off measures such as energy credits, a double payment of Child Benefit, a double week of Social Protection payments, a temporary business energy support scheme, rental tax credits, and a reduction of student fees. All of these make perfect sense as the Government strives to help people struggling to pay their bills.
Politically, the problem is that, with inflation rampant, there is very little political credit to go around, and as Charlie McCreevy from his ministerial days knew better than most, budgets are political above all else. Mr McCreevy managed the trick of increasing welfare and benefits and also reducing taxation in the late 1990s and early 2000s. Two decades later, Paschal Donohoe is trying the same trick and the longterm future of both Fine Gael and Fianna Fáil may rest on it.
This is Mr Donohoe’s third Budget of this Dáil term, and despite the record spending of his previous two, his party remains in the doldrums.
Fine Gael was out of the traps early yesterday morning welcoming the greatness of the Budget on its various social media channels, and proclaiming that the party was putting more money in your pocket by cutting income tax and increasing pension and welfare payments.
Party leader Leo Varadkar was hailing it as a Budget for putting money into people’s pockets and supporting business, drawing a distinction between Ireland using its significant Budget surplus of €6.3billion to protect its people through significant social spending, and the British budget cutting taxes and borrowing to defeat inflation, while spooking the markets at the same time.
Meanwhile, the Minister for Social Protection, Heather Humphreys, declared it to be one of the biggest social protection budgets in the history of the State.
Yet, the suspicion must be that this Budget, despite the gargantuan spending, will not do much to increase Fine Gael’s fortunes. The opinion polls have for some time suggested that the electorate has its mind made up that both Fine Gael, and indeed Fianna Fáil, should be consigned to opposition at the earliest available opportunity, and it is unlikely that shortterm once-off payments will assuage a disaffected electorate.
In his speech, the Minister for Public Expenditure, Michael McGrath, alluded throughout to the social solidarity that Fianna Fáil has always claimed is its very reason for existence. Indeed he ended his speech by declaring that shared hope has been the bedrock of the country’s resilience, before ending with an obligatory Seamus Heaney quote that all politicians feel the need to use, and proclaiming that a better and a fairer Ireland is a good we will continue to strive for.
The nod to a fairer Ireland was an attempt to distinguish Fianna Fáil from Fine Gael, but as the Government now reaches its halfway point, Irish politics is clearly revolving around Government and Sinn Féin in opposition. More than anyone else, Sinn Féin itself recognises this.
After Pearse Doherty’s usual angry-young-man tirade in the Dáil, a far more clever speech was made by his sidekick, the party’s spokeswoman on Public Expenditure and Reform, Mairéad Farrell, who immediately focused on young people – the key demographic in the next election.
In correctly noting that politics was about choices, Ms Farrell argued that the Budget was not written with young people in mind, arguing that it had no meaningful action on housing and climate action, the two issues that resonate most with young voters.
‘You are being brought up for export,’ she told the youth of Ireland – a populist line, certainly, but an extremely clever one that fed into the ‘Ireland-is-a-failedstate’ narrative which is popular among a certain naive commentariat, obsessed with Fine Gael’s supposed neoliberalism but never considering how the Government actually makes its money.
It is unlikely that the reduction in third-level student fees will assuage young voters who, for all their sophistication, are drawn to simplistic populist demands and, indeed, solutions.
The problem for the Government remains that it is wedded to a technocratic approach to administering the State. This is a Budget about spending but it is not a Budget about ideas.
Where is the big idea about housing, which remains the greatest crisis facing the Government? Owners of unused properties will have to pay a new vacant homes tax three times the rate of their local property tax but, while welcome, this is not a proposal that is going to solve the crisis in housing, nor rally people to the Government’s banner.
Notwithstanding the enormous largesse that the Government announced yesterday, it still faces enormous political challenges if it wants to stay the course in this Dáil and win the next election. Yet what it has bought itself with this Budget is time, and a signal that it knows what people are worried about. In that context, it is about time that the governing parties took the phrase ‘ordinary working people’ back from the false prophets of the hard left.
Over 30 years ago, Charles Haughey told his ministers that he was not convinced that simply throwing money at a problem would solve it. This Government must hope that, when it comes to the cost-of-living crisis, he is wrong and that the people will reward it. For now, that verdict remains very much in question.
‘Coalition still faces huge challenges’